Do you want to FIRE?

How will it be if one does not have to go to work to earn a living? What if one can follow one’s passion like learning music and going to concerts… or travelling the world with nary a care? What if one can set up a consultancy to earn some money, but where one can spend under 20 hours a week? What if all these can be done under 45, or better still 40?

If these thoughts have ever transited your mind, you are thinking FIRE.

FIRE is not some new management concept to achieve financial nirvana and be transported to Shambhala ( aka Shangri-la )!

FIRE stands for Financially Independent Retire Early.

The movement – There are many across the world who are disillusioned by the drudgery of slaving away their prime years at some workplace with the sole idea of earning money to take care of goals and finally retiring, when one is around 60 . These people are looking at retiring early, really early… some as early as 30!

They want to pursue what they consider to be meaningful living, enjoying doing what they love to do, not conforming to the generally accepted norm ( which is what keeps most people at the yoke for decades ) of a day job.

Understanding FIRE a bit more – The FIRE movement started after a book titled Your money or your life written by Vicki Robin and Joe Dominguez.

FIRE is an attempt to look at the frills we have in life and become aware of how much more we need to work for each of those unnecessary trappings. Also, the focus here is to be very focused on the expenses, watch it carefully and maximise investments during one’s working years.

In this method, they are asking people to save as much as 70% of their income. This probably will work for those in the high income brackets, where the couple is working. It will also work if their expenses are inherently low or they do not have children or any other commitment.

To understand this a bit more, please go through this –
https://www.investopedia.com/terms/f/financial-independence-retire-early-fire.asp

Is this practical – That depends. If a person is looking for meaning in life and is willing to live a frugal life then, this will probably work.

The main problem that we need to contend with is the number of years we may have to live on the accumulated corpus. Today, people are living into their eighties and nineties. Hence, if a person retires at 40, they will need to provide for the goals ( like children’s education, marriage etc. ) as well as having living expenses for the entire period. This will most likely end in compromising on the lifestyle to achieve early retirement to live their life on their own terms. All the people in the family should buy into this ideology; else it will not work. 

One does run the risk of medical emergencies ( at some point ) that may take a lot of money from the corpus, that may then not be enough. Normally, in FIRE, considering the fact that the full-time income is going to come in for a relatively short time, the corpus accumulated will be comparatively modest. Anyway as per the FIRE movement, one can retire when one has 30 years annual expenses. If something comes in later on to rock the boat, there can be problems.

Also, many people want to maintain a good standard of living even after they retire. For such people retiring too early will not be an option. It can only be a few years before normal superannuation.

Some people also want to retire from full-time employment and work part time or do Gigs. This is also a possibility while considering FIRE.

Important to consider – There is one very important thing that I would like to highlight. The later years in one’s career are the years when one’s saving potential increases. In fact we have seen that in the last 10 years ( 50-60 years of the person ) of employment, a person saves as much or more than their savings till that time.

That is because their incomes at that point are high, their expenses have moderated, many of the goals are already met or have been provided for and lifestyle expenses too would have moderated. So, giving up the income during those years should be well thought through.

While giving up a well paying career, one needs to clearly understand that getting back in may be challenging or even impossible. Hence, taking that FIRE call may be a one-way street.

Family members need to fully understand this call, be equally invested in this concept and be supportive. Else, this can bring in friction that can mar the peace and happiness at the family level.

Conclusion – One needs to give serious thought to this and take a well thought out call. Living a meaningful life or a life where one has time can be designed by making appropriate career choices ( like taking up a teaching position instead of a corporate job ).

Also, one can bring in those elements that are important in the here and now, instead of seeking a full break from the normal career ( which is disruptive ). For instance taking a sabbatical between jobs or ensuring that one can enjoy enough holidays while still working is something that is feasible. So, it is not that life needs to be a drudgery without FIRE.

FIRE sounds idealistic, romantic. But tread with caution, it is still FIRE!