The Problem with the “FIRE” Movement
Summary
TLDRThe video script explores the concept of 'Financial Independence, Retire Early' (FIRE), highlighting its appeal and potential pitfalls. It breaks down FIRE into 'lean' and 'fat' lifestyles, emphasizing the importance of intentional living over accumulating wealth. The speaker critiques the movement's focus on a magic number and ultra-frugality, suggesting a balanced approach to saving, investing, and spending. The script concludes with strategies for achieving financial independence, such as cutting expenses, increasing income, or a combination of both, encouraging viewers to define their 'rich life' and pursue it thoughtfully.
Takeaways
- 🔥 The concept of FIRE (Financial Independence, Retire Early) is appealing but not without its challenges.
- 💡 FIRE involves reaching a 'Crossover Point' where investment income surpasses salary, providing the freedom to choose not to work.
- 🌱 There are different levels of FIRE, from 'Lean FIRE' which embraces minimalism and simplicity to 'Fat FIRE' which allows for a luxurious lifestyle.
- 📈 The FIRE movement promotes aggressive saving, often much higher than the average American savings rate.
- 🤔 The movement has been criticized for its focus on a specific financial number, which may not necessarily lead to happiness or fulfillment.
- 💰 A rich life is about living intentionally and abundantly, not just about achieving a certain financial figure.
- 🏡 Some individuals in the FIRE community struggle with the transition from extreme frugality to spending, indicating a need to learn the skill of spending money.
- 🚫 The demonization of spending within the FIRE community can create an unhealthy relationship with money.
- 🛍️ Recent developments in the FIRE community show a healthier approach to spending, with members discussing meaningful purchases and life experiences.
- 💼 Achieving financial independence is not easy and requires strategic thinking about both income and expenses.
- 💹 There are various strategies to reach the crossover point, including cutting expenses, increasing income, or a combination of both, with different trade-offs in terms of time and lifestyle.
Q & A
What does the acronym FIRE stand for in the context of personal finance?
-FIRE stands for 'Financial Independence, Retire Early', which is a movement focused on saving and investing aggressively to achieve financial independence at an early age.
What is the 'Crossover Point' mentioned in the script?
-The 'Crossover Point' is a concept where one's investments generate enough income to cover all their expenses, making it possible to stop working if they choose to.
What are the two main types of FIRE lifestyles described in the script?
-The two main types of FIRE lifestyles are 'Lean FIRE', where individuals live on a minimal amount of money, and 'Fat FIRE', where individuals aim to live a luxurious lifestyle with high levels of spending.
How does the speaker describe the potential negative impact of an obsession with a specific financial number in the FIRE community?
-The speaker suggests that an obsession with a specific financial number can lead to stress, anxiety, and depression, as individuals believe that reaching this number will bring happiness, which is not necessarily the case.
What is the issue with living in 'Ultra Frugality' for an extended period of time as described in the script?
-Living in 'Ultra Frugality' for a long time can make it difficult for individuals to learn how to spend money wisely and enjoyably when they eventually have more financial freedom.
What is the speaker's view on the demonization of spending within the FIRE community?
-The speaker criticizes the demonization of spending within the FIRE community, stating that it can create an unhealthy relationship with finances and prevent individuals from spending money on things they truly value.
What are some positive aspects of the FIRE movement mentioned by the speaker?
-Positive aspects of the FIRE movement include encouraging higher savings rates, demonstrating how to take control of one's money, and enabling some individuals to create a meaningful life.
How does the speaker suggest achieving financial independence in a balanced way?
-The speaker suggests achieving financial independence by strategically targeting both income and expenses, either by increasing income, reducing spending, or a combination of both.
What is the significance of the 'crossover point' in the context of the FIRE movement?
-The 'crossover point' signifies the moment when one's investments are generating enough income to cover their living expenses, which is a key milestone in achieving FIRE.
What is the speaker's personal stance on the FIRE movement and early retirement?
-The speaker aligns more with the 'Fat FIRE' approach, valuing the ability to spend extravagantly on things they love, and is not particularly focused on early retirement as a goal.
Outlines
🚀 Introduction to FIRE Philosophy
The video script introduces the concept of Financial Independence, Retire Early (FIRE), questioning its feasibility and allure. The narrator, a best-selling financial author, outlines the video into three parts: explaining FIRE, discussing its problems, and suggesting alternatives. FIRE is described as having enough investments to cover living expenses without working, exemplified by the 'Crossover point' where investment income exceeds salary. The script mentions different FIRE approaches, such as 'Lean FIRE' for minimal living and 'Fat FIRE' for luxurious lifestyles. The narrator also acknowledges the positive aspects of the FIRE movement, such as promoting high savings rates and financial control, before delving into its potential issues.
