The FIRE Movement – America’s Hottest New Trend in Personal Finance

We Brits have never been much cop when it comes to talking about money; sure we moan a bit when the tax man nibbles a bit more of our hard-earned away, but by and large things just work and the state has traditionally been there to nurse us through periods of sickness and look after us in our dotage.

By contrast, our cousins on the other side of The Pond have always had a much closer relationship with their money – born of necessity, the 401k/fifty-nine-and-a-half conversation is a staple around many a US dinner table.

However, things are changing here as reliance on the state is replaced by the need for financial self-reliance; only this week we read that the state pension pot will be empty by 2032, and those that make no provision for their financial future could find themselves in dire straits.

Whilst not delivering money for nothing, sister site Muckle believes strongly in the need for individuals to take personal control on the road to financial freedom; if we believe that we are moving closer to the US model, it could well be that the pursuit of FIRE becomes as ubiquitous here as it is becoming over there – as ever access to good information and high standards of financial education will be key.

In this guest post, Melanie Pickel of Partnersinfire.com explains what the FIRE movement is all about; Muckle picked up on a quote from Melanie on Twitter which it intends to use often in its attempt to encourage more people to embark upon a long term investment regime – ‘the best time to plant a tree was twenty years ago; the second best is today’

What is the FIRE Movement?

The FIRE movement is The United States’ hottest new trend in personal finance. A huge number of Americans (and by Americans, I mean people from the US, but lots of personal finance bloggers from Canada are getting on board too!) are realizing that the good paying jobs aren’t ever coming back, and that the social safety nets designed to keep us from poverty are failing. Instead of wallowing in self-despair, a lot of us are taking our lives in our own hands. We are getting FIRED up!

What is Fire?

FIRE stands for Financially Independent/Retired Early.  The goal of the fire movement for many people is to not have to depend on a job. We want to have enough money from sources outside of traditional employment to maintain our standards of living. For some, that means passive income via investing. For others, it means rental income. Still others achieve FIRE by being extremely frugal and saving huge percentages of their incomes. There are thousands of ways that people get on the path to fire (and there is probably a blog for each way).

Types of Fire

Because there are multiple paths to FIRE, there are multiple types of FIRE as well.

Lean FIRE means that you maintain financial independence by spending less than forty thousand US dollars per year.

Coast FIRE means you have enough money in savings to be financially independent when you reach the traditional retirement age of 65 (it means you no longer have to contribute to your retirement accounts).

FI/OR means that you are financially independent and retirement is optional.

For More information on the types of FIRE and other basics of the FIRE movement, check out my post on FIRE Fundementals

These different types of FIRE really illustrate the vast diversity of the FIRE movement.  Some people would rather scrimp and save and live off less than 40K per year than go to a menial job, while others love their careers but want to ensure financial security.

Neither route is right and neither is wrong, it all depends on what you want out of life. I think it’s great that more and more American’s are deciding that they don’t want to be a slave to they system. We are finding creative ways to opt out!

Back-Up Plan

Even if you do love your job and have no plans of quitting, it’s always a good idea to have a back- up plan. Are you certain that your company won’t go out of business?  Is it possible that you could get laid off? What would happen if you are disabled and can’t work anymore? Would you ever have to unexpectedly quit your job to become a caretaker for ailing parents?

For most Americans, being financially independent means that none of these things will destroy us. It means that we will be able to weather any storm and still maintain our standard of living. We need to ensure that we are capable of handling these things ourselves, because, unfortunately, in the United States, there aren’t a lot of good social programs set up to make sure we will be ok if any of these things happen. We have to include the unexpected into all of our plans, because the safety nets we do have are so low that we will end up in poverty if we do not. In addition, some of our political parties are fighting to remove the tiny nets that we do have.

Why FIRE if I have a safety net?

There are tons of reasons why you should seek fire even if you live in a country with a progressive safety net. First and Foremost, that safety net might not always be there.

The UK has been renowned for their excellent social programs, including the socialized healthcare system. However, recently I’ve read lots of blogs and reports from people across the Pond that their system is failing. New politicians don’t give it the same support it once enjoyed. Newer parties are coming into power demanding more individual responsibility (welcome to our world!). You never know what the future will bring, and whether those programs will still be available when you need them (or maybe everything I read about it is hyperbole, who knows?)

The biggest reason to get on board with the FIRE movement though is freedom. Do you really want to be tied to that job for your entire life?  Is life really about slaving away for forty hours a week, 50 weeks a year, for fifty years? That just sounds miserable to me.

I don’t want to live to work, and neither should you. I want to live my life and explore the world!  Maybe you want to spend your life reading the complete works of the 16^th century, or curating the most beautiful garden in the neighborhood, or helping abused animals find homes. Whatever you want out of life, it’s much easier to get if you can take care of your financial needs without a job.

That’s what the FIRE movement is about. It’s about giving you the time to pursue your passions. And that’s why you should get on board. Get FIRED up with us!