Thanks to a recent Kiplinger article, I've found an entire movement of Millennials that I had no idea even had a name.
FIRE- "Financial Independence, Retire Early". What is the idea? Work hard for a number of years, pay off debt, stock up savings, live off of a small portion of what you are bringing in....then stock all the rest up into savings and retirement.
Sound familiar? If you've read our blog for long, this may sound familiar, as this is exactly what we do here. We call this making ourselves "Artificially poor" forcing ourselves to live on less than we bring in so we can pay off our mortgage (prior to that, the goal was paying off student loans), save for retirement and our daughter's college, travel and do things like have one parent stay at home.
Here is the part where we differ: For the FIRE movement, the next step is once you've hit your magic savings number...you actually retire.
I was skeptical, as is my BFF Suze Orman, but here are some things I'm finding out about this movement.
1. No one actually retires. By that I mean, these individuals of the FIRE movement aren't just sitting around doing nothing. They are primarily entrepreneurs. They leave their 9-5 job, and decide to pickup a job they love (often creating their own) and take a significant pay cut. However, these people probably won't have a significant pay cut for long. Many are becoming bloggers, consultants and business owners. They are simply becoming self- employed.
2. They are number crunchers. I love a good number cruncher. They have a strict savings goals, and have planned accordingly for the decrease in income.
3. They CAN go back to work. Since it is a new movement, I'll be curious how long it actually lasts. Taking a few years off in your early 30's is great...but is that the forever plan?
4. They live modestly. Here is the key to this movement...be happy with what you have. All of these people are choosing to live frugally both before their "retirement" and after. Most live on under $40,000 a year. To some, that sounds like a pretty crappy "retirement".
Honestly, we should all take a page out of the FIRE movement book. Live frugally, save now (short term pain, long term gain) and take advantage of your biggest asset in savings....time. The longer you have to let your assets grow, the larger they will become when you need them.
Are you thinking of joining the FIRE movement? Here are a few things you should consider:
1. Crunch, recrunch, and have multiple others check your numbers. This is a game of numbers. To someone who is going to continue to work and contribute to their retirement for the next 30 years, you can have far less saved in retirement at 30 then someone who is planning to cease working entirely at age 30.
2. Mitigate Risk. Insurance policies can help with some of your risk. Life insurance, accident insurance, and lots of "fluff" in your emergency savings accounts will help you mitigate those unexpected expenses. In my opinion, you should also be 100% debt free before even considering this path.
3. Don't burn any bridges. When you leave your job, leave on a great note. You may decide "retirement" isn't for you. I would refrain from saying "see ya later, suckers!" as you walk out the door of your office. You may be back.
4. Factor in those key items you're missing out on. Leaving a job in your peek "earning" years is really missing out on a lot of potential income. You're also leaving things like employer savings matches, group health insurance, and social security down the road. Is it really worth it? Are there other options instead (going part-time for example)
5. Plan long term. This is great if you're 28, childless, newly weds...but are you planning to have kids later on? Or maybe living in that tiny house is awesome right now...but do you really want to live in that same house when you are 45? 65? 80?
6. Have a passion for your next step. If you are going to be an entrepreneur, you better have a passion and plan for your next steps. Are you going to make sure you have a job that covers all daily expenses? Or just supplements money you have stored away?
7. Have a backup plan. If you don't love "Retirement" continue to nurture relationships that can build a way for you to reenter the job force.
So do I love this movement? Yes! Will I join this movement...unlikely. I love what they are about, and I especially love that they are setting themselves up to retire young if they would like to. This is something Kevin and I hope to do. We have a goal to save so I could retire at age 50, but have no plans to do so!
FIRE- "Financial Independence, Retire Early". What is the idea? Work hard for a number of years, pay off debt, stock up savings, live off of a small portion of what you are bringing in....then stock all the rest up into savings and retirement.
Sound familiar? If you've read our blog for long, this may sound familiar, as this is exactly what we do here. We call this making ourselves "Artificially poor" forcing ourselves to live on less than we bring in so we can pay off our mortgage (prior to that, the goal was paying off student loans), save for retirement and our daughter's college, travel and do things like have one parent stay at home.
Here is the part where we differ: For the FIRE movement, the next step is once you've hit your magic savings number...you actually retire.
I was skeptical, as is my BFF Suze Orman, but here are some things I'm finding out about this movement.
1. No one actually retires. By that I mean, these individuals of the FIRE movement aren't just sitting around doing nothing. They are primarily entrepreneurs. They leave their 9-5 job, and decide to pickup a job they love (often creating their own) and take a significant pay cut. However, these people probably won't have a significant pay cut for long. Many are becoming bloggers, consultants and business owners. They are simply becoming self- employed.
2. They are number crunchers. I love a good number cruncher. They have a strict savings goals, and have planned accordingly for the decrease in income.
3. They CAN go back to work. Since it is a new movement, I'll be curious how long it actually lasts. Taking a few years off in your early 30's is great...but is that the forever plan?
4. They live modestly. Here is the key to this movement...be happy with what you have. All of these people are choosing to live frugally both before their "retirement" and after. Most live on under $40,000 a year. To some, that sounds like a pretty crappy "retirement".
Honestly, we should all take a page out of the FIRE movement book. Live frugally, save now (short term pain, long term gain) and take advantage of your biggest asset in savings....time. The longer you have to let your assets grow, the larger they will become when you need them.
Are you thinking of joining the FIRE movement? Here are a few things you should consider:
1. Crunch, recrunch, and have multiple others check your numbers. This is a game of numbers. To someone who is going to continue to work and contribute to their retirement for the next 30 years, you can have far less saved in retirement at 30 then someone who is planning to cease working entirely at age 30.
2. Mitigate Risk. Insurance policies can help with some of your risk. Life insurance, accident insurance, and lots of "fluff" in your emergency savings accounts will help you mitigate those unexpected expenses. In my opinion, you should also be 100% debt free before even considering this path.
3. Don't burn any bridges. When you leave your job, leave on a great note. You may decide "retirement" isn't for you. I would refrain from saying "see ya later, suckers!" as you walk out the door of your office. You may be back.
4. Factor in those key items you're missing out on. Leaving a job in your peek "earning" years is really missing out on a lot of potential income. You're also leaving things like employer savings matches, group health insurance, and social security down the road. Is it really worth it? Are there other options instead (going part-time for example)
5. Plan long term. This is great if you're 28, childless, newly weds...but are you planning to have kids later on? Or maybe living in that tiny house is awesome right now...but do you really want to live in that same house when you are 45? 65? 80?
6. Have a passion for your next step. If you are going to be an entrepreneur, you better have a passion and plan for your next steps. Are you going to make sure you have a job that covers all daily expenses? Or just supplements money you have stored away?
7. Have a backup plan. If you don't love "Retirement" continue to nurture relationships that can build a way for you to reenter the job force.
So do I love this movement? Yes! Will I join this movement...unlikely. I love what they are about, and I especially love that they are setting themselves up to retire young if they would like to. This is something Kevin and I hope to do. We have a goal to save so I could retire at age 50, but have no plans to do so!
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