🤔 Critique of FIRE Movement's Focus on Numbers
This paragraph critiques the FIRE movement's fixation on reaching a specific financial number as a determinant of happiness and freedom. The narrator argues that life satisfaction is not linearly correlated with bank account figures and that a rich life is about living intentionally and enjoying the present, not just an end goal. The paragraph also addresses the issue of 'hyper frugality' among FIRE adherents, suggesting that extreme saving can lead to an inability to spend money meaningfully in the future. The narrator warns against the potential for anxiety and depression associated with an obsession over financial targets and emphasizes the importance of learning to spend money wisely throughout life.
💡 Achieving Financial Independence: Strategies and Personal Choices
The final paragraph presents strategies for achieving financial independence, discussing the importance of both increasing income and decreasing expenses. The narrator provides examples of how different approaches, such as cutting expenses in half or increasing income by 30%, can significantly reduce the time to reach the 'Crossover point.' The paragraph also touches on the personal choice aspect of financial independence, with the narrator sharing his preference for 'Fat FIRE' and a willingness to spend on things he values. The video concludes by encouraging viewers to consider whether FIRE aligns with their vision of a rich life and to decide on their path to financial independence.
Mindmap
Keywords
💡FIRE (Financial Independence, Retire Early)
💡Crossover Point
💡Lean FIRE
💡Fat FIRE
💡Frugality
💡Savings Rate
💡Financial Independence
💡Investing
💡Lifestyle Inflation
💡Rich Life
Highlights
The concept of FIRE (Financial Independence, Retire Early) is introduced as an appealing but potentially unrealistic goal.
The 'Crossover Point' is explained as the moment when investment earnings surpass salary, allowing for the choice to stop working.
Different types of FIRE are described, including 'Lean FIRE' for minimal living and 'Fat FIRE' for a luxurious lifestyle.
The importance of saving more and taking control of personal finances is acknowledged as a positive aspect of the FIRE movement.
The potential negative impacts of an obsession with a specific financial number for FIRE are discussed, including stress and anxiety.
The problem of ultra-frugality leading to an inability to enjoy wealth in the future is highlighted.
The FIRE community's tendency to valorize minimal spending and the potential toxicity of this mindset are critiqued.
A shift within the FIRE community towards more open discussions about meaningful spending is noted as a positive development.
The video offers practical advice on achieving financial independence through aggressive saving and investing.
Three strategies for reaching the crossover point are presented: cutting expenses, increasing income, and a combination of both.
The importance of strategic thinking about earnings and expenses is emphasized for achieving financial goals more efficiently.
Personal preferences and choices in lifestyle and financial planning are encouraged as integral to the FIRE philosophy.
The video concludes by encouraging viewers to consider if FIRE aligns with their vision of a rich life and to share their chosen strategy in the comments.
