If you’re not a regular in the personal finance corner of the Internet (where spreadsheets are sexy, fluent NASDAQ speakers proliferate, and people can get spittle-flecked with outrage while arguing about the relative merits of various debt-payoff strategies), you may not be familiar with the FIRE movement.
This acronym, which stands for Financial Independence/Retire Early (and which makes my inner grammar-lover scream since Financial Independence/Early Retirement is the proper parallel structure even though FIER isn’t as compelling an acronym), and it is a BIG thing in personal finance media right now.
The first time I heard of FIRE as a movement, I was intrigued. I am generally in favor of everyone doing what they can to gain better control of their own financial situation, and that is exactly what FIRE claims to be all about.
But on top of the fact that FIRE is described in the media as a male-dominated practice (even though Amy Dacyzyn and Vicki Robin are the OG financial independence writers), there are a couple of aspects of the FIRE movement that make me a little uncomfortable.
For instance, among FIRE proponents, you will often find the kind of financial experts against whom I often rail. The ones who shame people for the purchases they make. Those who say “should’ve planned better” to someone in an emergency. The folks who make simple pronouncements (Increase your income and decrease your spending!) as if they are also easy.
But on top of the shame issue, there are a couple of reasons why I'm leery of FIRE, even though I know it can make a huge difference in people's lives:
How FIRE Works
Part of the appeal of the FIRE strategy is how simple it is. FIRE offers a concrete mathematical definition for financial independence. You have achieved FIRE when the following equation is true:
Your Annual Expenses < 4 Percent of Your Invested Savings
For instance, if you spend $40,000 per year, you will need to have at least $1,000,000 invested. The assumption behind this equation is that you will be able to cover your yearly expenses with nothing more than the interest on your investments. You will be able to leave the $1 million principal untouched while withdrawing no more than 4 percent per year.
The 4 percent withdrawal rate assumes that your investments will grow about 10 percent per year, which is the historical average annual market return. In addition, this rule also assumes that inflation will eat up about 2 percent to 3 percent of your annual growth. Withdrawing no more than 4 percent per year (other than adjusting for inflation) should theoretically protect your nest egg for an indefinite retirement.
(Unfortunately, the assumptions underpinning this equation are not necessarily safe since the market doesn’t always grow by 10 percent per year and years with major losses could seriously wound a nest egg, especially for anyone planning for 40, 50, or 60 years of retirement.)
While there is some debate over the exact details of what makes for a safe withdrawal rate or nest egg size, this mathematical definition forms the core of the FIRE movement. There are a number of calculators, blog posts, books, magazine articles, podcasts, twitter accounts, and Facebook groups all created to help you crunch the numbers to determine exactly how much of your income you need to save to retire in your 50s, 40s, 30s, or even earlier. Everything beyond this equation is about learning how to reach your FIRE number as quickly as possible.
Once you understand the math behind it, achieving FIRE is all about embracing the tradeoff. You know that you will forgo luxuries, free time, and even some necessities, in order to speed up your retirement timeline by decades.
Being prepared for this tradeoff is legitimately a good thing. FIRE followers know that they want to minimize the amount of time they spend working for an income. They get there through a combination of mindset shifts and extreme frugality, and they are generally pleased to be living life on their terms.
But even though FIRE can work that way, it can potentially create just as toxic a lifestyle as having to work forever in a job you hate.
The Potential Mindlessness of FIRE
One of the central tenets of the financial independence movement is rejecting a mindless adherence to consumer culture. FIRE practitioners rightly point out that we often spend money without thinking just because we have been conditioned to do so by our society. Pursuing FIRE is all about refusing to accept the mindlessness of unnecessary consumption.
Unfortunately, focusing on money in the pursuit of FIRE can create a different kind of mindlessness. Rather than think through how you want to spend your money, you may end up exchanging mindless consumption for mindless financial accumulation. The pursuit of a higher bank balance can become your goal, rather than using your money to improve your life satisfaction.
