Dec 20, 2019  | Tags: FIRE, personal finance, retirement

Our Insights

When say ‘FIRE Movement,’ we’re not talking about the raging infernos of a bushfire. FIRE is in fact an acronym for ‘Financial Independence, Retire Early.’ 

Much like an actual bushfire, however, the FIRE strategy is very aggressive. It involves intense saving and investing with a self-denial lifestyle with the ultimate goal of saving up enough to retire early in your 30s or 40s.

Some people champion this strategy as a way to get the most out of their working years and then leave the traditional 9-to-5 grind so that they can live out the best years of their life in relative financial freedom.

The FIRE strategy might sound good, in theory, but it’s neither easy nor foolproof. Consider a few pros and cons of the FIRE movement.

Pros of FIRE

More time.

With the FIRE strategy, you could theoretically retire early and have more time to enjoy your retirement while continuing to live a low-stress and financially-independent lifestyle. This strategy can spare you years of working at an office desk day in and day out.

A simpler lifestyle.

FIRE communicates the idea that you need to live your best life while you can and not postpone such enjoyment for the years when you’re too old and sick to do anything.

By simplifying their lives with the FIRE strategy, many people have found themselves with more time to spend with their families, travel or take up new hobbies and pursue new interests. There can be much more satisfaction in getting the most out of life via experiences rather than in just accumulating money.

Greater control over your finances.

The FIRE strategy primarily focuses on the one financial element you can control: your spending. 

Instead of letting your wealth grow or shrink at the mercy of the economy, you can take back some control by applying principles of the FIRE movement. Closely tracking every cent and spending on only the bare necessities will ensure that you never have to go into debt.

Cons of FIRE

Dissatisfaction.

Some who’ve tried the FIRE strategy ultimately admitted that they were miserable. Working extremely hard every day and denying yourself even occasional small luxuries and treats can wear away your morale and lower your quality of living. The FIRE lifestyle of scrimping and saving could be physically and mentally harder on you than working towards retirement in the more traditional way.

Disappointment.

FIRE appears to be a smart and simple strategy. After all, what better way is there to save money than by not spending it in the first place?

FIRE, however, is not infallible. It’s extremely risky to invest a bunch of your savings and hope the market performs well enough to make your savings last for the rest of the 40 or 50 years you expect to live.

You have to also consider the possibility that your financial needs, goals and responsibilities can change over time. If you’re able to keep working, you’ll be in a better position to pivot and adjust your retirement and savings strategy than if you quit earning at a young age and lived off relatively limited savings.

Loneliness.

When you become known as a financial ascetic, your mates may start to avoid you. Unless they’re all avid supporters of the FIRE movement as well, you might find it hard to keep up with their more materialistic lifestyle choices.

For example, your friends aren’t going to invite you out for brunch or a beer if they know you’ll just give them a lecture on your savings strategy. You won’t be able to bond over shared holidays, shopping trips or sporting events.

The FIRE strategy does place an emphasis on the value of time over money and thus promotes having quality relationships over quantitative experiences. But if you’re extreme in your views and lifestyle, then you could end up alienating yourself from more moderate friends and family members.

Is FIRE the Right Strategy for You?

The FIRE strategy certainly has some appealing principles. And they aren’t all inherently wrong principles, either. But you do have to carefully weigh the negative impact that FIRE can have on your life, both now and in the future. 

Here at Calder Wealth Management, our financial experts recommend taking a balanced and sustainable approach when it comes to planning your financial strategy. An extremely self-sacrificing lifestyle can be unrealistic, if not dangerous. It’s still possible to live a comfortable life while adhering to personal tenets that value time and family over wealth accumulation.

Ultimately, there's no cookie-cutter strategy. You need to sit down with an expert and work out a plan that is right for you, based on your values, lifestyle and wealth goals.

Get advice

Don't chase financial fads, work with experienced, credible financial planners and advisers with a track record of success.

Talk to the team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder at Calder Wealth Management.