October 9, 2018
I have been fascinated by rise of the FIRE movement. Financial Independence/Retire Early is the full name, and it is full of interesting people who are not really good at being like everyone else. They have all sorts of paths to making enough money or reducing their cost of living to such a point that it allows them to stop living the normal approach to life where we learn/work/save/retire/die … in that order and on a schedule that leaves the retirement portion until very late in life.
(Click here for the Reddit group.)
The interesting bit isn’t this group however, it is the comments by Suze Orman, a financial commentator, stating that “retiring early requires $5 million” otherwise it would be the biggest mistake of your life.
There is a very big debate on the subject in the media, and I thought I would chime in. Ms. Orman made points about this early retirement craze that are completely accurate, including potential issues with returns on investment, health care costs, lifestyle changes, societal upheaval and so forth. It is important to note that these issues happen whether you are working or retired, and they happen whether you are poor, working poor, modestly wealthy or an oligarch.
The real issues come into play in other significant areas, and they are the focus of the FIRE movement (for many anyway), and they revolve around how you want to live your life. For many, it is not about the ‘retirement’, rather, about the freedom to choose one’s activities, and the realization that the pursuit of material wealth is NOT creating happiness.
Anyone who is serious about financial security would not trade it for some brief experience, or even an amazing purchase. That simple trade-off happens all the time though and highlights the burden individuals place on themselves for the pursuit of things and ‘experiences’. The FIRE movement is mostly about rationalizing these needs and wants with what one is willing to work for and how people want to live their lives.
It is now pretty clear that many of the things that defined normal life for our grandparents and parents are not really appropriate to our children. Home ownership is becoming an expensive option, and renting makes more sense for many. Car ownership is even less reasonable for many today, especially when living in large cities. While everyone seems to be getting an education, the price for that education is significantly more than it was decades ago, yet ‘equivalent’ education doesn’t provide the same opportunity as it did decades ago.
So what should you do? Well, my best advice is to stop following a script. That said, here is a script for the modern world:
- The first thing is to find ways to be happy that don’t require a lot of money. Recognize that these things may change, and resist changes that are expensive!
- Next get an education that supports work/employment that pays MORE than that lifestyle.
- Now work really hard and enjoy your lifestyle
- Since your work should have a financial return MORE than your lifestyle costs, invest the rest.
- Repeat until your savings and/or investments will cover your costs.
In Ms. Orman’s rebuttal of the FIRE movement, she asserts that future costs (including inflation, medical, disasters or other setbacks) could wipe you out and this is a serious concern, particularly if your options for making money dwindle (stale resume, outdated skills, ageism). But that doesn’t make this approach impossible, it just means that you have to be smart, responsible and build in contingencies.
No matter what your opinion here, the first step; financial independence is a worthy approach to life at any age. Whether you retire early or not is a choice that can be made at that time. Just note that money doesn’t make you happy, it just provides security. Happiness is a choice.