Inside the FIRE movement: fantasy vs fact in early retirement

FIRE (financial independence, retire early) is an international movement of people who seek financial control and flexibility by strict budgeting and frugal living.

Would you be willing to spend 10 to 15 years working two jobs, living in rented student-style digs and saving and investing every possible dollar, if it meant you could retire in your 30s? A growing number of millennials think FIRE is worth the sacrifice.

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How does a 20-something rebel against the system in 2019? For a growing number of millennials, the answer is simple: by saving money. More specifically, they are radically reducing spending to stash away at least 50 per cent of their income and retire in their 30s or 40s.

FIRE (financial independence, retire early) is an international movement of people who seek financial control and flexibility by strict budgeting and frugal living. They have an aversion to debt and work extra jobs to boost their income early in life, then rely on low-cost growth investments such as exchange-traded funds (ETFs) to both build capital and draw from in early retirement.

It’s about having the freedom to pursue your dreams and ambitions (no matter what your age), says Deacon Hayes, author of You Can Retire Early! Everything You Need to Achieve Financial Independence When You Want It. When your net worth is 25 times your annual expenses, you’re considered financially independent.

FIRE was born in 1992 out of the best-selling book Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez. In the book, the authors correlated expenses and time spent at work to hours of your life. 

The movement first gained popularity in the US, spread through a 1990s newsletter called The Complete Tightwad Gazette. Today, the FIRE message is shared through blogs and podcasts, with one – FIRE Drill – downloaded 7000 times per episode, securing it a spot in the top 100 investing podcasts on Apple’s US charts.

You’ll find other specialist forums on Reddit devoted to the FIRE movement in Australia, the UK, Europe, Canada and Asia.

Rich dad, poor dad, retired millennial

FIRE is one of those radical ideas that divides people because it involves some of the most personal things human beings deal with – money, relationships and self-worth.

Due to the passions stirred by the FIRE movement and his job in the public sector, the millennial behind the blog prefers not to disclose his full name. “Matt” says he was always good at saving and being frugal, and discovered the FIRE movement online in 2014.

“FIRE is basically like financial independence [FI] on steroids,” he says. “I knew FI was possible, but the people who had achieved it were all much older than me, so I assumed it must take decades of saving and investing.”

Matt’s investigation of FIRE strategies convinced him that FI as early as your 30s was possible, and the hundreds of people who comment on his website seem to agree.

"Careful spending in the consumer system we live in is also probably a positive, as is the willingness to be flexible about how you can earn a living in response to the way the world is developing." Dominic McCormick, Investment Consultant

One writes: “You merely need 10 years of pure sacrifice. I started late in my career, first decent job at age 30 and little money. Rented a small room, paying little and close to work. Worked hard, overtime etc. Scrooge for first five years. I took every dollar as gold because I understood the power of compounding.

Post five years, started to go easier on finances. Invested from day one. Fortunately it was 2008/2009 onwards. Bought a mixture of shares and Aussie properties. Had a like-minded partner, so it was a breeze. Retired age 38. Partner works one to two times a week. Two kids. Net worth A$2 million including super.”

Matt says Australian FIRE chasers focus on investing in shares via ETFs and listed investment companies and believe there’s a good chance they will be able to live off 4 per cent of dividends from their portfolio forever, which also factors in inflation. (This includes cashing in some of the shares over time.)

This investment strategy is common to FIRE groups in other countries, although some include other sources of investment such as rental property.

Financial independence, retire when?

Sydney-based investment consultant Dominic McCormick believes that, on the one hand, a rebellion against materialism is long overdue. “Careful spending in the consumer system we live in is also probably a positive, as is the willingness to be flexible about how you earn a living in response to the way the world is developing,” he says.

Psychologist Jane Enter, of Cape Byron Medical Centre, agrees. “Millennials are extremely smart and they have looked at the way that boomers consumed and worked, and said they want greater balance and to do life differently.”

The FIRE movement is also characterised by a desire to avoid reliance on government handouts.

However, the investment strategies used for FIRE by many millennials may be overly optimistic, McCormick believes. 

“There seems to be excessive reliance on the rule that you can withdraw 4 per cent of the portfolio each year, and the growth as well as the income will reliably replace this.”

