What does FIRE mean?
FIRE is an acronym that stands for "financial independence, retire early."
The idea behind it is that if you make the right lifestyle choices, you can save a significant amount of money — enough to retire much younger than the traditional retirement age of 65.
FIRE's true believers say it's possible to retire at 45. Or 35. Or even younger.
J.P. Livingston, who blogs at TheMoneyHabit.org, has made a name for herself with her story of how she was able to retire with $2.25 million — at the age of 28.
How did FIRE start?
The FIRE movement traces its roots to Your Money or Your Life, a 1992 book by Vicki Robin and Joe Dominguez that popularized the concept of financial independence: having enough money to pay your bills so you don't have to work.
"You need not be resigned to devoting the majority of your waking hours to making money," says the book's introduction. "The nine-to-five grind may be the societal default, but you can steer your life down different highways — with off-ramps to your true calling and a more pleasing future."
Another writer who gets credit for stoking FIRE is Jacob Lund Fisker, author of the 2010 book Early Retirement Extreme. Fisker says he was able to retire at 33 from his job as a nuclear astrophysicist by saving a ton of money, then learning to get by on just $7,000 a year.
"The real problem is not how much we earn; it's how much we waste, perhaps to demonstrate our supposed wealth, when we spend it," he writes.
How are people saving enough to FIRE?
Though one popular rule says you should save 10% of your income for retirement, Fisker says he set aside 70% of what he earned. The FIRE movement has adopted saving 70% as the ultimate goal.
How do you do that? The FIRE faithful say it's simple: make more money, invest it well, and don't spend any more than you absolutely have to.
You might automate your savings during your work years, so the money is whisked out of your pay before you ever see it. Using an automated investment service like Wealthsimple can help diversify your investments and protect you from market gyrations.
You have to make sacrifices, too, like deciding you'll stop dining out or buying new clothes.
Livingston, the woman who retired at 28, tells CNBC she saved big by using a mind trick to keep expenses down: Before making any major purchase, she'd calculate how many hours she'd have to work to pay it off. And then she'd ask herself, Is it worth it?
What do critics of the movement say?
The FIRE movement has attracted some doubters, including personal finance icon Suze Orman — who is definitely not a fan.
"I hate it. I hate it. I hate it. I hate it," Orman said, when she was asked about FIRE by podcaster Paula Pant.
Orman says if you want to retire way early, you'll need $5 million, $6 million or maybe even $10 million, because you never know what life might throw at you. "You will get burned if you play with FIRE," she said during the interview.
But Pant is an enthusiastic FIRE supporter — "I love it, I love it, I love it" — and says that, as someone who achieved financial independence at 31, she was shocked by Orman's take.
"I believe the act of generating sufficient passive income that you have freedom from mandatory work is life-changing," Pant tells MoneyWise.
She adds that she still works — in fact, harder than ever: "The difference is that I know I don't have to punch a clock in order to keep the lights on and the refrigerator full."
What can the rest of us learn from FIRE?
Other followers of FIRE say Orman, who's worth a reported $35 million, doesn't seem to get that few people need an excessive amount of money to live on comfortably.
Or that insurance and an emergency fund can protect you from financial disaster. Or that financial independence doesn't necessarily mean complete retirement from all work, as Paula Pant knows.
The FIRE movement isn't for everybody, but it's hard to argue with its underlying principles:
- Live below your means.
- Save and invest as much money as possible.
- Look for other income sources.
- Think about and start planning for your retirement
That's a good course of action for leading a wise financial life — regardless of whether you dream of retiring decades earlier than most people.
Fine art as an investment
Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.
That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.
Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.