What is FIRE?

Have you ever heard of the FIRE movement?

FIRE stands for Financial Independence Retire Early and it’s a really big personal finance movement online right now.

Essentially, if you are aiming for FIRE, you want to save enough money that you’re able to retire early, like really early. People normally think of a retirement in their 50’s as pretty young right? Most people normally retire from working in their 60’s. 

However, if your goal is FIRE, then you are trying to retire much earlier than that. When the money that you’ve saved reaches a point where you could live off of it for the rest of your life, then you’ve essentially retired, because that’s what being retired is.

Retirement is just a construct that we’ve created in our society that almost every single person goes through. They work for about 40 years, often at a job they hate, and then they quit with the intention of finally getting to enjoy their life and retire to a beach somewhere.

What I love about FIRE is that they’ve completely turned that idea of a typical retirement upside down, but I’m not sure if it’s what I’m after.

What Would It Take To Retire Early?

Crazy to think about?

Yeah, I think so too, but let’s do the math.

Let’s say you make $50,000 a year. If you invest your money correctly, financial advisers say that you can most likely withdraw 4% of your money each year. That 4% becomes enough to live on without digging into the big nest egg that you’ve saved up. 

So how much money would you need to give yourself $50,000 to live off of?

The answer is $1,250,000.

That’s a lot of cash…. 

To arrive at that number, I multiplied 50,000 by 25. The suggestion is to save 25-30x the amount of money that you want to live off of.

So if you had 1.25 million in the bank, you could retire right now and have $50,000 to live off of for the rest of your life. 

Sound crazy?

Well, the math works out. 

Multiply the income you’d like to have by 25 to see how much you’d need to save to create that lifestyle.

So if you want to live off of $100,000? That’s 2.5 million. 

But a big premise of the FIRE movement is also learning to live on less. If you had way fewer things in your life, what would you really need to have to live?

Could you live a simple lifestyle on $35,000 a year? Then, you’d only need 875k in the bank.

You may be wondering, how do you ever save this much money to be able to retire?

How do you pull together that much cash? 

You do everything you can to get there as quickly as possible, and there’s a whole community of folks out there that are trying to do just that.

Would You Enjoy That Retirement?

But what would retirement look like if you retired radically early?

If you hate your job, you might just think that you’d want to go sit on a beach everyday. 

But there’s actually a good chance that after a month of that, you’d actually start to feel pretty…bored.

It’s almost tough to believe, but retiring just for the sake of retiring may not be all that it’s cracked up to be. 

That’s why you would want to consciously fill that newly found free time with things that you truly enjoy.

And if you don’t start working on something to fill that time, it’s going to be taken up with scrolling facebook, which would turn into a nightmare. 

What would you spend your time doing if you didn’t have work?

I believe We’re Meant to Work, Why Not Make Money Doing it?

Here’s the part about the FIRE movement that I don’t like.

I actually think that we’re meant to work. 

I think that work helps fulfill us, give us purpose, and helps drive personal human growth.

Why not make money doing that work?

These days, there’s almost an infinite number of directions you could go when it comes to making money.

I think that if you reached the point where you could just quit and do nothing, I think it’d be awesome for a short term, but then I think you’d get bored. I think you’d begin to want to do something with your life.

So when you do retire, you want to fill it full of things that bring personal fulfillment. You want to be involved. You want to contribute. You want to take the opportunity to build, create, and be apart of community. 

So here’s my advice, don’t confuse wanting out of a job you hate with wanting to retire early. 

If you’re wanting out of a job, then get out of a job. But I believe working itself is fulfilling and worthwhile. 

Use your work to fuel your dreams and aspirations, not be something you seek to escape. 

Your Work Provides You An Income

Lastly, when you work you get an income.

Use that income to propel yourself forward. 

While I think there are many, many good things we can learn from the FIRE movement (living with less, purposeful lifestyle design), I don’t want to work that hard to get my expenses that low just so that I can avoid having a job. 

I would rather use my income from my work to fuel a fun lifestyle, and I want to use my work to craft a life of meaning and purpose.

Jared

Disclaimer: All investing is subject to risk. I am not a financial professional. The ideas contained in this blog are strictly for educational purposes. You assume full responsibility for any actions you take.