It’s no secret that frugalism has been growing in popularity as a lifestyle choice in recent years.
If you’ve had any exposure to frugal living, you’ll likely be familiar with terms like ‘gazelle intensity’ from Dave Ramsey’s Financial Peace University or ‘coupon stacking’ from the recent couponing craze.
Trending as the pinnacle of smart consumerism, frugal living has birthed a whole generation of blogs in the past couple of decades. And for good reason.
Frugal living is a natural consequence of challenging economic factors like unprecedented consumer debt levels, stagnant salaries, and rising costs for essential expenses like housing, college education, and health care. For many, buying used, bulk, and at a discount became normal practice.
In the wake of this sobering sentiment emerged another brand of frugalism that’s spreading like wildfire. It’s aptly called F.I.R.E. (financial independence / retire early).
Starting with a small community of high-earning techies fixated on getting out of their stressful corporate jobs, the FIRE movement has grown rapidly to over 430,000 subscribers in its Reddit community.
You may have heard about this largely millenial-driven phenomenon as it seems to be getting notable media attention lately. Various pundits have taken their stab at endorsing or dismissing the movement.
So how does FIRE work?
How FIRE works
FIRE is founded on the premise that if you sock away 40-70% of your earnings for 10-15 years, you’ll accumulate a nest egg large enough to generate passive income that’ll fund your basic living expenses. The main engine of the FIRE approach is built on drastic lifestyle downgrades to maximize your savings rate and investing in low-cost index mutual funds to grow your portfolio aggressively.
Once you amass a nest egg that’s at least 25X your annual living expenses, you can safely retire and draw down (start taking money from) your hard-earned investment portfolio at a rate of 4% a year.
At this point, work becomes a choice since you’re no longer dependent on earned income to fund your basic living expenses–known as financial independence. This strategy has enabled devoted enthusiasts to retire as early as their late 20’s or early 30’s.
So what’s wrong with this approach?
While FIRE practices some great values, the core philosophy has flawed.
Aside from the technical arguments made against the FIRE rationale by many financial gurus, my major qualms with FIRE are largely philosophical.
If you’re considering FIRE, think about these objections before you proceed. But first, let me share some context around my experience with frugalism.
My story with frugalism
In 2011, my husband and I moved across the state to help plant a small church in Asheville.
We both had good jobs, owned a house, and had a solid network of close friends. Nonetheless, we felt a gnawing tug on our hearts and a deep nudge that it was time for us to move on.
Now if you know anything about Asheville, it’s a far cry from the suburban sprawl of Raleigh where we moved from.
Asheville is a quaint but vibrant town in the mountains of Western North Carolina. It’s often likened to hip cities like Boulder, CO and Portland, OR. It has a strong local culture that’s very progressive in the realms of green energy, healthy living, local farm-to-table produce, and minimalism.
So naturally, after moving to Asheville, we adopted some of that minimalist lifestyle. We canceled cable TV. We sufficed with one vehicle for a number of years. We rented low-cost units until we were ready to buy.
As we stripped down to one income so I could stay home to care for my kids, I underwent a personal transformation. I grew from being an impulse-driven consumer into a much more intentionally minded, principled one. I learned how to cut my husband and sons’ hair. I became a Craigslist guru buying secondhand furniture and baby gear. I consigned kids clothing. I meal prepped. I even sewed Halloween costumes.
We basically DIY’d our way through most everything. Some of it by choice. A lot of it out of necessity.
Fast forward to now. I’ve since pivoted into the field of financial planning and gained a better grasp of how finances and wealth building works. More notably, I took on a new perspective on the role of consumerism in my life and the pros and cons around debt.
All that said, I’m not a stranger to the principles of minimalism and frugal living. But I do have some bones to pick with the tenets of the FIRE movement. Here’s a quick breakdown of why I oppose FIRE.
1. Lifestyle
A primary selling point of the FIRE methodology is the liberating lifestyle waiting at the end of the accumulation tunnel. Save obsessively and retire quickly.
