FIRE stands for Financial Independence, Retire Early. The FIRE retirement movement takes direct aim at the conventional retirement age of 65 and the industry that has grown up to encourage people to plan for it.
By saving 70% of their income, FIRE movement followers pursue quitting their jobs decades before reaching 65 by living off small withdrawals from their portfolios.
The goal is to achieve the 4% rule: Save up enough money, where 4% of it equals to your total annual expenses. So if you spend $100k a year on living expenses, you would save $2.5M.
This means extremely frugal living.
But why should you care?
Strong savings habits should always be encouraged. However, your patient may take it too far. Constantly declining social invites to save money can lead to less human interaction and loneliness.
Reducing basic necessities for family members can also lead to harm. For example, reducing grocery budgets and substituting in cheap, unhealthy foods put others at risk.
Even creating a home culture of poverty living will deprive family members the basic joys of life.
Advice to consider during sessions.
By saving 70% of their income, FIRE movement followers pursue quitting their jobs decades before reaching 65 by living off small withdrawals from their portfolios.
The goal is to achieve the 4% rule: Save up enough money, where 4% of it equals to your total annual expenses. So if you spend $100k a year on living expenses, you would save $2.5M.
This means extremely frugal living.
But why should you care?
Strong savings habits should always be encouraged. However, your patient may take it too far. Constantly declining social invites to save money can lead to less human interaction and loneliness.
Reducing basic necessities for family members can also lead to harm. For example, reducing grocery budgets and substituting in cheap, unhealthy foods put others at risk.
Even creating a home culture of poverty living will deprive family members the basic joys of life.
Advice to consider during sessions.
- Why: Remind your patient that the goal of retirement shouldn’t be the retirement, but the retirement should be the means to a higher goal. If your patient is looking to quit a corporate job to start his/her own non-profit, that’s a worthy goal. If the goal is to just quit a job without a plan after, then ask your patient if the real solution is simply to just get a more fulfilling job.
- Basic necessities are still necessities: Remind your patient that not everything should be eliminated from a budget. For example, canceling health insurance for the sake of saving money places him/her in a vulnerable position if an incident occurs. Even worse, an entire family will be impacted by this poor decision.
- Free-time is free-time, not happiness: Friendships, community and a sense of belonging creates happiness. But these require sacrifice and years of social investment. Sacrificing this for happiness in the future can lead to free time without friends.
- Set a realistic budget: Attempting 70% savings is a noble goal, but is it necessary? Have your patient actually calculate what is needed to retire and when. If they realize they actually don’t spend much per year and want to continue working for another decade (perhaps they have a goal to reach a certain status/position in the company), then they are being irrationally urgent.
- We live in a consumerist society, but not every spend is trivial: People will shop out of boredom. Rather than just eliminating all spending, have the patient consider the ROI (return on investment) for every purchase. For example, purchasing a new iPhone every year will not result in additional value to your patient. But paying for admission to a networking event can pay dividends in the future.