Inflation surges. These ‘FIRE’ adherents are escaping the flames.
Rising prices have caused legions of consumers to worry about the future, with inflation reaching a new 40-year high in June. More than half of Americans believe the United States already is in a recession. Security is at stake even among Americans earning $100,000 or more, two-thirds of whom say they are “very concerned” about inflation, one poll found last week.
But for one group of Americans – practitioners of FIRE, or Financial Independence, Retire Early – clouds of economic doubt have not rained on their parade, at least not yet. Made up mostly of millennials and Gen Z, the movement emphasizes living below one’s means with disciplined savings, diversified income, and robust do-it-yourself investing.
Why We Wrote This
With inflation persisting and even notching a new 40-year high, consumer worry is rising. One group of Americans, scraping for a lifestyle of financial independence, may show paths toward security.
Inflation “is hard for everyone,” says Julien Saunders, co-host of the Rich & Regular podcast with his wife, Kiersten. But he sees an advantage for people “who have already done a lot of the work” to get scrappy and save.
The movement is also about finding higher values in life. “Happiness researchers, they talk about things like life actualization or emotional well-being, but I think we’re talking about the same thing, which is having a purposeful life,” says Jordan Grumet, host of the Earn & Invest podcast.
In March, when the inflation rate hit a 40-year high, Kim Massale didn’t fret about rising prices for food or other goods. She and her husband, John, had already cut back on unnecessary spending on Amazon.com and elsewhere. Instead, they socked away $30,000 into a retirement fund.
The day before he quit his lucrative aerospace job last week, Ryan and his wife bought a new Subaru Ascent after years of making do with one vehicle. “That’s probably the only thing so far inflation-wise that’s really adjusted our lifestyle and decision making,” says Ryan, who declined to have his last name published for privacy reasons.
Rising prices and looming fears of a recession have caused legions of consumers to worry about the future and pull in their horns. Security is at stake even among Americans earning $100,000 or more, two-thirds of whom say they are “very concerned” about inflation, according to a Morning Consult/CNBC poll conducted last week. More than half of Americans believe the United States already is in a recession, according to an Economist/YouGov survey last month.
Why We Wrote This
With inflation persisting and even notching a new 40-year high, consumer worry is rising. One group of Americans, scraping for a lifestyle of financial independence, may show paths toward security.
But for one group of Americans – practitioners of FIRE, or Financial Independence, Retire Early – clouds of economic doubt have not rained on their parade, at least not yet. Made up mostly of millennials and Gen Z, the movement emphasizes living below one’s means with disciplined savings, diversified income, and robust do-it-yourself investing to achieve financial independence long before retirement age.
The strategy worked in an era of low inflation and rising stock prices. Now that the economic scenario has flipped, the FIRE movement is about to get tested. On Wednesday, the Bureau of Labor Statistics reported that the U.S. inflation rate hit 9.1% in June, a new 41-year high. Practitioners say they’re ready.
Inflation “is hard for everyone,” says Julien Saunders, co-host of the Rich & Regular podcast with his wife, Kiersten. But “I do think it helps for people who have already done a lot of the work to dig deep and get scrappy and find ways to save even when we’re not in a hyperinflationary market.”
Some devotees go to great lengths to cut expenses. Jacob Lund Fisker, an early pioneer of financial independence and creator of the Early Retirement Extreme blog, became financially independent at 30. Now married, he and his wife each live on $7,000 a year in Chicago.
Others take a more relaxed approach. Ms. Saunders, for example, participates in a couple of Buy Nothing groups, local bands of people who give away things they no longer need to neighbors, she says. “It’s just this idea of searching there first instead of going to a store or even a thrift store.”
Also, a devotee might plow 25%, 50%, or even 75% of their income into savings, a financial cushion that typically goes into stocks or rental property, holdings that usually hold their own in inflationary times. And it’s hard to be scared about losing one’s job in a recession for people who work because they want to, not because they have to.
Many financial professionals frown on the idea of early retirement because it means drawing down reserves that otherwise would have years and decades to grow bigger. And for those starting out, the FIRE journey can be bumpy.
Ryan, the former aerospace engineer in the greater Boulder, Colorado, area, got his baptism by fire during the Great Recession. After buying his first house in 2007, he saw its value drop by half before he sold it at a $100,000 loss. It took him three or four years to dig out of that financial hole and buy another property. Now, having sold all his rental properties, Ryan is relying on his wife’s part-time income and their significantly more than $1 million stock portfolio to get them through. He’s stress-tested it against a number of historical scenarios, including the stagflation of the 1970s and the Great Depression, to make sure that his family can survive a downturn.
