Is FIRE The Answer for Early Retirement?(Financial Independence, Retire Early)

Photo by Mathieu Stern on Unsplash

When I talk with members of my generation (Gen Z) about retirement, the conversation isn't always optimistic. The idea of working our entire lives with a lack of promise for financial security is daunting.  

With that in mind, I started researching the topic of early retirement, and discovered something called the FIRE method. The FIRE method stands for Financial Independence, Retire Early. It originated in the 1992 book, Your Money or Your Life by Vicki Robin and Joe Dominguez, The premise is based on extreme savings and controlled spending. In the book, the authors state that people should evaluate every expense in terms of the number of working hours it took to pay for it, and then decide if the expense is really worth it.  

FIRE's basic concept involves living below your means, saving as much as possible now, so that in the future you are able to live comfortably. People who commit to the FIRE method dedicate up to 75% of their income to savings while working full-time. When their savings reach approximately 25 times their yearly expenses, some may choose to quit their day jobs and completely retire, living off the savings they have amassed. 

Like me, yYou may be thinking that there is no way anyone can happily pull this off, but there are three variations that may work for people who want to try it. The first type is Lean FIRE which is extreme devotion to extreme savings. A person participating in the Lean method typically adheres to living very minimally and is willing to save almost all of their income. The second type is Fat FIRE, which is ideal for a participant with a comfortable 9-5 job looking to save more than the average person, but also still wanting to keep living their life. This is generally more suited for someone with a higher salary who can afford to save a lot without giving up spending on some activities like vacations. The last variant is Barista FIRE, which to me seems like the most realistic approach. This variant of FIRE is a mix between Lean and Fat., People who follow this variation worked hard at saving during their full-time positions, and have made enough to quit that job. They then take a part-time job to have spending money, like working in a coffee shop, which is where the term "barista" comes from. This person utilizes this method for more free time, but also for the ability to work on something at a slower pace, or even pursue a passion project. 

For many of us, the pandemic, showcased the fact that we can work in ways that honor a better work-life balance (like hybrid or fully remote work.) Along with that, many in my generation have a growing lack of faith that Social Security and pensions will be available to us in the future. That's why something like the FIRE method can sound so appealing. However, we need to be realistic about whether it is right for us. 

Because it involves saving and investing a huge amount, if not most, of your income, following the FIRE method can be extremely difficult to pull off, especially if you have a modest salary, student loans, plan on having kids, or live in an expensive area, like a major city. To be successful, you need a high income, serious discipline, and a certain amount of luck. Even if we could adhere to the FIRE principles, I can't help but wonder if it might be wasting youthful joy for something that isn’t fully guaranteed anyway.  

 
I am glad I learned more about the FIRE method, and I hope that you did, too. It offers useful concepts like cutting unnecessary spending, investing early and better budgeting strategies. That is information we can use at any age or stage of life. As someone who is beginning to worry about saving more and more, it is interesting to see the other side of the spectrum in comparison to many young people that do not use their savings account just yet. I personally will not be able to participate in the FIRE method, both due to my financial situation and lack of spending control as a 21-year-old girl, but I hope this gives information for you who are ready to retire soon, and willing to start now.