You’ve probably already heard about the FIRE movement.
FIRE stands for financial independence, retire early. Usually, the people who follow it are in their 20s and 30s and saw what happened to the economy in 2008 and have decided to put saving above all else in a bid to free themselves from worry.
They’re having a reasonable human reaction to a truly awful time. Of course, the stock market /zigman2/quotes/210599714/realtime SPX +0.48% since 2008 has more than made up the lost ground, as one would expect.
The economy recovered, too, judging by the normal indicators: Unemployment is extremely low, wages are rising, inflation is in check. Yes, full employment, high real estate costs and low pay are still problems, but broadly speaking things have turned around.
Yet the FIRE warriors rage on, zeroing out credit cards (good), foregoing hobbies and spending on entertainment (questionable) and reportedly living on ramen noodles in the name of hitting a somewhat arbitrary savings number as soon as humanly possible (very hard!).
As a financial adviser, a lot of my job is about helping clients set realistic, achievable financial goals. Part of that process involves creating low-cost investment portfolios that match risk with reward according to their personal temperament and needs.
Another part is financial planning. Sure, you want to fund your future retired self without worry. But, today you have a mortgage to pay, your kids need to go to college, and yes, you deserve and want to buy that latte once or twice a week.
And, nothing against ramen noodles, but ideally what you eat should be a choice, not a discipline.
A new direction
What’s the alternative? Lately, I’ve been telling folks to stop thinking FIRE and instead think FUND — financial understanding, new directions.
Financial understanding is educating yourself about the facts of how money works. The research is out there, in copious amounts. For instance, the reason so many people have moved to index funds is not fad-driven; it’s because low-cost investing really works.
If learning something new is the stick, the “new directions” aspect is the carrot.
Who wouldn’t want the freedom to retire a few years early with total confidence? And yet blogs with titles such as “I Retired at 40 and Now I’m Back at Work” flood the internet. Even the early FIRE devotees who hit their ambitious savings goals are realizing that a life without work can be meaningless.