I did a talk last week about money and being mindful of what you have and how you use it coming up to Christmas. It led me to write this post as I have recently been reading about the “Financial Independence Retire Early” (FIRE) movement. This is an interesting movement that espouses restraint, control, and clarity about what you spend your money on, why, and how you spend it.
The central premise is that you drastically reduce your spending and save to build up a portfolio that will yield passive income to enable you to reach early retirement in double-quick time. Get all that? The “official” idea is that you build up a war chest of 25 times your net annual spending needs which you can draw from at the rate of 3% to 4%. These drawings should be covered by growth and dividends, rental yields, thus protecting your capital.
Critics say that the control and reduction of spending are excessive and can only work for higher incomes. It also adds to misery with this frugality and minimalism being unsustainable in the long term. They miss the point though because to me it is much more than just getting to a point of financial security.
I am a big fan of this movement. Not in a naïve, daydreamy kind of way, but it links closely with my values and money coaching work. I have spoken often at events about minding your “pot of gold” which is all the money that will come to you in your lifetime. You need to mind it not only from your own waste, mismanagement, and ignorance but from blind consumerism and the marketing machines that convince you to open your pot for them. Ultimately you use your pot for what you want, not what others want.
FIRE is turning on a switch in people who may never have thought about money in a different way. How you waste money and how you allow yourself to be sucked into the norms we have about work, consumerism and spending is not something most think about. We get a job to pay taxes, to buy more stuff, to look for a better job, to buy even more stuff to put into a bigger house without ever asking “is there a better way to do this and how can I learn it?” One in ten US households rent space in lockups to store the stuff they have accumulated needlessly. This is starting to happen here. Cue the decluttering movement also.
In his book, “Early Retirement Extreme”, Jakob Lund Fisker asks us to do just that; to be more mindful about what you are using your money for and how to change. I feel this message is more powerful than most financial education books. Why? Because the desire to change is sparked within people. It adds a goal and a vision and a path to those wishing to learn about their finances and gives more context to earning and spending.
If you would like to discuss these or any other issues in confidence, why not contact me for a 30-minute chat to start or at [email protected] to see how I can help you. Personal financial and career coaching gives clarity and purpose to your money and work life.