FIRE is a millennial movement that emphasis on living on a little money, save the rest, and retire early. As good as it sounds in theory, the execution is exceptionally challenging. You might have to save more than 50% of your income from achieving the goal.
You will be enjoying early retirement with no stress while many of your friends will be working hard. There will be no stress of post-retirement fund in the last stage of your career. However, at the cost of almost every comfort at present.
Here, we have mentioned the advantages and disadvantages of the FIRE movement to let you decide, is it worth the struggle?
You get motivated to reach a goal with the FIRE movement. Think of it as an intent required to encourage hard work. You now have a forced focus to achieve financial independence.
Think of the routine you follow daily. Is it just waking up, going to work, and perform household chores? You need something to make your everyday intentional and actionable.
Dreams of Future at the Expense of Present
You need to work diligently for the next decade to achieve the goal. And the reward will be in the distant future with early retirement and enough money in the bank. There is no guarantee there will be no stress or anxiety post-retirement.
Also, you may sacrifice some valuable moments that you might regret later. Also, the journey to achieve FIRE might be more fun than life after it. You do have a purpose today, but there might be nothing to live for after retirement.
A financial crisis can hit you anytime in your lifetime. The direct lenders might help you during the time of need by offering fast loans with no guarantor. But it is always recommended to have enough in the emergency fund to counter any problem.
With FIRE, your entire focus will be on savings. The retirement might have to be postponed a year or two if you face a financial emergency.
A Bad Trade-Off
Think of the sacrifices you need to make to achieve this level of financial independence. You need to save at least 50% of your income from getting enough money. There might be no dream car, house, or other stuff you always wanted.
In addition, it is not ideal for everyone. Since some of us face a hard time managing the finances, too, there is no guarantee that something like a coronavirus pandemic can completely fail the whole plan. Moreover, all that suffering for the first few years went for nothing.
Control in Your Hand
Control over money is significant to manage finances and have a secure future. Without proper control, you are dependent on your paycheque every month. There will be unnecessary spending, which makes saving enough money a challenging task.
People who are part of the FIRE movement save up to 70% of their income. The moment you save the desired amount, you start controlling the money. Therefore, future finances are safe and secure.
Too Much Focus on Savings
Saving such a huge amount from your paycheque requires determination. You need to plan every expense and save wherever possible. However, it creates too much stress on the savings, that one might no longer enjoy it.
At a certain point, you will find it unnecessary. You are living your life for the retirement date, letting go some of the greatest joy of life.
The knowledge you will gain about FIRE movement will help you in the long run. It will make money management easier for you. And you will focus more on long-term investments instead of non-essential expenses.
Fire movement provides an entirely new perspective toward personal finance. You are more inclined towards saving and post-retirement funds. Even if you don’t follow the movement, you still can take valuable lessons from it.
Unnecessary at Times
Think of the time you will spend after retirement. As mentioned above, life without purpose is dull and uninspiring. It makes early retirement unnecessary as you might enjoy the later stage of the career. And there will be no unnecessary savings as well.
To conclude, FIRE is a movement that requires extreme savings for the next 5-10 years. If you believe it is better to work hard the next few years and retiring early is a good idea, go ahead with it. But if living life while enjoying every moment is in your mind, FIRE movement is not ideal for you.
Budgeting and Money Management
The foundation of FIRE movement is to create a new budget that results in at least 50% savings. You will learn how to live on a limited budget, regardless of your income. And there will be fewer expenses with a comfortable life.
Another benefit of this movement is the uncomfortable questions about our lifestyle we try to avoid. You need to face them to manage and track your money more efficiently. Moreover, you will have deep insight into your expenses and savings each month.