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Applying Personal Finance Principles to FIRE

The subject of FIRE (Financial Independence Retire Early) has captured the imaginations of many.  Some love it and some hate it, because it’s a good strategy for some and not others.  Many variants of FIRE have evolved over time to suit people’s different needs and desires.  This makes it hard to speak generally about FIRE, but there are principles that we can use to judge a particular FIRE plan.

Here is a general personal finance principle:

Don’t cheat your future self by indulging your present self.

The fact that we tend to discount the future too much makes this principle difficult to follow for some.  Roughly speaking, this principle means you should plan for your future consumption to match your current consumption.  In some cases, a carefully thought out plan can have some higher consumption in the present than in the future.  The key here is having a sensible plan rather than just living for today and ignoring the future.

FIRE enthusiasts don’t have trouble with this principle.  However, when it comes to evaluating some FIRE plans, we can flip this principle around:

Don’t cheat your present self in favour of your future self.

I sometimes see FIRE plans like the following.  “I’m going to live on ramen in a terrible apartment until I have enough to quit the high-paying job I hate and retire to a life of travel.”  This fails the second principle.  Why not live at least as well now as you plan to live in the future?  It’s better to balance the quality of your future life and your present life.  You could still retire at the same time if you wish by living better now and not quite as lavishly in the future.  Or you could push out your retirement date a little.  Either way, live a tolerable life in the present.

Back when I was younger and working in high-tech, I knew many programmers who hated the pressure and long hours, but it was their only way to earn a big income.  The term FIRE didn’t exist back then, but the concept made sense for them.  They could tolerate their jobs for a while to amass enough savings to either retire or switch to a much lower-paying job they would enjoy.

For FIRE to work for these burned-out programmers, they would necessarily have to live on a fraction of their income.  During their working years, it doesn’t make sense to increase the pain of working a stressful job at the same time as spending nothing on any pleasures.  They should live at least as well in the present as they plan to live in the future.

When people sacrifice the present too much, they sometimes find themselves unable to enjoy their retirement, because spending their savings feels wrong.  This is a trap that you can avoid if you follow the second principle.

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Comments

  1. johnAugust 25, 2026 at 9:48 AM

    Coast Fire is my favorite variant.

    ReplyDelete
    Replies
    1. Michael JamesAugust 25, 2026 at 2:53 PM

      Each person's situation is different. Coast FIRE fits for some people. As long as you're staying on the right side of reasonable investments principles, go for it.

      Delete
  2. MordkoAugust 26, 2026 at 12:25 AM

    The core of this philosophy seems wrong to me. It prioritizes wrong things in search of weird objectives leading to unbalanced lives.

    ReplyDelete
    Replies
    1. Michael JamesAugust 26, 2026 at 8:24 AM

      Your view is common. I think this is mainly because FIRE in its many variants probably isn't best for you. But it's not hard to see that it is sensible for some people whose situation and abilities are different. It made sense for the programmers I knew who had no other way to make so much money, but they knew they couldn't handle the continuous stress for long.

      Delete
    2. MordkoAugust 27, 2026 at 4:45 PM

      If someone hates his job, a better strategy might be to put all this effort into qualifying in something you din’t hate.

      Delete
    3. Michael JamesAugust 27, 2026 at 4:53 PM

      You're missing the critical element. A socially-awkward programmer making $250k/year plus options may not be able to make even $100k/year at something they can tolerate. For many people, what you suggest is possible, but there are fields that pay very well where those skills don't carry over to other high-paying fields.

      Delete
    4. MordkoAugust 29, 2026 at 12:53 PM

      People promoting FIRE seem very sociable and not at all awkward. Then again, they don’t seem to be practicing what they preach. They seem to be doing a lot of ME (marketing and earning) rather than “RE”.

      Delete
    5. Michael JamesAugust 29, 2026 at 1:54 PM

      Yes, although there are many people who have followed some version of FIRE to run their lives, many of those who write about FIRE aren't retired.

      Delete

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