What Do We Think of the FIRE Movement?

Aptus Partner Tim Quillin (TQ): SC, I don’t know what to make of the FIRE movement. Is it a bunch of extreme savers living an ultra-frugal lifestyle because they hate their jobs? Do they just want to build a nest egg so they can give the man the finger and move to a beach in Nicaragua? We’re passionate about helping people save for retirement, but I worry that these FIRE-breathers are setting the bar unrealistically high, while most millennials struggle just to pay down student loan debt and save 10% into their 401(k)s. Isn’t the FIRE movement like the oh-so-extreme CrossFit movement, with a cult-like following but no impact on the health and wellness of the broader community?

Aptus Founder Sarah Catherine Gutierrez (SC): Well, that’s certainly one way to look at it, but I think the mainstream FIRE movement is taking serious inspiration from the people taking saving and debt repayment to the extreme.

But let’s talk about extreme. Is it extreme to have a doc sleep in a sleeping bag for 18 months to pay off all her student loan debt? Maybe. But I wish we could define a 20-year student loan repayment as extreme. Imagine a $40,000 student loan that costs a person $250 per month to pay it off over 20 years!!!! That’s like buying 3 pretty late model, nice cars over that period. That kind of debt handcuffs people.

And on the CrossFit, plant-based, kale-eating crazies—well, I drink a kale smoothie in the morning. Sure, I use it to wash down my Chick-fil-A, but I feel like I’ve gained some wisdom from the extreme dieters and exercisers to make some pretty good and reasonable diet and exercise changes. While I don’t feel any desire to join the extreme, I’m also not turned off by the notion of a healthy lifestyle.

Can you see any value from what the extreme FIREs are doing so publicly?

TQ: I don’t know. I hope so. We’re seeing a lot of new clients that draw inspiration from the FIRE movement. Most of our younger clients are looking to sharpen up their financial plans to help them maximize student loan reduction and increase their retirement savings. No doubt. But maybe there’s an equal number that get discouraged?

I know some people trace the roots of the FIRE movement back to the 1990s and the book “Your Money or Your Life.” It seems, though, that FIRE is a product of the economic wasteland of the 2008/2009 recession, which seems to have been imprinted on the psyche of the millennials. Every young adult novel of the past decade has been set in a dystopian future. I worry that the FIRE movement—like doomsday prepping and Suzanne Collins novels—will fizzle out.

Here's one other consideration. It turns out that all the fresh college grads from the past decade, freaked out about the future and squirreling away money in a panic, benefited from a crazy bull market. The stock market tripled from mid-2009 to today. The FIRE power savers were socking money into stocks as the market was roaring. It was like the steroid era of the FIRE movement. When new FIRE starters need to pump iron twice or three times as long to see the same results, will they be able to stick with it?

SC: I see your point. You think that maybe FIRE will historically be a blip. The perfect conditions existed to drive two extremes: on one end the millennials going off the grid, eschewing modern luxuries to save and pay down debt, and on the other end millennials who simply gave up. They gave up, bought the nice house, bought the nice car, let the retirement plan auto enroll them at just 3%, and assumed that student loans would always be with them. They know they won’t have enough to retire one day, but they take comfort in the company of so many other millennials in the same boat.

You and I have always recognized a personality difference in our approaches to this work. I am the hopeless optimist, and I recognize that. But I completely disagree with your analogy of pumping iron. I actually don’t believe that people assume their savings would get over-rewarded with 20% annualized returns. What I believe is that when people save, they get hooked on the feelings that come with being a saver.

Think about our practice. We have seen hundreds of people become savers. But have we seen that many people go the opposite direction—from savers to net spenders? Of course not. Because saving money makes people feel safe, secure, responsible, happy. They enjoy vacations more; just like the research says—taking a vacation on savings rather than credit cards makes people enjoy the vacation more.

I believe we are witnessing a great transition from older generations of spenders to younger generations of savers. This is not about minimalism or frugality or saving for moralistic reasons. I believe it is far more practical than that. Deep down, we are born with some sense that we have to save money. But the generations before weren’t given the financial literacy tools, upbringing or practical reasons to tap into that place. 

I believe the FIRE movement is resonating deeply with people because it does tap into that deep knowledge that we all have. We know rainy days are coming. We know retirement is coming. We are seeing baby boomers want to stop working but unable to. 

In your scenario, do you think that the current savers stay savers but that when the larger economic forces shift that the movement just fails to gain more savers?

TQ: I’m the curmudgeon on our team and I embrace that role. My only concern is that Financial Independence, Retire Early may feel unattainable for some. I don’t want perfection to be the enemy of progress. I want people to continue to join the savings revolution.  

And FIRE is definitely a lot better than ICE. Indebted, Compulsory Employment. Yea, I just made that up. Pretty awesome, I know. 

Let’s talk about the cash flows for two fictional clients, let’s call them Crystal Ice and Ash Fire. I heard that groan, SC. Step off. Give this a chance. 

Crystal Ice graduates from college with $40,000 in debt and takes a great job that pays $60,000 a year. That’s righteous dinero, so she moves into a nice apartment, leases a car and starts eating out with friends most meals. She makes the minimum student loan payment and doesn’t save into her company 401(k). She’s spending everything she makes and will most likely expand her lifestyle to consume all her income even as her career progresses. She won’t ever be able to take time off to travel and she won’t have any cushion to help her start a business venture.

Ash Fire, coincidentally, also graduates from college with $40,000 in debt and takes a job for $60,000 per year. She’s been reading FIRE blogs and is hardcore committed to the cause. She moves into a house with 5 roommates, uses public transit, and eats lots of ramen noodles. She refinances her student loans into a floating rate agreement and plans to pay them off in 5 years. She’s saving 25% of her income into a Roth 401(k). After she pays off her student loans, she’ll be saving 40% of her income for retirement. Her goal is to quit working when she’s 35 and become a roadie for Kendrick Lamar.

I’ll be honest with you, Ash’s future looks a heckuva lot more interesting than Crystal’s. FIRE beats (melts?) ICE.

But can’t there be a middle ground? 

Meet Luke Warm. WARM. Wealth Accumulation, Rational Moderation. This is rhetorical gold, right? I know.

Anyhoo, Luke also has the $40k in debt and $60k job. He chooses a 10-year student loan repayment plan and saves 10%+ into the company 401(k). He lives modestly, but normally. He splurges on a nice dinner with a date once in a while and eats ramen noodles, not because that’s all he can afford but because, honestly, he just loves the stuff. He wants to eventually own a home and car, but no rush. Most importantly he wants a career that he loves and can stick with long term.

I’m team WARM. And I’m running out of FIRE puns.

SC: Ok, I think we found agreement. I’m with you on WARM. I have always believed that the FIRE movement would spark a secondary movement of that nature. I have never believed that the average person would become a FIRE, only that some of the principles of the FIRE movement like saving 10% for retirement, paying off student loans more aggressively than over 20 years, and making a contingency fund for replacing a roof, the air conditioner and the car, would become more mainstream. 

WARM. It feels cozy. It feels like a place that a lot of people might aspire to. I’m in.

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