Wednesday, March 6, 2019

Is FIRE Impossible for Reasonable People?

“Whether you think you can, or you think you can't―you're right.”
― Henry Ford

Retiring in your 30s or 40s seems like an impossible dream for most people. But the FIRE (Financial Independence Retire Early) movement is filled with people whose goal is to retire well before the usual retirement age. Critics say these FIRE penny-pinchers deprive themselves of any joy in their lives, and that FIRE is impossible for reasonable people. There is some truth to this, but not much.

The truth is that most adults have created a life for themselves that makes FIRE impossible without huge changes. They bought a big house far from where they work and own cars for commuting. They’ve committed almost all their income for the foreseeable future to a lifestyle they’ve chosen. No amount of eating in or other penny-pinching will make a big enough change to make FIRE possible.

That isn’t to say that smaller changes don’t help. Cutting out small amounts of spending here and there can improve your life tremendously. The key is to identify spending that isn’t bringing you happiness. But this type of change won’t shorten your working life by decades.

For FIRE to be a reality, it’s best to start before you make huge financial commitments. Instead of buying a big house far from where you work, you choose to rent or buy a modest place close to work. The savings can be huge. Reducing your commute by 25 km each way saves about $5000 per year. Renting or owning a smaller place can save much more. By avoiding building an expensive life, it’s possible to save much more of your income and build toward early financial independence.

If you’ve already built an expensive life, changing to the FIRE path requires big changes. It likely means selling your home, selling expensive cars, and moving to a modest place closer to work. Few people are willing to make these changes.

None of this means it’s wrong to buy a big house for your family in the suburbs and commute a long way to work. It’s just that this choice precludes early retirement. Life is about choices. FIRE is not impossible; it just requires the right set of choices on the most expensive things in life. However, most people tend to push big choices like houses and cars right up to the limit their income supports.

Some critics say FIRE is impossible unless you have an enormous income. This isn’t true. FIRE is certainly easier with a big income, but it’s still possible to avoid making lifestyle choices that consume most of your future income. Some incomes really are too low for FIRE, but the lower limit is well below $100k/year.

Other critics say FIRE isn’t possible in certain expensive cities. Staying in an expensive city is a choice. You’re free to do as you please. But if your income is too low for FIRE in downtown Toronto, then FIRE may be possible somewhere else. You may not want to find a new job and a new home, and that’s your business. But you’re then choosing the status quo over FIRE.

The truth is that most people like the idea of being financially independent and retiring early, but they’re not willing to do what it takes to get there. Instead of admitting that this is a choice they’re making, they want to deride those who seek FIRE, and declare it impossible for reasonable people. But this just isn’t true. My own path is only mildly FIRE-like. I could have retired much earlier by spending less, but didn’t. That was my choice.


  1. There is also value in starting out this way without actually retiring before 40. I did a lot of these steps early on but now find it unnecessary to stick to them strictly.

    The compounding advantages are already at work which gives me a lot more options. And the way I would spend the next 30 years, even with little to no financial pressure, will probably involve as much earning as spending.

    In some ways I can now spend more than average while my investments keep growing on their own. Even without getting to full retirement there are a lot of benefits that will keep growing over time and allow me to make good long-term financial choices.

    Being slow to increase your spending (and managing your money well) can give you a lot of the advantages without having to make a lot of sacrifices.

    1. @Richard: Agreed. A few good early choices can set you on a great path for life. But make the wrong expensive choices early and you're committed to a path of paying off debt for decades.

  2. The following exchange is reproduced to remove broken links.

    ----- Journeys of The Zoo March 15, 2019 at 12:08 PM

    Dear Michael,

    "Compounding, the 8th wonder of the world." Einstein said something like this. Smart man.

    I really appreciate this non-FIRE bashing post. I've read many over the years and even more lately. People will always come up with an excuse like need a big income or not living a fulfilled life.

    Maybe FIRE is just "our thing" and living like that doesn't cause us (m)any sacrifices. We're all different and what works for me, doesn't have to work for others.

    The difference is that I'm not out there telling everyone what's wrong about the lifestyle they've chosen. I'm just getting on with mine.

    Again, thank you.

    Regards, Sarah.

    ----- Michael James March 15, 2019 at 1:02 PM

    @Journeys of The Zoo: Glad you liked it. FIRE isn't for everyone, and FIRE means very different things to different people, but most people could benefit from thinking about FIRE's biggest messages.