Transcripts
fire financial Independence retire early
those words sound great right well I
have some problems with the idea of fire
you see who doesn't love the idea of
retiring early with complete Financial
Freedom it sounds great but is it too
good to be true as a best-selling
Financial author who's helped millions
of people get their financial lives in
order here's my honest opinion on fire
I'm going to break this video down into
three parts I'm going to tell you what
fire is the problems with it and then
I'm going to recommend what you do
instead let's start with part one what
is Fire Imagine one day you woke up in
your 30s and you had enough money in
your accounts to never work again in
other words your Investments were
generating more money than your salary
was I remember years ago going on TV to
talk about my bestselling book I will
teach you to be rich before the camera
started the anchor and I were talking
and they leaned over they congratulated
me on my book said oh great job do you
have to work anymore and I sat back and
I realized I'd never really put it that
way but no I don't have to work anymore
and that was a powerful moment it's an
example of something called The
Crossover point where your Investments
earn enough to fund your expenses
automatically and this idea was first
described by Vicky Robin and Joe
Dominguez in their book your money or
your life it's an incredibly influential
idea in personal finance money makes
money and at a certain point your money
is just generating so much new money
that all of your expenses are covered
this is also known as being financially
independent and what can you do when you
hit the crossover Point well at a
minimum you can do nothing you can
choose to work or not cuz after all you
could spend the rest of your life
spending down your Investments a lot of
people call this retiring early together
that is financial Independence plus
retiring early or fire to break this
concept down even further there's lean
fire which is people who've decided they
can live on a lean amount of money often
$30 to $50,000 a year in perpetuity they
typically reject materialism they
Embrace Simplicity often in an extreme
way they're likely doing fun things like
going for walks in the park and bird
watching on the other end of the
spectrum there is fat fire which is for
people who want to live an extravagant
life at the highest levels of spending
think of flying first class staying at
the Four Seasons or am man Resorts
putting three kids through private
school you ever wonder for example how
celebrities can spend
$250,000 on a single party that's
because their money is earning so much
money that they actually have to work to
spend it all for example in 2018 Oprah
bought a house for $8 million seems
outrageously expensive right but keep
this in mind her net worth at the time
was over $4 billion and if she just
conservatively invested that money
generating 4% her Investments alone not
even counting her salary would generate
$160 million that year effectively
making the house free to her now that we
know what fire is let's break down the
problems part two the problems with the
fire movement now before we get into
some issues here I want to acknowledge
the positive things about the fire
movement first I got to say I love the
way that the fire Community has raised
the question of saving more money fire
is a total antidote to Americans
lackluster savings rate most Americans
stretched to save 10% fire absolutely
obliterates that by showing it's
possible to save 25 40 even 70% of your
income if you get clear about your goals
second fire demonstrates how you can
take control of your money and live the
life you want I love that a lot of
people shared that they were initially
attracted to fire by a blog post which
explained how they could retire decades
earlier than they thought possible
that's incredibly powerful and third
some fire members have created a really
meaningful life for themselves I want
everyone to be able to articulate your
unique rich life and then to use your
money to live it that's what money is
for but there are also some problems
with the fire movement and I see it a
lot the first problem I see is that the
fire movement is often obsessed with a
number and everything revolves around
that a lot of members of the fire
movement exhibit classic signs of stress
anxiety even depression thinking that
hitting some mythical number in their
Spreadsheet will suddenly make them
happy and as we know from the tons of
conversations I've had on my podcast
including all the conversations I've had
with people over the last 20
years it
won't the way you feel about money is
highly uncorrelated to the amount in
your bank account more importantly a
rich life is not about achieving a
number a rich life is one where you wake
up you enjoy what you're doing one that
has lived intentionally abundantly
proactively a rich life is not some
destination in a spreadsheet cell a rich
life starts today even if you have debt
and it's living a rich life today and an
even richer life to tomorrow another
problem is that people working towards
fire often spend years living in Ultra
frugality I'm talking hyper frugality so
that one day in this mythical future
they can enjoy their money but that's
not how people work I've seen this with
guests on my podcast Mindy and Carl for
example who are actually quite prominent
in the fire Community who in their early
50s built an over $4 million Fortune but
as members of the fire Community they
still struggle to spend their money
that's because when you set the goal of
accumulating a number it becomes very
difficult to learn how to spend it in
other words you can't be ultra Frugal
for years and years and then magically
flip a switch and suddenly you are
spending money that's like saying I want
to make friends later when I'm 50 or
that's like a lot of Indian parents who
tell their kids don't date okay you're
26 time to get married it's like what
I'm missing an entire skill set here you
end up not learning the skill of
spending money and that is a skill
something that has to be learned in your
20s your 30s your 40s of course you
should save of course you should invest
aggressively I talk about that all the
time but you've also got to exercise
that spending muscle now because if you
don't it deteriorates and in fact you
create new grooves that simply tell you
the only right thing to do with your
money is to accumulate it or even hoard
it and the third problem with fire is
that it's a movement that often
valorizes how little you can spend that
becomes toxic you can see it in fire
forums where people constantly worry
