The latest pros and cons from the FIRE ground.

I've written a lot of posts about FIRE which stands for Financial Independence/Retire Early. I've been all in on financial independence but I think for a lot of people, retiring too early is regret waiting to happen. By retire I mean not working.

Earlier this week Suze Orman took a flamethrower to the idea saying to retire at 30 or 40 you'd need $5-$6 million to confront whatever adverse circumstance that might come along. While I believe part of the risk is that too many FIRE aspirants can't envision things going wrong, needing $5 million to fund a $40,000 lifestyle (in today's dollars) for 60 years seems like overkill.

Mr. Money Mustache, a founding father of the FIRE movement, wrote a lengthy rebuttal to the Orman hit job. The rebuttal has an element of being overly defensive but there was a lot of good insight from him along with some overlap with what I have been writing about for a long time but there were also some things that I would disagree with or is just not realistic for most folks. His post is comprised of eight sections, the first one is titled This is ALL WINNING and there are NO DOWNSIDES. Those are his capital letters. He says that "if you think there is even the slightest flaw with the ideas behind FIRE, you’re probably just not understanding it correctly." Everything has potential downsides. Downsides are not necessarily reasons to not do something but something like choosing a lifestyle might merit weighing out the pros and cons which hopefully allows the opportunity to mitigate the cons and make a more informed decision.

Section 3 pushes back on the notion that only high earners can do this. Where the focus is on independence then I can agree. The way I have often framed this is to ask who is wealthier, the person who makes $20,000 and lives like he makes $10,000 or the person who makes $100,000 and lives like he makes $200,000? However, if the average salary for 2018 college graduate is $50,000 and they put 10% into a 401k, spend $3600 on healthy insurance and net $2800/mo after all of that and paying taxes and then have to pay rent, how much more can they save? Not to mention potential student loan repayments. While I know FIRE proponents would refute this, it is difficult to envision accumulating a vast sum at an early age without an exceptionally high wage or living with parents.

Some common ground with Mr. Money Mustache might be that he says the focus should be on financial independence. That I can buy into! By you're mid-30's it is possible to build something of a financial base that gives you some optionality for career changes (taking a risk to do something new). This was my path.

The fourth section offer examples of how to spend less, the examples are useful. He says to stay fit you can pay $2500 for a personal trainer or you can buy some weights off Craig's List for $100, my gym costs $10/mo.

Number 5 is about investing and I'm just gonna say it makes a lot of assumptions about pre-planning, a very low portfolio withdrawal rate and very rational behavior. I am sure these assumptions honestly pertain to him but we all know that too many investors become irrational in the face of capital market adversity. I've detailed examples where a bear market decline coinciding with the need to pay for something big that is unexpected can torpedo a retirement plan and that possibility seems to be missing from the post. He addresses it sort of by saying "if you are afraid of what might happen in the future, you have a mental problem rather than a financial problem. So you should work on that first, by training your mind and body." If that resonates with you then follow his advice but observations dealing with people professionally is that he is wrong about this.

The end of the article has good stuff about how to take care of yourself and covers a lot of ground I have covered in terms of benefits from feeling better and spending less on health related matters by virtue of a healthy diet an a sustainable fitness routine.

The independence angle is something I've been blogging about and living for many years. Living below your means and taking good care of yourself makes every aspect of your life easier. This is essentially the entire premise of my book, Random Roger's Rules: Building Blocks For A Happier Life. Still focusing on the independence aspect of this, when you remove potential sources of bad stress like money problems and hating your job you have a much better chance of being happier.

Like just about anything FIRE is something to learn from and then "take what you need and leave what you don't."