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What if you could travel the world in your 30s without worrying about how many vacation days you have left or if you have enough retirement savings? Quit your 9 to 5 job and only work on projects that feed your soul and make you happy?
You can, according to a group of early retirees that gave up the daily grind with the help of the FIRE Movement—a lifestyle that promotes a certain style of saving and spending to lead you to the central tenets of “Financial Independence, Retire Early.”
FIRE itself has been around for nearly two decades, but has experienced a more recent resurgence in the form of millennials who are eschewing the traditional daily grind to tip the “work-life balance” in the direction of the life they want, throwing the idea of a right retirement age out the window.
Let’s Meet Some Young Retirees
FIRE blogger Early Retirement Dude officially retired at 36, and hasn’t looked back. He and his wife were both making very good money with full-time corporate jobs in Boston when they decided they’d had enough.
“I went into a grey kind of monolithic corporation where I was always the youngest person in the room. I got miserable very quickly,” said Early Retirement Dude, who prefers to stay anonymous. “That’s when I decided, I got to get out of this. But being a financially conservative kind of guy, I had to do this in a financially conservative way.”
Living in one of the most expensive cities on the East Coast meant paring down one time and annual expenses to what he called being “extremely frugal.” They did their own home repairs and spent only what was necessary, mainly simple food and housing. Between tightly controlling their finances and saving income from four rental apartments they owned, Early Retirement Dude and his wife were able to save more than $100,000 a year until they had a big enough nest egg to retire and live off their investments as passive income streams.
Now 50, Early Retirement Dude has been retired for 14 years and lives in the south, which has a much lower cost of living. His wife works what he calls a “hobby career” as a part-time caterer to feed her passion for cooking. And he blogs about his experiences to help others who also want out of a traditional career path and an earlier retirement date.
“I lay a great deal of it at the feet of the simple toxicity of the modern workplace,” Early Retirement Dude said of the new wave of millennials discovering the FIRE Movement. “So when you extend this kind of thing to them, they think, ‘Oh my god if so and so’s doing it, then maybe I could too.’”
FIRE bloggers Kristy Shen and Bryce Leung, former computer engineers who both retired before the age of 33 and have been traveling the world on “permanent vacation” for the last four years, said the uptick in interest is the result of more and more people who have been successful in achieving financial independence via FIRE. Their blog, Millennial Revolution, recently hit 5 million views with 1.3 million visitors.
“We’re becoming harder to dismiss as weirdos who just live in the woods and cut their own hair,” Shen said. “I think people are starting to realize FIRE is not about deprivation. It’s actually about financial freedom, and I think that’s what’s so attractive to people and why it’s starting to spread into a truly global movement.”
How to Retire Early
It’s never too early (or too late!) to start your own FIRE journey.
Figure living expenses first, then your approach to saving
While Shen and Leung, and Early Retirement Dude approached FIRE a bit differently, both households started by figuring out exactly what their monthly expenses were and then adjusting their spending and saving accordingly.
“It’s not so much a formula, as a budget for frugality,” said Early Retirement Dude. “Anything above and beyond that was saved.”
They also cut costs by figuring out what they could do that had the most “bang for the buck.” Instead of booking an expensive vacation, they bought equipment to go white water kayaking.
“For about $150 worth of equipment,” he said. “I can go out and have a thousand hours of cheap fun.”
Shen and Leung, on the other hand, are proponents of the 4 percent rule, a method of saving borrowed from traditional economists, but adapted for the FIRE movement.
Here is how they explained it on their blog:
Simply take your living expenses (eg $40K/year) and [multiply] that by 25 (because dividing by 4% is the same as multiplying by 25). So $40,000 X 25 = $1,000,000.
So if your expenses are $40K/year, once your portfolio reaches $1 million, you can retire and live off 4% of the investment income per year for the rest of your life.
But… if you’re flexible enough that you can live on less than $40K or if you’re planning to work part-time or a side gig after “retiring” from the 9 to 5, you can do it MUCH faster with way less.
Start earning passive income to continually add to retirement accounts
This could be anything from rental income (just make sure you are charging enough in rent to cover the cost of owning real estate and still add to your savings) to investment returns to royalties from book sales.
Shen and her husband never set out to become authors, but they’ve translated their FIRE blogging success into a new book just out, Quit Like a Millionaire.
“I wasn’t even planning on writing a book. It took an editor from Penguin to convince me to do it,” Shen said. “She realized that because I didn’t do anything crazy like start a multi-million dollar company or get lucky in the stock market, my story was reproducible and could potentially help a lot of other people pull it off too, so that’s why I ended up writing the book.”
That passive income can help pad your living expenses or simply help grow your portfolio.
Avoid more debt at all costs
If you currently have credit card, education, or mortgage debt, work on paying it down while you save to improve your net worth. And don’t take on any more in the meantime and lower your annual spending to divert more to debt repayment.
“Financial advisors love to say there’s ‘good debt’ and ‘bad debt,’” Shen said. “In reality, all debt is bad, and if you’re not careful and you sign up for a big mortgage or an expensive student loan to pay for a useless degree, you could seriously screw yourself over for decades to come.”
If your current job is not enough so you can pay down debt and focus on building wealth for the long-term, consider taking on a side hustle. Use the added income as a starting point to start building your savings.
Learn to DIY
Early Retirement Dude said he’s saved thousands of dollars in repair and maintenance costs by tackling home improvement projects himself at no to low-costs, thanks in large part to watching YouTube videos.
“I do basic maintenance on our cars, I fix our appliances,” he said. “I have gotten halfway decent at basic carpentry.”
And since they are retired, they can take care of all the little jobs around the house, such as cutting the grass or gardening, that other people might hire out because they simply don’t have time.
Ignore the skeptics
There’s a lot of chatter out there among finance traditionalists that dismiss FIRE as a fad or even something that could do serious damage to your portfolio. Ignore them, said these experts.
Early Retirement Dude said he gets the most pushback from the Baby Boomer generation.
“For one reason, it’s not the way they did it. For another, they just don’t think the savings goals and retirement planning are realistic,” he said. “They think having a couple million bucks in a savings account is the requirement, that’s the way you do it, but that’s not true. There are all different kinds of flavors of FIRE.”
Shen said even her own parents were skeptics, but have softened since seeing their success.
“I realized that by living this awesome life and teaching people how to do it themselves, that’s how you convince the skeptics on retirement,” Shen said. “Show don’t tell. But, hey, if people want to remain trapped in their cubicles, that’s their prerogative. More freedom for us.”
Disclaimer: The opinions expressed by the interview subjects are not necessarily those of Earnest.