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Critique of the FIRE Movement 

The FIRE movement is an abbreviation for Financial Independence, Retire Early. It’s essentially a lifestyle more than anything, with almost a cult-like following. 

The way of FIRE is to save a large portion of your income, such as 50% or more, by living frugally. The money gets invested and the end result is that the withdrawals of say 4% from your portfolio replace your work income. 

This lets you quit your job and retire earlier than the norm. The movement has a major following, with over 2 million members on the FIRE subreddit. And even YouTube channels dedicated to its teaching. It's important to live below your means. But it's more important to not trade one vice for another. Like overspending and credit card debt for being too stingy. 

The problem I see with FIRE is not with living below your means. We should all learn to be frugal if we haven't yet, it's a simple skill to master. The ROI on saving and investing may even be bigger than the ROI from your college degree or other specialized training you received. 

First Critique 

Where FIRE falls apart is in its main principle. The first problem with FIRE is forgetting what happiness is about. I personally believe that FIRE has convinced millions that happiness is in capital accumulation. 

What I mean by this is it is a coping mechanism to make its users feel like the best years are not today but decades away. The so-called golden years of retirement. 

The problem with this is that life is supposed to be enjoyed in the present, regardless of the size of your investment portfolio!. And FIRE starts to destroy this old principle and replaces it with selling you their version.

I think most people will come to realize that after they achieved some kind of number from a portfolio perspective they will feel exactly the same!. Maybe even worse because they'll be disappointed that nothing has changed!. 

In fact that’s where Financial Independence, Retire Early reveals its most scary truth. FIRE tends to attract those that are already very good with money!. A lot of these people have had a good relationship with personal finance since they were children. 

A second Problem

This is where we encounter the second problem, FIRE can bring out the worst in some of these people by telling them that some of their not so great habits are actually ok!. 

By habits that are not the greatest I mean being stingy instead of frugal. Stingy is what can happen when you let FIRE consume you. When you start developing a fear of spending a few dollars on a coffee when you have 500k in a brokerage account!. 

And I don’t mean not spending because you don't like their coffee. It could be anything other than coffee, like $30 on a meal out. When you have to rationalize and think hard about something so small when you have more than 99% of the world population, something is not right. 

And you've convinced yourself that, perhaps subconsciously, that life is about capital accumulation. That your net worth is really just sadly your self worth. This can lead to forgetting about present needs or those of their family members to hit a financial metric. I don't have any data but I’m sure FIRE has contributed to a number of failed relationships. 

So don't let finance and a number become your primary motivation in life. Life is about the present, the present is to be enjoyed, the future is something that will become the present given time. 

And when the future becomes the present the amount of capital you have won't make your day-to-day life better. The quality of life is the by-product of many decisions you have made and once you reach that financial metric nothing will change.

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Third Hurdle 

The third major hurdle of Financial Independence, Retire Early is an absence of any budgeting. What do I mean by this?. Well lets take for example your current situation. 

You plan a budget according to your income. So, If I make 50k per year, my spending on expenses for the year should be less than 50k. You understand your income but also your expenses, and plan accordingly. 

There's an amount that can be spent on housing, it's probably unreasonable to spend 90% of your income on housing. As 10% left over will probably not cover the left-over expenses. 

The FIRE movement does not do a good enough job of explaining what the use of this money is while in retirement. For example, when you no longer have debts, and don't have to spend money on your children, or not as much any longer. 

What do you need those millions in your retirement or brokerage accounts or in real estate for?. A hypothetical but very real example is you and your partner are 45 years old with 2 million in liquid assets. If you withdraw 5% that is 100k a year in before tax income, perhaps closer to 80k in after tax income. 

If you have become used to frugal living, which is what FIRE is all about after all. And some followers of the FIRE movement spend little, as low as 20-30k on their expenses, what will you do with the extra 50K?. Having a 20k budget vs a 80k budget on expenses would necessitate a very large change in your lifestyle. 

The lack of planning for future spending is concerning. One reason for my concern is that it's a sign of a lack of understanding of what you are actually trying to accomplish. 

Having a goal of 2-3 million in net worth may not be beneficial for you if you don't have a vision for utilizing the capital. It's just a number on a screen at that point. Always have a plan and a clear understanding before committing to something big.

A final Critique

Members of FIRE don't address ignorance of behavior and habits, which reveals itself fully while in the retirement stage of FIRE. The habits that are developed and lived with such as frugality, which is necessary when it comes to FIRE, will be difficult to break for many. 

Even though it may sound counterintuitive, just like some people have a difficult time not spending less than they make, there's also another side to the coin. 

People that become used to spending money only on necessities become habitually frugal, that is how they become millionaires in the first place. So going from frugal to having an extra 50k to spend on wants requires new habit development. 

And new habits can be quite difficult to form at a later age. Especially when your frugality becomes a part of your identity and when it becomes your definition of success. 

Just like spending carelessly, the fear of spending money becomes real for some of these people. The person or couple develops their own world view and even with millions in their accounts, they have to think hard about spending an extra $30 on a dinner. This is also an unhealthy lifestyle that may be difficult to enjoy to the fullest.

So what's the Solution?.

Everything should be in moderation, even saving and investing. Especially when saving and investing is a lifestyle more than anything like FIRE is. 

The solution is to enjoy yourself today and not fall victim to some hypothetical better future tomorrow when you have a ton of money and no need to work. Save and invest but do it because you understand the principles of paying yourself first and in having a financial net worth. 

For those that want to retire so badly there are a million ways to go about it. Live in an RV or a cheaper home, live in the basement of your home and rent the second floor out. 

Move in with a family member and just pay for a bedroom. Or move to a country where you can get by with $200-300 per month. None of these require millions of capital.

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