The Financial Independence / Retire Early (FIRE) movement is much in the news these days. You can hardly go to a financial website without seeing a headline about someone who “retired” in their 30’s. There is, not surprisingly, plenty of debate about what distinguishes retirement from being a professional blogger who writes about FIRE. Much of what I see is “click bait”, not much different from articles by self-proclaimed investing gurus. Beyond the hype, though, there is a deep and important idea: people can transform their lives by aligning their consumption and financial habits with their true values. FIRE is really about being mindful and intentional with how you spend your life and, specifically, how you use money effectively to accomplish your goals..
I first came across what is now called the FIRE movement when I read Your Money or Your Life by Joe Dominguez and Vicki Robin back in the early 90’s. The central theme of the book is to identify what you truly value and how this relates to money. From this foundation, you make money a tool to enable the life that you want rather than planning your life around earning and consuming. Dominguez and Robin refer to the process of managing money to reflect your values as financial integrity. This book has proven to be an enduring classic and a new edition was released in 2018. It is definitely worth reading. I will note that the investing portion of the book is out-of-date, even in the latest edition.
The most important idea behind much of the dialog on FIRE is that too many people are locked on the hedonic treadmill of earning and consuming. They get trapped in an endless process of perpetual lifestyle inflation, always wanting the next bigger or better thing or experience. All of this consumption requires more money and more work, of course. Many people find themselves short of time, tired, and frustrated because they still aren’t happy. FIRE advocates typically conclude that they would be far happier with less consumption and more time and freedom. To this end, FIRE advocates saving very aggressively when you are young and living simply. Rather than rewarding yourself with more consumption, you reward yourself with more time to spend as you wish, whether that means being a more engaged parent, volunteering, writing your blog or novel, etc.
There is a contingent of the FIRE movement that borders on asceticism and sometimes comes across as obsessively penny-pinching. It doesn’t take long to observe an implicit competition between FIRE bloggers on how little money they manage to live on and, as a result, the earliest age at which they can quit their jobs. This can be an interesting sideline, but the essence of FIRE is, in my view, not about self-denial but rather about being intentional with work, money, and consumption, and not getting trapped in the unpleasant situation that Will Rogers so aptly describe in the following famous quote:
Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like.
While many FIRE advocates seem pretty austere, they provide a counter-point to the standard menu of financial choices of American families. People are, in general, highly susceptible to following the herd and this is especially pronounced in outward consumption. We tend to feel that we should be able to make consumption choices that are like our peers. Part of this is self-gratification and part of it is that we may feel as though we are perceived as less materially successful if we don’t ‘keep up’ with the consumption choices of our peers and colleagues. The FIRE movement models a different paradigm and reading examples of people making very different choices feels empowering.
Geoff Considine on Finance and Economics 