A Simple and Straightforward Take on the FIRE Movement
Financial Independence Retire Early may be passé but its principles are forever
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Did you hear? FIRE isn’t cool anymore.
If you don’t know about the FIRE (Financial Independence Retire Early) movement, it can be summed up in one sentence:
A person saves an unrealistic amount of money in their twenties and thirties, invests it in index funds which they live off in 4% increments for the rest of their life, thus never having to work again.
It’s a very tempting prospect. So tempting in fact, I was a FIRE advocate for a few years. I wasn’t keen on the retirement bit but loved the financial independence bit.
Times change. The world changes. Nowadays, FIRE is little more than a pipe dream for most who are more concerned with grappling with the cost of living crisis and mega-inflation than they are about retiring at 40.
FIRE may be quenched, but that doesn’t mean its principles are dead too. They’re not. They are in fact kickass. They could make all the difference to your finances - and your simple life.
I may no longer follow a FIRE-based life, but the following 7 FIRE principles have stuck with me - and keep my head above water.
Measure your time in hours of your life
Say a sweater costs $50.
You get paid $50 an hour. Great, you think. It will only take an hour of your life to save for that sweater.
But take away all workplace deductions from that $50 - tax, social security, the cost of your commute, your work clothes, canteen lunch, everything - for ease let’s say that leaves you with $25.
That same $50 sweater is now 2 hours of your life. Is it still worth it?
This is one of the main principles behind FIRE and one I live and die by. It’s cheesy as hell but time is a finite resource - none of us have any more than 24 hours in a day. Swapping out dollars for hours is a constant reminder of that and can really help when you’re debating about whether to buy *insert item here* or not.
Track your spending (but don’t judge it)
Four years ago, I started to track every single penny that went out of my account. It went into a spreadsheet that calculated what percentage of my earnings was going into each category.
I never judged my spending, I simply tracked it. After a few months, I had a really good overview of where my money was really going. Then I used my gut to tell me if I felt comfortable with that.
When it comes to discretionary spending, this is a game changer.
I no longer have to budget because my gut will tell me if I’m spending too much in, say, eating out or on travel or wine. If I am, I’m more careful the next month.
I also never get to the end of the month wondering “where did all my money go” because I know exactly where it went.
The system is simple, but it works.
All debt is bad debt
I don’t like debt of any kind (a mortgage is possibly an exception but even that I’d rather not have).
Debt is expensive. It can financially kill you.
FIRE advocates don’t like debt either and for anyone who follows the movement, eliminating debt - particularly consumer debt - is the first priority.
I’m with them.
I’ve written a few stories about debt that have gone viral. For fear of repeating myself, I suggest you read these once you’re done here:
Is That Person Rich or Just in Debt? Knowing the Difference Will Game-Change Your Life
Just Because You Can Make Mountains of Money Using Debt Doesn’t Make Debt a Good Thing
You can afford anything but not everything
If there was ever a phrase to sum up how to simplify your finances, it’s this sentence.
Simple living is all about prioritization, not deprivation. Prioritize what you want to spend your money on, forget the rest and unless you have a $10m boat in your sights, you might just make it.
I’ve just hit publish over at Medium on a story about precisely this:
3 pairs of shoes. 2 sweaters. A handful of t-shirts. One pair of jeans and another of leggings. A couple of dresses. And enough underwear to last a week.
That is by and large the extent of my wardrobe during the Fall and Winter months.
Then there’s my wine collection.
I wouldn’t think twice about spending $20+ on a bottle for a midweek buzz and my fridge will always contain at least 6–12 bottles in there. And that’s nothing compared to the 300+ collection I always had when I lived back in the UK.
Most people think I’m nuts (the jury is out on that) or that I’m Rockefella because why else would someone spend so much on wine?
The answer is, every person I know in the wine trade would spend that much on wine, and then some. And a lot of them don’t give a fig about clothes either.
I’m not nuts — I just know how to prioritize.
Someone else might not think twice about dropping $50 on a dress every week but would balk at spending more than $10 on a bottle of wine once in a blue moon. They don’t feel like they’re depriving themselves either.
This is the crux of minimalism and living a simple life. People who practice it never feel deprived, they’ve just learned to only spend on what matters to them. Someone’s buying habits will only look like deprivation if they have deprioritized what you would not.
FIRE disciples know how to prioritize and then some.
Learn from them - I certainly did.
Don’t fear the frugality
In much of the Western world, frugality is a dirty word. It speaks to a (false) narrative that a frugal life is a dull life.
Not so much in the FIRE world. If you want to save a million bucks by the time you’re 40, you and frugality are going to be best friends.
But that doesn’t have to be a bad thing. Especially if you reframe frugality as intentional spending.
Spending intentionally reduces the chance that you’re going to bitterly regret what you buy because you’ve truly thought about it. It cuts out all the fluff. It stops you from buying something because you think you should, not because you want to.
Frugality isn’t a dirty word. Reframe it and it could become the word that will save you financially.
Invest in a way that works for you
FIRE disciples live and die by index funds because it works for them and their love of the 4% rule.
The theory goes that if you take historical index fund growth of 8%, and you withdraw 4% of your portfolio in year one - increasing it by 4% every subsequent year to account for inflation - you will never run out of money.
The jury is out about whether the 4% rule really works, but FIRE advocates swear by it - and thus by index funds.
The point is, they have found an investment strategy that works for them - and a simple one at that.
I like index funds too but they are not the only way. There’s real estate. There’s my friend Rocco’s “pots of money” approach. There are as many ways to invest as there are people.
Depending on where you are in your money journey, you may think investing extra cash will never happen, but with a simple approach it could happen quicker than you think - and knowing what to do with that cash could become a big priority.
Take a leaf out of the FIRE book and keep it simple. However that may look to you.
Lifestyle inflation can do one
If there was a single money principle to take away from today, this would be it:
Lifestyle inflation SUCKS.
FIRE advocates know this. As their salary grows, their studio apartment and hunk of junk car probably won’t. They won’t tie up every promotion, every extra penny of salary in more stuff because they know that every extra dollar they pay for a thing is one dollar less towards their freedom.
Personally, I adore living a carless existence in one or two-bedroomed apartments. I love having the freedom to down tools at a moment’s notice - as I am about to in order to wander Testaccio market in Rome in search of Recipe Wednesday’s ingredients. And I can do this precisely because I live in small apartments with few outgoings.
Me and FIRE may have our disagreements but we both believe that lifestyle inflation is a money killer.
Keep it simple, keep it small. It’s more fun that way.
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I may have parted ways with FIRE a year or two back but I still love these principles, because they’re rooted in simplicity.
Keep your outgoings low. Spend intentionally. Simplify your investments.
If you’re interested in learning more about FIRE, there are some great blogs and books, all of which are rooted in these very principles. Just remember you don’t need a million in the bank to reap the benefits of the movement. You can take exactly what you want from it - forget the rest.
Books
Your Money or Your Life - Joe Dominguez and Vicki Robin
Financial Freedom - Grant Sabatier
Blogs
See you next week, friends.
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This article is intended for information and entertainment purposes only and should not be considered investment or financial advice