A Financial Journey


Financially Independent, Retire Early

FIRE is more of a movement than anything. It’s bigger in the US, due in part to the king of FIRE, Mr Money Moustache (ie growing your ‘stache, gettit?!). His superb blog as been running since 2011 and has a huge following. He posts on a range of subjects, all within the themes of the site. This is mostly financial (see below), but the concept is more holistic than that. He also has a youtube channel here.

MMM, as he’s known (it’s a bit of an alter-ego, one which pulls no punches), was a pretty highly paid software engineer, who with his wife, retired by 30. The proof as they say is in the pudding. There’s no point a 45 year old still working full time should be preaching people about retiring early, so I won’t!

The FIRE concept is essentially this:

Earn as much as you can.

Spend the least you can.

Invest the difference wisely.

Once the power of compounding as snowballed your investment to approx 25x your outgoings, you have enough ‘FU’ money to retire. The 4% is controversial, but essentially it’s a ‘safe withdrawal rate’. You investments should grow enough that, after fees and taxes, if you withdraw 4% per year to live off, the capital won’t go down, therefore you can live off it indefinitely. Some argue with the 4%, but based on the US stock-market’s historic yields, this is possible.

As other article on here will say, other people are that this is no longer sustainable. I’m still on the fence on that one!

MMM has articles showing how, if you can incest 75% of your income, you can retire after just 9 year of work. There’s been a lot of press around FIRE in the US. It really seems to split opinion. Many people say you need several million in the bank to retire well. MMM’s approach is to live frugally enough that you don’t need to be working to 65 and beyond. Who can argue with that (apart form those who benefit from managing investments for people for 20 years!).

The retirement part also causes some debate. However when you read the blog and it’s many comments, or other related ones, it really isn’t about retiring and sitting on a beach / playing golf, it’s about having the freedom to choose how you spend your time. Nobody can argue that that isn’t a valid aim.

As well as aiming to reduce spending, the FIRE ethos as an environmental aspect, in its refusal to buy in to western consumerism. The blog has a huge number of suggestions for a more frugal life, many of which would be too much for some people. Driving is a particularly difficult one. The UK isn’t quite as bad as the US; people still walk from time to time, and not everybody drives a 2 tonne pick up truck for no apparent reason other than feeling manly. MMM, who refers to anything bigger/newer/more expensive than necessary as Clown Cars, cycles pretty much everywhere, despite Colorado’s UK-shamingly snowy winters.

My thoughts.

It’s hard not to be attracted to the concept of not having to work any longer than needed in jobs you wouldn’t otherwise be doing. There is no doubt that most people can reduce their spending (and consumption) considerably if they are willing to make a few sacrifices. There is also no doubt, as I state here, that pretty much everybody can earn more money than they do if they really wish too. There is also no doubt that as a society we need to reduce the energy and resource consumption if we want to be around for a few more generations. Saving 75% of your income however is rather dependent on your income. If you make say £5k/month, which isn’t unusual amongst the blog commenters, putting away £3k+ is quite feasible. Especially if there are two incomes. For those of us on sub £2k, a mortgage and bills to pay, saving 25% is a stretch (though not impossible). £500/month, invested wisely, will still compound into a useful sum, but it will take decades.

One advantage we have over our US cousins is free health care. One of the main arguments people see to have is what happens if, having retired, you or your family are hit by a serious illness. In the US this can bankrupt people. In the UK we don’t realise the value of the NHS.

That said, we need to resist the temptation to say ‘well I can’t do 75% so I won’t bother’. The same attitude can be seen in several areas; I can’t lose a stone so I won’t bother trying. I can’t get a £50k job playing with Labrador puppies so I’ll stay on the dole. As I hope the rest of this site will show, saving/investing any amount is best than nothing. So go and start! now!

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