The Briefing

Live frugally and retire at 40?

How the FIRE movement works and why it comes under fire

FIRE is a lifestyle defined by frugality and extreme savings and investment. The goal? To stop working at the age of 40. While the savings plan can work, it’s also viewed critically. We explain in simple terms.

June 16, 2022
Reading time 2 min.

💎 Why do I care?

Never work again after 40? Unimaginable perhaps. But some young adults dedicate their lives to this goal. FIRE people want to retire at the age of 30 or 40 - not because they don't like their jobs, but because they want to be financially independent.

FIRE actually has nothing to do with 🔥. It’s the abbreviation for "financial independence, retire early".

People that follow the FIRE movement spend way less and save much more. Their ultimate goal is to accumulate enough money to afford one thing — free time. A lot of it. This means continually keeping an eye on finances and constantly investing money, instead of spending it.

Living modestly in your twenties, on purpose?

Anyone who has studied or completed an apprenticeship knows what it means to lead a modest lifestyle. FIRE people do this voluntarily. They look for cheap deals, cycle instead of driving and cook for themselves before spending money at restaurants. And they do this to the extreme.

The goal: Reach the ‘FIRE number’ — the individual sum of money that you theoretically need to be able to stop working until the end of your life. You do this by saving everywhere possible and in turn making the right investments with those savings. To work out how much you need to save, you can use a FIRE calculator. Here’s a simplified example:

Why is the FIRE concept interesting?

People who follow FIRE want to accumulate enough money to be able to finance their rent, electricity, public transport and all their other monthly costs. To do this, they have to be incredibly organized — sums on paper just don’t cut it. Specially created savings plans and sub-accounts that limit their spending save them time and effort in managing their financial overview. Allowing them to see and manage exactly how much they spend on food, clothing and other purchases.

This is not only exciting for organized minimalists, but also for those of us who finally want to know how much we actually spend on clothes or taxi rides a month.

Another FIRE trick: share! The FIRE community has a strong network, continually motivating each other to consume wisely so that each member can achieve their goals. How about a friends’ savings account to keep everyone motivated and disciplined?

Interestingly: The original purpose of the FIRE movement was not early retirement. Initially, the founders wanted to create a movement that would drive more conscious consumption and do good for the planet.

Why is FIRE controversial?

FIRE people are known for living simply. Many things that most people enjoy are a disadvantage to the FIRE lifestyle. City living? Way too expensive. Love to travel? Not ideal. Every cinema ticket, every coffee to-go: all life’s little pleasures are all strictly measured against the ultimate savings goal. For many of us this is unimaginable. It’s still important to find the balance between conscious consumption and austerity.

Add to that the fact that when it comes to surprise expenses — an accident, illness or repairs — the FIRE concept is risky… You stopped working early and didn't carry on paying into that pension fund.

In addition, not everyone can choose FIRE. While you don't have to come from a wealthy household, you do need to have a good income and low expenses. The seemingly typical FIRE saver? Male, in IT, with a spartan lifestyle.

🔥 What does this mean for me?

The FIRE movement can provide a template for more conscious consumption and better control of your expenses. But of course there are many different opinions on the subject. To form your own, ask yourself: is self-funded early retirement an option for me? How minimalist can I really afford to be with my consumption?

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