By Samantha Yardley
FIRE (financial independence, retire early) is a fiscal movement gaining some serious traction. Endeavoring to encourage millennials to become financially free by promoting aggressive frugality in younger years, it aims to debunk the notion that you can’t retire in your ‘30s.
Fundamentally, FIRE is regarded as a way of life, rather than an investment strategy, and sees enthusiasts save and invest as much as 70% of their income in assets that provide lucrative returns.
Financial planner Matt Gray CFP®, CAP says: “Who doesn’t want to retire early?! The idea of making money without having to work is attractive and admittedly sounds like a dream, giving people the freedom to spend their time as they wish. The appeal is a life without bounds.
“FIRE is a tradeoff between spending freely and working longer, or the opposite. Which do you want to have controlled, your money or your time? People in the FIRE movement generally prefer their time freedom to financial abundance.”
If money burns a hole in your pocket, this may not be the blueprint for you though, as living below your means and keeping expenses negligible is a must. Saving 25 times annual expenses is the formula prescribed to create enough surplus to achieve financial freedom and subsequent early retirement.
Ziga Breznik, owner and head of research at Public Finance International concurs that adherence to FIRE is non-sensical. “FIRE requires extreme saving! Personally, I think the whole idea is nuts, and smacks of the sense of entitlement, even immortality, that younger people often have. There’s absolutely no guarantee that you are going to be here to enjoy that money when you’re 50. You may not even have the health to enjoy your wealth.”
His advice to young adults is: “Please do save for the future- it’s very important- but don’t put all your eggs in one basket. Some people might be able to make the fantasy of sailing off into the sunset aged 45, quaffing champagne and caviar, a reality, but most don’t. You’re just as well enjoying the money that you earn while you are young and have the health and friendships necessary to really enjoy it.”