However, what this implies is that the majority of your friends and family will still be working when you retire. So while you (and perhaps your spouse) may have a good ‘ol time traveling the world or chilling on a farm, it might get a tad lonely.
Chances are many people won’t be able to relate to your newfound freedom. Your freerange lifestyle may even cause tension in close relationships as people feel critical or insecure around you.
And those pictures you’ll likely be posting from the Amazon forest or during adventures through Europe? They’ll become a source of FOMO for those still stuck in the cubicle. You may end up alienating yourself from peers you grew up with or contacts in your professional network.
Leisure is fun but it gets old when you do it in the absence of others.
2. Risk
FIRE embraces diversification by employing index funds in their investing strategy. These funds allow investors to spread their money over a wide range of companies from various sectors and industries, thus spreading out their risk.
However, there’s one glaring lack of diversification with FIRE. By aggressively deferring the enjoyment and utility of their hard-earned money into the future, the allocation of resources is grossly out of balance. ‘FIRE’d’ devotees are essentially putting all their eggs in the ‘future’ basket and little to none in the ‘now’ basket.
The problem with this is that the future is so uncertain. Investing 101 highlights this trade off between present safety and future risk with the adage, “$1 today is worth more than $1 tomorrow.”
Since FIRE is a relatively new movement, basing a substantial portion of your life’s assets and utility on a set of generally untested assumptions is risky. It’s a gamble you’re making on time which can be financially detrimental at worst. At best, it’s a precarious experiment.
Only time will reveal the true merit of this approach. Until then, there’s a risk FIRE enthusiasts could end up with a lot of regret if things go south, even as the novelty from defying the status quo wears off.FIRE enthusiasts could end up with a lot of regret if things go south, even as the novelty from defying the status quo wears off. Click To Tweet
3. Focus
Like many quests for financial freedom, FIRE is focused on maximizing enjoyment and personal happiness. Compared to other approaches, however, I found that the FIRE philosophy is more self-focused.
After reading countless articles and listening to different podcasts, my conclusion is that FIRE is predominantly concerned with one’s own freedom and security while generally oblivious to the needs of others.
Because the goal is to retire as early as possible, there’s little consideration for the possibility of unplanned yet noble expenses like caring for an aging parent or giving substantial sums to charitable causes.
The decision to make purchases stems from questions like: “How will this purchase make ME happy? How can it solve one of MY problems? What level of enjoyment and fun will I experience?”
It’s still self-serving consumerism, just in a different context.
Since much of the FIRE doctrine is predicated on a lean lifestyle, there’s no margin for error–let alone slack to use funds for unplanned purposes, however honorable.
4. Mindset
Related to being self-focused is that the FIRE mentality seems to be grounded in scarcity mindset, not abundance (though they’d like to say otherwise). Since FIRE’d folks are no longer working and aren’t making steady additions to their nest egg, there will likely be a looming–perhaps subconscious–fear of potentially running out of money.
Traditional retirees report having this fear that can keep them up at night when the stock market takes a dip. Early retirees aren’t immune–they actually have to deal with it for a longer period of time.
Similarly, due to the highly analytical, spreadsheet-driven frugalism that many FIRE enthusiasts employ, every buying decision becomes a big effort to perfectly weigh out the trade-offs in order to “optimize” spending. FIRE folks obsess over questionable practices like credit card churning, the minutia of tracking ROI (return on investment), and going to great lengths to minimize their taxes.
This scarcity mindset can be exhausting and unfortunately, it doesn’t foster the peace of mind that comes with an abundance mindset.
5. Delusion of control
Being in control is one of the touted benefits of FIRE. Instead of reporting to high-up corporate execs, FIRE enthusiasts idolize the notion of having full autonomy to call the shots on life or, as they say, “live life on your own terms.”
While this may sound lovely, having control over one’s life and finances is an overly romanticized concept not rooted in reality. The truth is that we’re never fully in control.
As patrons of capitalism, we’re at the mercy of the markets and economy. When we make projections into the future, there are life events and catastrophes that we can’t knowingly account for. And as a whole, society and the world changes–sometimes at lightning speed.
