What the FIRE Movement gets wrong

Last month I introduced the concept of the FIRE Movement and discussed the difference between Early Retirement and Financial Independence. Today, I’m going to take a more detailed look at the FIRE Movement and the issues and concerns I have with it.

The FIRE (Financial Independence Retire Early) Movement is a growing trend among young professionals who are looking to retire early. The movement has its origins in the early 2000s, when a blogger coined the acronym and wrote about the idea of living a frugal lifestyle to save for retirement at an earlier age. Since then, the FIRE Movement has gained a following of people who are striving to save enough money to retire as early as 30 years old and get out of the Rat Race.

I think much of this is commendable and its certainly in line with my beliefs that we aren’t here to live to work, but the other way around.

However, from my own experience with the movement, I have noticed several areas that concern me deeply.

Lack of focus on what your values are

As I wrote in last month’s blog, early retirement is a statement of something you don’t want to do anymore – work. But just as important is figuring out what you DO want to do.

One thing we never recommend our clients to do is to blindly save at the expense of your current lifestyle. After all, what is the money for if not to fund the life you want?

We’ve all heard a story or two along these lines: a man who worked from age 16, looked forward to his retirement and spoke excitedly about all the plans he would enjoy once he got there. He saved every penny towards it and denied himself the little joys along the way in favour of squirrelling it away for the future. Then, the day after he retired, he dropped dead. He never got enjoy the retirement, the plans, or the money. So, in the end, what was the money for?

Life is about figuring out what matters most to you. We help our clients answer the most important question: “what’s the money for?”

Lack of basic understanding of key financial principals

The FIRE movement certainly seems to have a larger following amongst younger people – people who haven’t had as much experience in running a household or business with multiple financial dependants.

I recently spoke to someone who felt they didn’t need a financial plan as they “had their own spreadsheet”. After two or three questions, I found out they had forgot to factor in inflation to the 60-year forecast.

Failure to engage and partner with a financial planning expert

The FIRE movement certainly seems to focus on a DIY approach to financial planning and investment. I think this comes from the failure to understand what financial planning really means, and how it adds value.

I can completely understand why younger generations are loathe to pay for financial advice, when most likely their parents’ experience with so-called “financial advice” was a bank selling them a pension 30 years ago, with no advice to be seen and costs hidden behind every corner you could imagine.

Financial planning didn’t exist in Ireland 30 years ago, but it does now. And if you think you will manage to retire early without the help of an expert, you’re in for a surprise on your 50th birthday.

Focus on fees and not value added

Fees are massively important to your financial plan. So, you better make sure if you’re paying someone that they are adding value.

Things that add no value to you include:

• market forecasts

• picking stocks

• fund picking

Here are some things that truly do add value:

• cashflow modelling

• behavioural investment coaching

• tax planning

• being held accountable to your own best intentions

 
My father has a famous phrase: “there’s a man that knows the price of everything and the value of nothing”. I think this sums up a lot of the problems the FIRE Movement.

Failure to understand that your goals and desires will change over time

Hands up if you knew everything in your 20s and 30s? I sure did. And then all of a sudden, I didn’t.

Working with families from their 20s right up to their 80s and beyond, I can say it’s pretty clear that your dreams, goals and aspirations will change over time. If you’re in your 20s or 30s now, you probably have no idea what keeps a 50-year-old awake at night.

Trying to build a DIY plan for 60+ years on your own, with no outside input, is doomed from the outset.

What if I do want to retire early?

Having said all of this, I admire the principle behind this movement. These people have figured out that working 80 hours weeks until you are 60 is probably not the best use of the one and only chance you get at life. They deserve some credit for trying to get people thinking a little bit differently.

If retiring early is something that you want to figure out (who doesn’t?), start out by talking to an expert. If you’d like to find out more about how we could help, please do give us a call on 01 908 1500 or email us at info@metisireland.ie.

Cian Callaghan
Private Client Manager