What would happen in a deep or extended bear market, he asks. Even those who are older may face problems, “and we’re talking about millennials who are looking at at least 50 years of retirement”.

That said, many FIRE followers, including Matt, say they never plan to retire, they just want to be financially comfortable enough to do work they love. Others start later in life and don’t have such an enormous portfolio to build.

Financial consultant Ivan Guan, author of FIRE Your Retirement: 3 Simple Steps to Financial Independence and Retire Early and founder of, says: “FIRE is a widely discussed subject among the online community in Singapore.

“Typically, FIRE becomes a topic when people reach their 40s. It is probably because they are sick of their corporate jobs and want to make some changes. At the same time, they have more financial resources [such as savings] and time [as their children have grown up] to devote to FIRE.”

FIRE-proofing life

McCormick says that, theoretically, the FIRE model could work, if millennials save and invest enough money to not only account for long retirement, but also inflation and unexpected life events such as illness.

“Over a longer time period, it is more likely that some form of disaster may hit. If you are retiring on a very frugal budget, you need everything to go right, including in life and the assets market. Often, FIRE followers just look back at how equities have done recently and assume high single-digit or double-digit returns.

“At the same time, younger people who follow FIRE need to be willing to give up on eating out a lot or going on expensive holidays, and a lot of millennials are about experiencing life as well.” 

“I don’t think of FIRE as restricting my spending,” says Matt. “I think about it as a shift in mindset and identifying what truly makes me happy.

“I’m human. I buy stuff I don’t need all the time, but I know that spending money on something I don’t need will mean I’m delaying my [progress] towards freedom.”

He and his partner don’t buy the latest smartphones, and they rent a small unit instead of buying a house.

On this, Guan, himself a millennial, concurs: “There is nothing wrong with buying a house if you can afford it. However, tying down your financial resources to a property [especially in Singapore] creates a huge future liability and opportunity cost. If you have a mortgage to pay, you simply can’t quit being a slave of your work.”

Matt and his partner also focus on the small stuff that adds up. “We make little smart decisions like always packing lunch for work, using credit card rewards for cheap flights and insurance, trying not to buy any clothes at full price, and stocking up on specials at the supermarket [we average A$600 a month at the supermarket, which is quite expensive and something we could really tighten up if needed].

“In a normal year we save 60 to 65 per cent of our income. We still go out for drinks once a week and get a Friday night takeaway. But if we haven’t retired within five years – when I am 34 and my partner is 32 – something has gone drastically wrong.”

Of course, you could argue that someone in a First World country or a higher-paid career has a better chance of building a bulletproof portfolio. For many people, FIRE is outside of the realm of their day-to-day life because they don’t make a living wage, says Elizabeth Willard Thames, author of Meet the Frugalwoods: Achieving Financial Independence Through Simple Living.

“Achieving FIRE in Singapore is exceptionally challenging, considering the high cost of living in one of the world’s most expensive cities,” says Guan.

However, he believes the FIRE movement awakens a person’s desire to achieve more in their lives, not only limited to financial success, but other aspects in life. 

“It also helps bring up the society’s standard of financial literacy. The bad thing about the FIRE movement is that, if you’re not careful, you may end up sacrificing other important things in your life.”

Matt agrees a potential disadvantage is alienating yourself from friends or family because they live a vastly different lifestyle than you. The advantage, he says, is peace of mind, options and being able to prioritise what’s important.

The value of work

Work is not just about paying the bills. It can be meaningful if it gives you purpose, development opportunities and recognition. “People need meaning and connection, a reason to get up each day. For many, a job can provide that, as well as structure, and connection with colleagues,” says Enter.

On the other hand, if you have a job you hate, or you just don’t believe in the capitalist/consumerist world most of us live in, then the idea of giving up 40 hours a week of your life to work may rankle a little.

It is believed to be Confucius who said: “Choose a job you love, and you will never have to work a day in your life.”

“When you work for your passion instead of survival, the whole dynamic changes,” says Guan, “but I must admit it is not easy to achieve.”

The answer for many may indeed be FIRE; in other words a focus on becoming financially independent as soon as possible.

It seems life after work, and a big life, is possible, no matter whether you’re 30 or 65. According to Guan, “the difference between a dream and reality is action.”

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June 2019
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