about money even when millions of
dollars in the bank they often worry
about what the community will say if
they were to buy a nice car I've had
people on my podcast who have millions
of of dollars in the bank they want to
buy something nice like a nice bag but
the question is what would my friend say
and that demonization of spending within
the fire Community creates an unhealthy
relationship with finances if you want
to buy something and you can afford to
do it I'm all for it now the good news
is that in recent years there are more
and more people in the fire Community
talking openly about spending money on
the things they value there are
prominent members of the fire Community
who have come out who have spoken about
their struggles in spending money and
their journey to be able to spend money
meaningfully there are other folks who
have shared some of the things they've
bought and how it has affected them in a
positive sometimes even negative way
there are conferences where fire
attendees are now talking about the
meaningful lives they want to create not
simply the amount of money they want to
save I love that that's a totally
healthy development and I'm a big fan of
it we don't want an unhealthy
relationship with food just as we don't
want an unhealthy Rel relationship with
money money is not meant to Simply Be
accumulated it's meant to be
thoughtfully respected saved and
invested and yes also spent before I get
to the third part of this video do me a
favor hit subscribe turn on
notifications it helps this channel grow
and it lets me keep sending you new ways
to think about money every single week
all right that brings me to part number
three how to achieve Financial
Independence the right way now fire is
not easy and often you'll hear people
who are not in the fire Community
instantly dismiss it they'll say things
like I'm too young to think about that
or 50% savings rate I can barely save 5%
it's interesting by the way the people
who say I'm too young to think about
saving and investing just a few years
later you'll notice that they change and
they'll say it's too late for me to
start isn't that interesting often
you'll hear people say this beautiful
Chestnut I'd rather spend my money now
than nickel and Dy myself for the next
30 Years
nobody told you you have to nickel and
dime yourself but what about being
thoughtful and intentional with your
saving and investing of course the real
answer is that you can choose whether
the crossover point is part of your rich
life and if you want to reach it you get
to choose how to achieve it so how do
you achieve Financial Independence like
I mentioned earlier in this video a lot
of people in the fire Community Focus on
saving a huge portion of their salary
forget about 10% or 15% a lot of them
are talking about 40 50 70% let me give
you an example let's say your household
income is $80,000 your monthly expenses
are 6,000 bucks theoretically you could
reach your crossover point in 38 years
if you follow the usual advice of saving
and investing 10% or you could reach it
a lot faster let me show you with some
real numbers option one you could cut
your monthly expenses in half now a lot
of people are like off REM you're
telling me to cut my money monthly
expenses in half do you know how much it
costs yes I get it it's expensive but
there are also a lot of examples of
people in the lean fire Community
actually doing it so let's just go
through the process following the
strategy for example you could reach
your crossover point in just over 12
years keep in mind the trade-off here 12
years is really fast for a crossover
point but you've targeted ongoing
spending of
$36,000 per year every year
and that's quite low for a lot of people
in fact according to the US Bureau of
Labor Statistics the average US
household spent
$72,000 in 2022 let's take another
option option two you could raise your
income let's say you follow the advice
in my book I will teach you to be rich
and on my website to negotiate a 30%
raise if you take all that extra money
and you invest it you'd hit your
crossover point in 22 years notice that
this takes longer than option one
actually a lot longer but in this
example you've targeted spending $72,000
per year that's much more in line with
what the average US household spends and
you could probably maintain it a lot
easier or option three you could do a
combination of both if you increase your
income by 30% and cut your spending by
30% you'd hit your crossover point in
just 9 years that is an extremely short
time to your crossover Point combined
with relatively High High spending and
that shows the power of targeting both
your income and your expenses now
remember a lot of people don't think
about their earnings and spending in
this strategic of a way and as a result
they do the same thing most other people
do they spend pretty much all they make
they save a tiny amount whatever's left
over they end up working for decades and
then they find themselves ranting about
taxes on Twitter without knowing what
the hell they're talking about or what a
marginal tax rate is do not be that
person please recognize you have the
power to dramatically change the way you
approach your working years you can earn
more learning how to increase your
salary is a skill you can spend less the
fire Community has shown us it's
possible or you can do both you decide
on your rich life let me tell you about
my personal choice I actually like the
idea of spending extravagantly on the
things I love what do I mean by that
that means that I'm much more more
aligned with fat fire than lean fire I'm
willing to work I've built the skills to
increase my income I invest aggressively
I want to live in cities that tend to be
pretty expensive that is the choice I
have made but I'm not particularly
interested in retiring early maybe I
will maybe not but it's not a goal of
mine it's not something that I work
really hard towards I put money aside
I've set up money rules for myself and I
know the type of lifestyle that my wife
and I would like to live with that said
retiring early doesn't always have to be
part of fire you can choose to Simply
become financially independent and then
decide what you want to do all right now
that you understand the different types
of fire and some of the problems that I
want you to be aware of use this video
to decide if going after fire is part of
your rich life if so let me know in the
comments which option you're going to
use to Achieve Financial Independence
now check out this video pop up on
screen to watch more
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