A modest anti-FIRE manifesto.
This āindependently poorā project of mine, whether you want to call it a blog, a website, or, dare I say it? Manifesto, whatever this is, itās meant to explain how you can live the good life, on a budget, without the need of FIRE (Financially Independent, Retired Early).
If you can save 50% of your take-home pay starting at age 20, youāll be wealthy enough to retire by age 37. If you already have some assets now, youāre even closer than that. If you can save 75%, your working career is only 7 years.
For those who donāt know how FIRE is supposed to work, Iāll try and explain briefly:
You start young: work hard and earn a lot.
You save most of what you earn. Like 50% or more.
Everything that you save, you invest. Aim to get 7% annual return or more.
When your total wealth becomes so much that you can live off 5% of the annual return on your investment, you can retire.
To illustrate #4, look at this example: If you have 1 million and if you can take up 5% annually, thatās more than four thousand euros per month.
| Savings | 5% annually | Per month? |
|---|---|---|
| ā¬ 1.000.000,00 | ā¬ 50.000,00 | ā¬ 4.166,67 |
| ā¬ 500.000,00 | ā¬ 25.000,00 | ā¬ 2.083,33 |
| ā¬ 350.000,00 | ā¬ 17.500,00 | ā¬ 1.458,33 |
| ā¬ 150.000,00 | ā¬ 7.500,00 | ā¬ 625,00 |
| ā¬ 75.000,00 | ā¬ 3.750,00 | ā¬ 312,50 |
I started this project because I was vehemently opposed to FIRE. Why? Not because I donāt think it can work, I know for a fact it works (more or less) for some, but because it works for some. But what about average people? It so happens that I (and many others) did not to study engineering and get a job at Google or Apple at age 20 that immediately paid ā¬100.000,00 annually while I still lived in my parentsā basement. I didnāt start a company that I can sell for a million or more. And no, my parents didnāt leave me that much wealth, either. What about people like me? You know, the rest of usā¦
For us, normal folks, there is āØindependently poornessāØ. I know, poorness, it has such a negative connotation. But I hope that these past 1,5 years I have, by the examples and practical observations that I shared, helped you, my dear readers, to see the upside of things. Before highlighting those, letās see why FIRE is a bad idea that doesnāt work for most people.
Deconstructing the madness that is FIRE.
To get back to those four steps that we just saw, here is why there are mostly impractical or impossible:
We are supposed to start working young and immediately earn lots. This is already an impossibility for those of us who donāt live in California near the Googleplex and studied something other than a STEM (science, technology, engineering, math) field. Most of us start working at age 25 and earn very little until we are in our mid-30ās.
Most people need to spend most of what they earn. It is true, and a returning subject of my own laments, that many people confuse needs and wants, but that aside, if you donāt earn a lot to start with, the laws of math dictate that youāll also end up with less. The emphasis on saving and investing instead of mindlessly spending is the only wonderful thing in all the fire-sphere. But here is the thing: Iāve always lived within my means, but then there have been many years when I would be thrilled if I had saved, say ā¬200, at the end of every month. At that speed, no matter how good you invest that money, youāll simply not save very much over long time periods.
I mostly agree with the investing part of FIRE. Itās plain nonsense to have money that is not working for you. But I also want to point out the wisdom of just holding cash or equivalents. Why? Because when markets go down, thatās usually when youāre most likely to lose your job and need to dip into your own savings. And wouldnāt it be absurd to sell those expensive stocks that you just bought, at a steep discount, just because you need the money now? Far better is it to have diversified your savings in things that return in the longer term (stocks or bitcoin) and have some cash just sitting on the sideline for emergencies.
Unless you have a physically demanding job, retirement is bad for your health. The entire idea that you just stop working seems silly to me. I know the FIRE-ists (or is it FIRE-ites?) would defend their cult by saying stuff like ābut retirement means different things to different peopleā or ābut I didnāt really stop working, Iām still flipping housesā or my personal favourite: ābut living only on my savings means Iām now growing my own cotton and weaving my own t-shirts. Do you know how much time it costs to live this frugally!?ā Some who are truly retired, of course, quickly discover that unless you have some very cool and interesting hobbyās itās just boring to sit at home all day.
True happiness is on the Middle Ground
An observant reader might realize that what I advocate is a form of FIRE too. But itās more realistic, more obtainable for the average Joe, it is, FIRE lite, if you will.
I, too, think itās a good idea to spend (far) less than you earn
and I, too, think itās a good idea to invest with long-term goals in mind
and yes, I too think mindless spending is not only nonsensical, but actively hurtful for our own wellbeing as well as our environment.
This is why Iāve written about how to dress for less, get around on a budget, and how to have fun with a small purse. And why Iāve coined the phrase āmoney efficientā to replace ācheap.ā
But thatās where the comparison stops. I do not believe focusing on getting a high-paid job is a wise life-choice, not even if itās just for a couple of years with early retirement firmly on the 15-year horizon. Why? Because focusing on money, even for a few years, will make you miserable. Hoping that those investments that you have will pan out is a rocky road with many pitfalls, and simply living for decades hoping for a better life if things work out eventually, is again, undermining happiness today.
The Independently Poor lifestyle doesnāt promise a way to get rich later in life, it instead tells you to focus on today, enjoy your time now, not by spending money but by spending time with friends, and maybe spend some money (that you can miss) on them while youāre at it.
Learning to live well within your means will result in your ability to save for when you need it. The peace of mind that comes from knowing you can easily replace your washing machine or car because 1. you have savings and 2. because youāve trained yourself to look for a cheap second-hand replacement, will minimize stress in your life.
Remember that chart earlier? The one that assumes youāll save up to a million, make a 7% return of investment on average every year, and then scoop 5% off the top to live on? What if we instead assume that youāve āonlyā saved ā¬ 75.000,00 (sadly, that is more than large cohorts of society). That amount is not enough to retire on, but if we assume the same 7% ROI and 5% payments to yourself, youāll have an extra three hundred bucks per month to spend if the need arises. Or simply if you want to work fewer hours.
Instead of maybe retiring at some future date, working fewer hours now and having time and energy to spend on friends and family is the option that Independently Poorness offers today.