“On the Great Depression, I don’t think anybody was living a great life,” he says. “But from a financial perspective, the models say that our portfolio and our approach should be able to handle that kind of a situation.”
What’s required, FIRE practitioners say, is a change in mindset.
Resetting priorities
“It was like a really difficult discipline to learn at first,” says Ms. Massale of Longmont, Colorado. “We were just sort of blindly living and spending a lot of money to create comfort in the present. When we stopped and made that change, we really were able to create both an experience in the present as well as a lifestyle for the future that’s way more free and way more aligned with our wish to be connected as a family.”
Instead of working full time at a job and on a graduate degree, Mr. Massale became a full-time dad to their two young children. Earlier this year, Ms. Massale pushed off much of her counseling and coaching to her 10 therapist employees, leaving her to run the business side of her company and spend more time with her children.
“Happiness researchers, they talk about things like life actualization or emotional well-being, but I think we’re talking about the same thing, which is having a purposeful life,” says Jordan Grumet, host of the Earn & Invest podcast and author of “Taking Stock,” a book on financial independence and personal fulfillment due out next month. “Those are the North stars that we tend to forget – or at least don’t ever do the hard work in figuring those things out, especially when we’re young.”
The modern FIRE movement has gone through a maturing process itself.
“The first FIRE practitioners were people who didn’t like their jobs at all, felt like work was miserable and really grinded it out in the 9 to 5, made as much money as possible, and then got out,” says Mr. Grumet. “This idea was that things like purpose and meaning were things you could put off until you had enough money to get away from work. The younger generation of FIRE practitioners is smarter and they realize that, ‘I don’t want to have to wait 10 years, work through incredibly hard nights and weekends and only then integrate that freedom.’ They want to integrate that freedom now. And so they’re looking at less aggressive models that allow them to enjoy themselves, maybe even spend money, and yet still build a path toward financial independence that feels comfortable.”
By his estimate, some 5 million to 10 million people practice FIRE. A Reddit discussion thread on the topic boasts 1.3 million followers.
Can it work for all income levels?
One of the criticisms leveled at the FIRE movement is that it only works for upper-middle income people with the means to save large amounts of money.
“It’s certainly a whole lot easier when you have discretionary income that you can use to put toward saving and investing without it taking away from your needs,” says Mr. Saunders, who wrote with his wife their first book, “Cashing Out: Win the Wealth Game by Walking Away.” Their aim is to teach the relevant FIRE principles to people of color who suffer ongoing pay disparities with their white colleagues.
“It’s very difficult to have a conversation with someone about retirement who doesn’t know how they’re going to put food on the table next month,” he says. “And so in those cases, conversations are much more centered around: ‘These are some of the newer ways that you should explore in terms of income generation and income creation,’ which I think given the growth of the internet is far easier for people to do today than ever before.”
Even many people with modest salaries can find ways to save, says Pete Adeney, author of the Mr. Money Mustache blog, which in 2011 began to popularize the idea of financial independence. He recalls helping a single mother living across town from her job at Walmart. She spent a third of her income on car expenses, given the car loan, insurance, maintenance, and gas. When Mr. Adeney convinced her to rent next door to her job, she ditched the car for an e-bike and saved $8,400 a year.
“More helpful to the world as well”
“The lower your income and tighter your living arrangement, the more important this becomes,” he writes in an email. “From my experience, work is better if you don’t need the money. So once you achieve early retirement (which simply means you are financially set for life), any work you decide to pursue after that point is likely to be very meaningful to you and probably more helpful to the world as well.”
In 2017, Chris Mamula of Ogden, Utah, ditched his 16-year career as a physical therapist, became a stay-to-home dad, and started writing part-time for a FIRE blog. Now, he’s getting a certified financial planner certificate. “I don’t know if I’ll ever practice,” he says, “but I kind of see myself offering a little bit of one-on-one counseling to people who need that kind of extra help beyond reading the blog.”
It’s a journey many successful FIRE devotees share.
“I have more space to think about giving back,” says Ms. Massale. She is currently working on creating free or low-price services to empower women and guide them in creating a lifestyle of freedom themselves.
