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What is FI/RE: How Millennials, Gen X, and Gen Z are rejecting traditional retirement

cash management fi/re financial independance retire early gen x gen z millennials retirement strategy Mar 06, 2021
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What is FIRE 🔥 

Financial Independence, Retire Early (FIRE) encourages people to aggressively save money to enable them to the ability to "retire" early. Retirement means different things to different people so within the Fire community financial independence takes on many forms. Read further as we discuss the grounds of fire movement, methodology, and who it is for.

Let's Dig Into The Basics:

Everyone has a dream of what retirement looks like to them. Many people dream of traveling the world, while others look forward to a beach house somewhere beautiful. For most, reaching the goal of a comfortable retirement and the dream thereafter lies entirely in their ability to save in their 20's and 30's when compound interest will do much of the heavy lifting for them. The FIRE movement helps people achieving their goals of ‘retiring early’ and finding financial freedom. FIRE adherents believe in increasing passive income and dramatically cutting down the personal and household budgets.

Grounds of FIRE - Financial Independence, Retire Early

Financial independence, retire early is a movement where people aim to achieve financial freedom withstanding a well-controlled and stable life, at a younger age. The whole purpose of FIRE communities emphasizes setting a dedicated goal to attain financial independence in their 30’s to 40's, rather than waiting until the conventional age of 65 plus.
‘’It’s less about retiring early and more about having the freedom to pursue your dreams and ambitions’’ – Deacon Hayes in the book ‘You can Retire early.’ Hayes also concludes that FIRE is not only about retiring at the earliest age, but rather living a debt-free life where one has the freedom to choose whether to work or not.

FIRE Movement Methodology – How it works

The FIRE movement began in earnest around 1992, with many believing the co-originators of the movement to be Vicki Robin and Joe Dominguez in their bestselling book, ‘Your Money or Your Life'. The book would be one of the first comprehensive illustrations of saving big and retiring early.

The plan starts by setting up a goal for extreme savings. Setting aside anywhere from 40%-70% of your annual income, which does the massive lifting by following these core points;

  1. Investing money into retirement accounts monthly
  2. Living below your means and minimizing overall expenses
  3. Boosting passive income by having multiple streams of income
  4. Eliminating any and all consumer debt
  5. Planning in advance for the cost the early retirement healthcare by utilizing HSA's and/or Long Term Care Insurance

These five points are essential for the FIRE Movement.

Millennials and other families have made the decision to devote upwards of 60% of their yearly income to the FIRE movement to achieve retirement well before the traditional retirement age. The simple calculation to ensure people who follow this method have enough saved to retire is to reach 30 times their annual expenses. Depending on the desired lifestyle and amount of savings, people who follow this program manage their household budget by withdrawing 3-4% yearly from their savings after retirement. The entire concept demands diligence to budget effectively, control expenses, save regularly and invest.

Who Should Consider FIRE?

The FIRE movement is for those people who want to live without debt and temporarily live a more minimalistic lifestyle. FIRE demands people to have patience, determination, and focus to retire early and live life on their terms.
Tanja Hester, an author, ultimately warns as she states in her book, “Retiring early because you don’t like your job is a bad reason to do it, and is a recipe for being bored or aimless when you get there”- Work Optional: Retire the Non-Penny-Pinching Way. Achieving financial freedom ultimately requires cutting down unnecessary expenses and maintaining a concise personal budget.

Sacrifice for the short term to live the life of your dreams long term.


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