In our consumer-driven economy, I found it interesting to learn that there is a growing online community known as FIRE—Financial Independence, Retire Early.
Most of us think early retirement means leaving the workplace before age 65, but this group has a goal of retiring in their 40s, or even earlier if they can. To FIRE followers, financial success isn’t about how much you can spend, it’s about how much you can save.
The concept of retirement and how to get there has changed through the generations. For many baby boomers, it meant working at the same place for 30-plus years and exiting with a comfortable pension. Generation X learned that most companies no longer offer pensions, giving rise to saving money in 401(k)s and other investment vehicles. Not having a pension also means there is no reason to stay with the same company your whole career.
Many articles have described Generation Y, better known as the millennials, as a generation that wants to live for the now. They would rather pay high rent for a cool downtown apartment than buy a house in the suburbs. They would rather travel than fund a Roth IRA. Or so their elders think.
In fact, there’s a growing FIRE movement among today’s millennials.
For many Americans, earning more means spending more. But FIRE believers track every penny they spend and equate their purchases to the amount of time they will need to work to pay for them. They would rather watch an instructional video on YouTube than call a repairman.
Their thrifty lifestyle doesn’t result from a lack of money. They live this way because they are focused on saving as much money as they can towards retirement.
Of course, extreme savings isn’t a new concept. We have all heard stories about people who appeared not to have two nickels to rub together, but turned out to be worth millions.
And then there’s Vicki Robin. This thrifty 72-year-old Seattle-area woman is one of the heroes of the FIRE movement. She wrote a book back in 1992 called “Your Money or Your Life” that has become a bible for today’s young FIRE adherents.
In the decades to come, it will be interesting to see whether there is a surge of millennials retiring extremely early. As a financial planner, I am all for aggressive saving, but it requires hard work. I hope this generation remembers to take a break and treat themselves sometimes.