Saturday , July 2 2022

FIRE, the movement that promotes retirement in 40 years


Barney Whiter's parents bought his home when he started high school in the United Kingdom in 1981.

"They made the British classic," he says, "big home, big mortgage."

Shortly afterwards, there was a great recession and interest rates rose to 17%, so his parents had to cut their costs to make a few mortgage payments: Vacation days are canceled.

Leo's father stopped buying beer and made his own. And man's attitude to money has changed forever: "It was terrible to owe a lot of money to the bank"says.

He passed his adult life, making sure he did not end up in the situation of his parents.

Barney Whiter graduated in Economics and trained as a Public Accountant, a profession that followed as a specialist in the language of money and worked on funding for 20 years.

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But while his salary rose from the initial 12,500 pounds (US $ 16,000) he earned at graduation, His way of life did not.

For more than two decades, Whiter had expected to save at least half his salary each month for retirement and any bonus you earned went straight to your savings.

He drove his bicycle to the office instead of taking the metro, plus reducing alcohol consumption.

The white man, now 48, managed to save enough retire at 43

But it was not a year before he retired that he met with Mr. Money Mustache, a blog written by Canadian Peter Adeney, a celebrity among young retirees.

Lewk realized that he was unknowingly part of a movement that has grown in popularity among younger workers around the world.

He's called FIRE: financial independence, retire early, or Spanish "financial independence, early retirement".

Starting a FIRE

The basic model is this: the participants live as strictly as possible, saving half of their income or more during the aged between 20 and 40 years.

The goal is to retire before the age of 50.

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Many fire enthusiasts do not intend to spend 50-year papers or cruise.

SE is about financial independence: the goal is to have a sufficient savings fund and live in the simplest way.

So they can devote more than looking for income and offers to a corporate job or worrying about the fact that the bank has a big mortgage.

And even though these ideas have existed since then, the online communities have allowed the FIRE movement to really consolidate itself over the last decade.

At present, thousands of people around the world subscriptions podcasts (one of the most popular called Firedrill), blogs and participate discussion forum on how to live a rigorous life.

They are not like others

These communities of young people who are obsessed with saving their retirement contravene a trend: most of millenniums They do not save enough to retire.

The millenniums in the UK save 4.6% of their salary on average for retirement. Lper person his followersThe FIRE movement accounts for half of its income or more, while spending as little as possible.

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Craig Curelop, a 25-year-old financial analyst, follows his philosophy "everything, do not use anything".

He owns a car but never drives it, but it bothers him in a place called Turo and uses a bike: "I did this and earned a few hundred dollars a month longer," he says.

This resident of Denver, United States, used to rent his bedroom at Airbnb and slept in the living room.

He extorted so much that he managed to buy another house in June of this year (his first duplex he bought in April 2017), where he lives in a room and rents the others.

"Right now I am saving between US $ 3,000 and US $ 4,000 per month"says.

"It is likely that I saved from 60,000 to 70,000 US dollars in 18 months since I first started home," he says.

This way of life is not excluded from criticism, some point out that there are high savings targets that are not feasible.

"They have many positive aspects and some good roots in financial planning, but I think it's an extreme version that is not necessarily suitable for everyone," says Damien Fahy, a London-based financial planning consultant.

The Mathematics of Life

Another controversial aspect of the FIRE movement is: How much money does anyone need to retire at 30 or 40?

Critics say this FIRE fans greatly underestimate how much they need to save.

Many (though not all) in the movement follow the 4% rule.

If a person withdraws only 4% of an investment, his income will mainly consist of interest and dividends and will not spend any of the funds.

The golden rule here is save 25 times the necessary costs: For example, to spend some US $ 39,000 a year, you will need $ 771,000.

But this rule has its flaws, especially when applied to young people. It is generally used for those who retire in the 60s, who Probably will not need money for more than 30 years.

Mathematics does not give, says Holly Mackay, founder of the Boring Money website: "If you retire in the 30 years, you could live 70 years longer. I think there is some naivety. "

Cutting, not cutting

Gwen Merz is 28 years old and has assets of $ 200,000 (mainly in real estate, shares and some cash).

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The American woman resigned her work on March 27 and now presents the Firedrill podcast: "I'm not a retiree, I have to work but I have the freedom to choose something that I really like and that can not pay that much"

She hopes that her investment will provide her with vital income each time she decides to stop working. And for her, the fire is not only financial, but also offers community and companionship.

"There are more people to go out with and do not look bad to have a car for 13 years," he explains.

He says he would like to have a Nintendo switch, but he thinks it is superfluous. She also eats less than before and does not travel so often.

You should be able to live your life better, but that does not mean you spend a lot of money, says Gwen Merz

Tips Cut the unnecessary costs to the point of feeling uncomfortable and then moving to the next highest level: "You should be able to live your life better, but that does not mean you're spending a lot of money."

White agrees. "You do not have to go to an expensive downtown bar," he says.

"There is no point in living miserable for 20 years only to be able to live miserably for another 20 years after work," he says.

Freedom of work

Although FI's RE's section is about to retire early, Merz and Whiter's goal is not to give up his job and do nothing until he dies.

"We are not ready to sit down and drink Mai Tais all day," says Merz.

"Human beings have an inherent need to work. We have to feel like valuable members of society and this is not going to stop because you have a quantity of the money at the bank"he adds.

On the contrary, it gives them the flexibility to do what they want.

"You have to live it to understand how powerful it is," says Whiter.

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