By Roger Ma
There has been a growing interest in the financial independence, retire early movement, or FIRE for short.
According to the movement, all you have to do is save 25 times your annual living expenses, and then you’ll be financially independent and have the ability to retire early. Best of all, when you become financially independent, you can do whatever you want with your time, and don’t have to worry about making money.
It sounds amazing, right? While there are some good aspects of the FIRE movement, becoming financially independent or retiring early won’t make you happy, and here’s why.
What Is financial independence?
Generally, being financially independent means, the earnings from your investment portfolio (and other passive income sources) are sufficient to cover your annual living expenses — empowering you to not have to work for a paycheck any longer.
Who is pursuing FIRE?
Many people in their 20s and 30s are drawn to this movement with the hope of “retiring” much earlier than the traditional age of 65, or transitioning to more meaningful work. To give you a sense of magnitude, the Financial Independence sub-Reddit currently has nearly 450,000 subscribers.
Why are these people pursuing FIRE?
People may have a variety of reasons for pursuing FIRE, including:
Seeking a formula or structure to follow: Until we enter the workforce, much of our lives are pretty formulaic: work hard, get good grades, get into a good college, and get a good job. After college, the number of paths one can take are nearly unlimited. With so many choices, it can be tough to know what path is right for you. The FIRE movement provides people with a formula to follow.
Escaping their jobs: 70 percent of all employees don’t like their jobs, so it’s not surprising that many may be looking to the FIRE movement to help rid them of their 9-5 jobs.
Seeking meaning or purpose: Some may be searching for a sense of meaning or purpose in their lives, and pursuing FIRE gives people the feeling they’re progressing and bettering their lives.
What’s wrong with pursuing FIRE?
There’s nothing wrong with being on the FIRE path in and of itself, but it does become an issue if there is a mismatch between what you are expecting to get from achieving FIRE and what you’ll actually get.
Achieving financial independence and having the ability to retire early doesn’t automatically provide you with meaning or long-lasting happiness. Targeting to be financially independent is similar to setting and achieving any other goal, like aiming to get a promotion or a pay raise.
People may set these goals to keep themselves busy or make themselves feel like they’re moving forward. The problem is, when you achieve that goal without a larger “why,” it may only provide fleeting happiness rather than the deeper meaning you were seeking.
Finding real meaning and purpose takes time, and is often a lifelong process that requires continual self-reflection to understand and align your skills, interests, and values, with what you do every day. Simply becoming financially independent does not allow you to “warp” past the hard work that is required to find work you like (paid or unpaid) and determine the life you want to live.
What do you suggest instead of pursuing FIRE?
I don’t think pursuing FIRE is a bad thing, as long as you know what you’re getting yourself into and what you’ll get from achieving your goal. Before hopping on the FIRE path, it may be helpful to ask yourself a couple of key questions:
Overall Goal: What do you hope to achieve by becoming financially independent? Are there other ways you can achieve your desired goal or is reaching financial independence the only way?
Job-related considerations: If leaving your current job is a key factor in pursuing financial independence, what elements of your job don’t you like (and what elements do you like)? What would an ideal job look like? How big of a difference is there between your current job and your ideal job, and are there minor or major barriers that may prevent you from tweaking your current job?
Life considerations: How will your life look different after reaching financial independence (e.g., what time will you wake up, how will you spend your days, who will you spend your days with, where will you live, etc.)? Will this be an enjoyable way for you to spend your time over the long run? Is there a way for you to do a “test drive” to make sure?
With all that said, you don’t need to be financially independent to find work you love or create a life you want to live now.
For those unhappy with their current jobs, know that you don’t necessarily need to make severe changes to your life to be happy (e.g., quit your job, go to graduate school, or travel the world). You don’t need FU (Fnck you) money to feel empowered to speak up at work, communicate your needs, and manage expectations to ensure you’re balancing work and life.
When people on the FIRE path get close to their FIRE number, many convey that they feel more comfortable speaking up and asking to tweak their jobs to maximize the responsibilities that they enjoy most. But the truth is, you may be able to work with your manager now to turn the job you have into the job you want — without needing to wait years down the line after you’ve amassed some large pile of money.
While the FIRE movement does have some positive aspects (many of which overlap with the Bogleheads), such as emphasizing deliberate spending, investing wisely using low-cost mutual funds and ETFs, and utilizing crafty financial strategies, you don’t need to pursue FIRE to live a life you want to live. Many of the benefits FIRE people realize down the line, such as feeling empowered to turn the job you have into the job you want, are things you can do right now. While financial independence may provide you with financial cushion and peace of mind to comfortably pursue paths outside your current career, you don’t need to be financially independent to start experimenting now. And there are some things financial independence, by itself, will never provide you — meaning and happiness.