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Fanning the Flames

Jonathan Clements  |  November 10, 2018

WHAT COULD POSSIBLY be wrong with saving like crazy, so you can retire early? That’s the notion behind the financial independence/retire early, or FIRE, movement. Yet lately, I’ve read a lot of carping about FIRE, both in articles and in the emails I receive.

Just last week, those complaints got yet another airing in The Wall Street Journal. Earlier, Suze Orman weighed in, arguing you need at least $5 million to retire early. “I hate it,” she said of the FIRE movement.

The complaints prompted a recent rejoinder from one of FIRE’s leading evangelists, Mr. Money Mustache. “The whole reason for doing any of this is to lead the happiest, most satisfying life you can possibly lead,” he argues.

Is all the controversy justified? Here are just five of the complaints I’ve heard about the Financial Independence/Retire Early movement:

  1. Quitting the workforce in your 30s or 40s simply isn’t an option for the typical worker. Most of those who retire early had high incomes, allowing them to save great gobs of money during their truncated careers.
  2. Many FIRE adherents are able to retire at a young age either because they avoided the cost of having children—or they hope that, by dropping out of the workforce before their kids reach college age, they’ll get heaps of college aid.
  3. Just as quitting work may boost financial aid eligibility, it can increase the premium subsidies received under the Affordable Care Act. Some FIRE adherents even collect food stamps. That’s led critics to charge that these early retirees are gaming the system, effectively mooching off the rest of us.
  4. The frugality required to retire early is excessive. While most Americans make the mistake of spending too much today while shortchanging tomorrow, FIRE devotees are criticized for being just as foolish—but in the opposite direction: They’re so focused on tomorrow that they constantly defer gratification.
  5. Many of the FIRE movement’s vocal advocates either earn substantial incomes from blogging, writing books and other endeavors, or they have a spouse who still works fulltime. In other words, they really aren’t living off the savings they amassed during extraordinarily brief working careers.

There’s some sliver of truth to these complaints. Still, it feels like a cooked-up controversy. In a country where most people save too little and are pitifully ill-prepared for retirement, should we really be getting worked up over folks who are maybe saving a tad too diligently? Indeed, I’d argue we need more Americans who are willing to sacrifice today so they can have a better tomorrow.

Perhaps I’m sympathetic because I favored the FIRE lifestyle long before it was a thing. Through my initial decades in the workforce, I lived modestly and saved prodigious amounts, so today—in my 50s—I can spend my days as I wish. Maybe more important, the philosophy that underpins the FIRE movement meshes with four key themes I often harp on.

First, forget pursuing your passions in your 20s and 30s. Instead, you should spend those years pursuing dollars, so you can spend your 40s and 50s doing what you love. My contention: Pursing your passions in your 50s will bring greater happiness than endeavoring to do so in your 20s, when you probably don’t really know what you want and when the conventional work world will likely still seem novel and exciting.

Second, the key to financial success is no secret at all: You need great savings habits. By comparison, everything else—investing in stocks for the long haul, favoring low-cost index funds, managing taxes—pales in importance.

That said, one of the key notions that drives the FIRE movement is also propelling the shift from expensive active management to low-cost, tax-efficient indexing. In both cases, folks are focused on cutting out expenditures that bring little or no benefit.

Third, the material goods we hanker after—the bigger house, the faster car, the latest electronic gadget—deliver surprisingly little happiness. If we live more frugally, there’s every likelihood we’ll be just as happy and, I suspect, even happier. The fact is, the thrill from a $35,000 car quickly fades, but the sense of financial security from $35,000 in the bank never grows old.

Finally, there’s often scant relationship between the work we care about and the work that’ll generate the biggest paycheck. To be sure, some folks have jobs that pay them handsome sums while also bringing them great satisfaction. If you’re in that camp, consider yourself extremely lucky.

But for many of us, there’s an inverse relationship: The more dollar income a job generates, the less psychic income we receive. That’s why saving early in adult life is such a smart strategy. By doing so, we can fairly quickly buy ourselves the freedom to spend our days doing what we’re passionate about and what we feel is important, even if that work pays us little or nothing.

Want to make sure you have that sort of financial freedom by the time you’re in your 40s or 50s? Saving like crazy in your 20s and 30s seems like a small price to pay—and it could be one of the wisest investments you’ll ever make.

Follow Jonathan on Twitter @ClementsMoney and on Facebook. His most recent articles include Just Asking, Warning Shot and Ignore the Signs.

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Paul LaVanway
Paul LaVanway
2 years ago

Re: The blog comment in reference to Apple by Adam Grossman….”I’m just saying it’s important to avoid loving an investment so much that you lose objectivity.”

This brought to mind something that I heard Malcolm Forbes say many years ago: “The more you like something, the less you notice how much it is costing you.” Forbes said this in a speech at a financial conference I was at and—-at the time—-was referencing his own well known art and “treasure” collecting habits. That said, I thought it was a wonderful behavioral economic insight on not only Forbes, but my own, spending proclivities.

jsshane
jsshane
2 years ago

Regarding FIRE, I have a new acronym for certain ‘participants’, siding with those in complaint #5. I call it “QMJBMSW” Quitting My Job Because My Spouse Works. Those that claim they are ‘retiring early’ and have a full time working spouse with full medical benefits aren’t fooling anyone. Just about all the stay at home moms back in the 1960s and 1970s were the originators of FIRE I suppose.

Bob
Bob
2 years ago

I’ve read several articles about the FIRE movement. I’m not impressed and don’t think this lifestyle will find many takers in the long run. Today’s FIRE devotees are young idealists who don’t want to waste their lives working to make a future for themselves the way their goofy parents did. They don’t like the work world, it’s not fun. I guess it’s too much of a rat race in their estimation.

Every profile I read about FIRE couples included a “side hustle.” What’s that? A side hustle is a job, a home based business in many cases. The side hustle pays those nasty monthly bills. One couple proudly said they planned on working the side hustle for 30 years! Not my idea of retirement.

Over the years I’ve met many people that said they were retired. They were retired from one profession. Now in “retirement” they work full time in a different profession, yet they insist they’re retired.

Work is work. Retirement is NOT working, period.

Steve Schullo
Steve Schullo
2 years ago

The FI and FIRE communities are a threat to not only financial advisers of which FI and FIRE community will not employ, but the entire powerful consumer market. These young people get it. I was fortunate to attend one of their conferences in my neighborhood last summer, CampFI Southwest. They understand 100% about investing, stocks, bonds, real estate, and the most important skill in the 21st century, frugal living. Everybody must live below their means to achieve FI or FIRE. I truly respect their categorical rejection of climbing the super stressful corporate ladder with the fake “rich” images complete with huge debts: $5000 suits, beautiful 5,000 sq. ft. home, and expensive cars, super expensive private schools for the children, maids, and opt for a less (A LOT LESS) stressful life, with quality TIME with family and friends, and doing what they love. My hat is off to these young people!
BTW in the 1960s that my Boomer generation rejected the consumer culture too. But by the 1980s, much of the counter culture movement went out the window and we opted for the borrow and spend.

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