Control is a grand mirage that many seek but never find. We can psych ourselves into thinking we’ve got all our ducks in a row. We work. We save. We buy hefty insurance policies to protect everything we own. We meticulously engineer a plan to escape the calamities of life unscathed. But in the end, life is still a giant ship that is very much sinkable.We meticulously engineer a plan to escape the calamities of life unscathed. But in the end, life is still a giant ship that is very much sinkable. Click To Tweet
Because of this, control is one of the biggest fallacies of the FIRE movement.
6. Entitlement
In this blog post written in 2014 by FIRE evangelist Pete Adeney, there is an underlying theme of entitlement. Mr. Money Mustache, as he calls himself, talks a lot about having the freedom and choice to buy whatever he wants whenever he wants.
Though it might sound glorious to some, I find this aura of entitlement disturbing. Yet, it’s understandable.
When someone hustled to live feverishly cheap for ten years, they’re bound to feel a certain level of deservedness. Their spending is justified because of the extreme sacrifices they made.
But what about those who make extreme sacrifices everyday and still don’t find themselves in the lap of luxury?
And what level of ‘sacrifice’ do FIRE’d folks really make anyway? Sacrifice is highly subjective.
When you earn three or four times the median household income but decided to live on a fourth of that, well, you’re still making it by pretty good. Is it really a sacrifice if all your basic needs are covered and your wellbeing is secure?
The problem is that while FIRE folks are circulating their testimonials and lecturing others on consumerism, they forget the position of privilege they had in choosing this lifestyle to begin with.
By rejecting the notion of work and projecting a haughty attitude from having figured out how to “hack the system”, they’re essentially slapping the working class in the face.By rejecting the notion of work and projecting a haughty attitude from having figured out how to “hack the system”, they’re essentially slapping the working class in the face. Click To Tweet
Many toil day in and day out just to earn a modest living, burdened with debt that is often unavoidable. Meanwhile, the FIRE community is burning through discussion forums on travel hacking and food options.
Instead of maximizing their contribution to society during their peak working years, they have the audacity to demand autonomy and freedom of choice.
And though many FIRE enthusiasts may disassociate themselves from extravagance and unearned privilege, the mere option to choose what lifestyle to subscribe to–and have the means to pursue it–is in and of itself a privilege.
Evidently, the new measure of luxury is not mere dollars or possessions. It’s choice. But choice comes at a cost–one that many simply can’t afford. So the cycle of inequality continues. Instead of manifesting itself in how people dress or what kind of car they drive, it’ll show up in the choices available to them.
Those who have the privilege to choose “wisely” feel entitled to their circumstances while those at the bottom of the socioeconomic ladder feel imprisoned in theirs.Those who have the privilege to choose “wisely” feel entitled to their circumstances while those at the bottom of the socioeconomic ladder feel imprisoned in theirs. Click To Tweet
Endless work
Invariably, the pendulum of society has started to swing from mindless consumerism towards mindful minimalism.
But in this age of materialistic enlightenment, we can’t forget the natural order of things. There’s no such thing as a hack. From the beginning of time, there’s always been a time for work and a time for leisure. When we try to disrupt the natural rhythm of work, we miss out on essential beauties in life.
In her children’s book, Tuck Everlasting, Natalie Babbitt wrote “You can’t pick out the pieces you like and leave the rest. Being part of the whole thing, that’s the blessing.”
My grandma is nearing 80 years old and she still works. Not by necessity, but by choice. As she demonstrates, retirement is not a priority when you feel like you’re making a difference. When you’re working to serve others, there’s no end to your work.
I don’t fault FIRE enthusiasts for chasing financial freedom. We’re all looking for freedom, but that freedom comes at a price. I hope we can count the cost of freedom carefully and take complete ownership in our pursuit of economic liberty–not only for ourselves but for others as well.
As Jon Krakauer wrote in his book, Into the Wild, “Happiness is only real when shared.”
