FIRE movement promotes extreme savings, early retirement

A relatively new financial movement aims at financial independence and early retirement, sometimes extremely early retirement.

And that’s the name of the movement: Financial Independence; Retire Early.

Adherents say people can retire in their 40s or even 30s if they practice extreme saving and investing.

The key idea is to enlarge the gap between necessary expenses and income. The money in the gap is what you invest.

As a practical matter that means closely tracking expenses, eliminating anything that isn’t necessary. Make sure your living arrangements are as inexpensive as possible. Eliminate all debt.

Cut expenses to the extreme. Then, enlarge the gap by side jobs or part-time jobs to create a big monthly investment number.

FIRE people try to make sure they max out 401K and retirement programs, while saving extra on the side. They intend to retire before they can withdraw funds at age 59 and a half. They also have to make enough money to buy private health insurance.

FIRE retirees actually don’t think of retirement as a way to stop work. They think of it as a way to work the way they want, without worrying about money.

Semi-anonymous blogger Roman, founder of TenFactorialRocks.com, says this can even be done with children. While the USDA says it costs $11,000 to $12,000 per year to raise a child, Roman says it costs more like $4,200 to $7,000 a year, depending on day care costs. Roman writes, “Kids want your time and attention more than expensive gifts, lavish vacations, overpriced tutors and royal treatment summer camps.”

On the other hand, Lisa Harrison of the Mad Money Monster blog, rejected the FIRE movement in favor of simple living. When trying FIRE, she and her husband cut out every single extra expense, from coffee dates to dinners, and they found that, after two years, their savings were up but their happiness was down. They decided to simply live in a frugal manner, saving money regularly, keeping expenses down, but going on dates and buying pizza. “A feeling of relief washed over me,” she writes.