Debbie Craig has encountered a few staunch devotees of the FIRE movement in her career. The Financial Independence, Retire Early (FIRE) method is an aggressive route of saving nearly everything during your early working years in order to stop working full-time in your 30s or 40s. “To be successful in the FIRE mentality takes D-I-S-C-I-P- L-I-N-E. Lots of it,” says Craig, branch manager and certified financial planner at Craig Wealth Advisors in Traverse City. She points to the relentless perseverance of saying “no” today for a bigger “yes” tomorrow and says oftentimes it’s difficult to stay on track when bigger future financial freedom is so far away.
So, What Exactly is FIRE?
The acronym FIRE is a term from the book “Your Money or Your Life” by Vicki Robin and Joe Dominguez, which was first published in 1992 and updated in 2008 and 2018. The best-seller shows readers how to live well while consuming much less by setting aside up to 70 percent of their annual income.
Experts break FIRE down into three tiers: Fat FIRE is retir- ing early and in continued comfortable style with a cushy nest egg. Lean FIRE means minimalist living and extreme savings, living on as little as $25,000 per year. Barista FIRE is saving up enough to quit a corporate job, but still needing to continue some type of less stressful work. The route you follow depends upon the lifestyle you’re willing and able to maintain.
Are You FIRE Material?
Does the idea of tossing the conventional retirement age of 65 out the window—or at least trimming a few years off— sound appealing? Join the slew of millennials embracing the extreme-saving lifestyle. Begin with holding onto 70 percent of your yearly income and when you reach approximately 25 times your yearly expenses, the FIRE method says you can quit your day job. Investing some of this money in equities or real estate is a common way to finance a comfortable lifestyle over the next 30 years.
“My acquaintances in the FIRE movement have had a goal in common: They don’t want to become their parents,” says Craig, who authored “Piece by PieceTM A Commonsense Approach to a Secure Retirement.”“They have seen their parents working and struggling into their golden years without any gold.”
One key to FIRE method success is having a partner to keep you motivated. Making a budget and sticking to it while earning as much money as possible is crucial. This may require a job promotion, adding a second one, or creating additional revenue streams through side hustles. A final major component is investing a larger portion of retirement savings than the average person is comfortable with. Basically, go big and do it early.
The Good, the Bad, the Wealthy
Even if you’re not all in with FIRE, Craig says, it is possible to achieve a secure retirement. Adopting some of the movement’s basic principles can help. “The biggest benefit is that they [FIRE devotees] are becoming more aware of their finances and how money is a tool for their life choices,” she says. When you focus on money management and budgeting, money tends to flow in your direction.
The one drawback Craig has noted is a solitary focus on debt. “It’s good to understand the perils in not paying off credit cards,” she says. “However, some debt can be a positive part of the entirety of a person’s financial plan. Utilizing the recent historical low interest rates to one’s advantage can be an equally powerful tool.”
The takeaway: Balanced thinking when viewing debt and equity and finding your personal definition of a rewarding life may just be the ticket to building your own FIRE.