So what does this kind of mindless financial accumulation look like? Often, it manifests as a kind of overzealous frugality. That could include anything from refusing to attend a dear friend’s wedding despite having enough money for the plane fare to driving on bald tires while waiting for a sale.
This kind of frugality in pursuit of mindless accumulation will get in the way of your life satisfaction, rather than add to it. The entire exercise is about money and only money, and you end up chasing happiness via bank balance rather than through consumer items. In either case, you are not truly enjoying your life.
A friend once told me that he stopped lurking in FIRE websites when he realized that many of the people in the groups had no real goal for their lives other than achieving FIRE. They hung their energy, time, and even identity on early retirement, but had nothing to retire TO. While leaving a toxic work environment is certainly a good reason to want to achieve financial independence, having nothing in particular that you want to do afterwards just sets you up for boredom and unhappiness—and the potential for other mindless behavior afterwards.
The Inherent Privilege of Competitive Frugality
One of the common criticisms of the FIRE movement is the fact most of its practitioners have more than enough money to take their well-being for granted. The majority of the high-profile FIRE cases in the media have been individuals making well north of $100,000 per year. It is far easier to live comfortably while saving half or three-quarters of your income if you make $150,000 annually than it is if you make $30,000.
For those individuals who are not earning big bucks (or even medium bucks), the FIRE movement can seem like pie-in-the-sky thinking. For such individuals, the tradeoff is not so much about forgoing luxuries to reach retirement ten years from now, but about living in penury for most of your career to retire ten years earlier than your peers—at best.
And that’s if it’s even possible to save money on a $30,000 per year salary. The truth of the matter is that it is expensive to be poor. If you can’t afford to buy things in bulk, you’ll pay more for individual items purchased one at a time. The monthly cost of a mortgage may be lower than rent, but it requires a down payment that may be out of reach. You can’t use a power drill to stir your peanut butter or a woodman’s vice to squeeze limes (to ensure you waste not a single drop of peanutty goodness or limey juiciness) if you don’t own the tools.
Extreme frugality for those who have plenty of money is more like a game than a survival strategy. For many people, it’s simply impossible to play that game, which some FIRE practitioners seem to forget.
Placing Your Happiness in the Future
The biggest thing that makes me leery about how FIRE is currently presented is the fact that it asks for sacrifice now in exchange for happiness later.
Don’t get me wrong: I’m a big proponent of planning ahead. Not only do I get all flushed with pleasure when someone utters the word “calendar,” but I consistently look for ways to improve future Emily’s life with little things I can do now.
The issue with FIRE is that many practitioners often want to shame people for enjoying little daily pleasures because that latte would be worth $1 million in the future if you could just give it up today. (Editor’s note: This assertion is ridiculous).
While it is human nature to place happiness in some future state—I’ll be happy when I lose 10 pounds, when I meet the perfect someone, when I have kids, when I sell my novel, when I make 6 figures—there is a tendency in the FIRE movement to act as though taking time for little joys in the present steals potential profits from your future. This is why you’ll see FIRE practitioners bragging that they don’t own a television or subscribe to streaming services, because they spend their down time on a lucrative hobby.
Our culture certainly needs to break up with the “buy now pay later” strategy for happiness, and that is often what the FIRE movement is reacting to. But some take this to an extreme that moralizes on the enjoyment of cookies and Netflix.
It ignores the fact that we all have the right to be happy today and tomorrow. That means allowing for the small joys and intentional spending, while also preparing for an unknown future. Finding the balance between full-on “there is no tomorrow!” hedonism and extreme “be prepared for tomorrow!” sacrifice may not be easy—but it is far better than placing your happiness out of your own reach.
Living with Intention
When FIRE works, it can be transformational. But it has to be intentional to truly offer a satisfying life, in the same way that working, playing, loving, spending, and relaxation all need to be intentional to satisfy.
Falling in love with a strategy like FIRE can feel pretty great, but it’s important to remember that no strategy can replace living intentionally and authentically. Not even one with a cool acronym.