The FIRE Movement: Financial Independence, Retire Early.

By: Stephan Hess, CFP® CDFA®

What Is The FIRE (Financial Independence, Retire Early) Movement?

We all yearn for some level of financial independence and the peace of mind that comes with it. For some, it will take a lifetime of working and saving; for others, it never happens.

Imagine attaining financial independence early in life, say, before you are even out of your 30s or earlier. This sounds unbelievable, like a 1 am get-rich-quick infomercial, but I can assure you it is a real thing, and many millennials have adopted it.

The concept is known as FIRE, which stands for Financial Independence Retire Early. To do this, you must change your behavior—one of the hardest things known to man.

If You Want To Retire Early, It Takes Great Discipline.

I don’t know how or when it specifically happened, but we Americans have become addicted to stuff. It’s pretty much in our DNA. The list of things we simply cannot live without is long and, if we are honest, probably unnecessary.

The money required to fuel such a lifestyle is not insignificant. It’s why the U.S. has one of the lowest savings rates compared to other countries. Society tells us that:

  • We need to buy a nice home and upgrade that over time.
  • We need to have nice cars and the latest electronics.
  • We need to have trendy clothes, go on amazing vacations, and eat out a few times a week.
  • And, of course, we need a $4 coffee every morning. (I am not judging anyone here, but let’s face it, we are pretty pampered.)

FIRE does not advocate the complete elimination of these things. Nobody wants you to live in a tent and eat only Ramen noodles. FIRE is an alternative financial management and wealth-building strategy that goes well beyond the budgeting advice from people like Suze Orman and Dave Ramsey.

But let me warn you upfront: It is extreme and requires frugality in every area of your life. In many ways, it is a rejection of the behaviors that most of us grew up with and follow.

Stephen Hess, CFP® CDFA® discussing plans to retire early with client.

FIRE Prioritizes Extreme Saving, Upwards of 50-70% Of Your Annual Income.

We are often told to save 5-10% of our incomes over a typical 40-45 year work horizon. This usually allows us to build enough savings to maintain our lifestyles in retirement.

What would happen if you saved 20% annually, or what about 50%-70%? It’s a simple math equation, and the result is less time required for accumulation. Instead of 40-45 years, it might only be 15-20 years.

Remember, the earlier you accumulate meaningful funds, the more those funds can create new funds for the rest of your life. Compounding is a powerful thing.

Get used to swimming against the current. If you do this, people will have strong opinions. They will also be irritated when you stop working 20 years before them. This is natural, but all you are doing is taking an extremely disciplined approach to prioritizing everything in your life. The new priority is elevating savings over everything else.

If FIRE Isn’t For You, It’s Still Good To Think About Your Spending Choices.

By prioritizing early retirement and extreme saving, you clearly must make different choices in consumption. Every new dollar saved is an increment of time you no longer need to work. Those time increments add up to hours, days, and eventually years.

Which is more important to you? Retiring five years earlier or that $4 cup of coffee? Is early retirement more important than the convenience of going out to eat? These are fair questions and are not designed to make anyone feel bad.

Everything in life is a tradeoff, and choices must be made. Most people are not going to follow the protocols of FIRE to the extreme and will instead find a balance that works for them. I salute anyone who can do this or some version of it. I myself could not live without British Baking shows and Dove chocolates, so I guess I’m out.

– Stephan Hess, CFP® CDFA®

If You Want To Retire Early, Let’s Discuss Your Savings Plans.

Retiring in your 50s sounds pretty good, huh? If you’re curious about what this could look like in your financial situation, contact our team. In our initial meeting, we’ll discuss which savings strategy will work best for you to retire early. Let us show you the way forward together.

Disclaimer: This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.