FIRE stands for Financial Independence/Retire Early. It’s a term that was coined in the United States by personal finance bloggers who started to blog about their journeys of achieving financial independence with the aim of escaping the rat race and retiring earlier than the standard 60-65 age bracket.
Obviously this is a hugely attractive proposition for pretty much any person around the world, so the concept and the FIRE bloggers themselves have become immensely popular.
I’d like to share my thoughts on the concept itself and the FIRE community, as there are some things I like and others I don’t like so much.
The most positive aspect of the FIRE concept and the blogger community is that it serves as an inspiration to normal people who can see others go through their journey and learn from their wins and mistakes.
It can thus be the beacon that shows that the rat race is not the only option, whatever your current financial situation and educational/class background.
These blogs can also offer practical advice on how one can go about thinking in a different way and start saving and investing. Unfortunately, most educational systems in the world do not prepare kids for adult life by providing them with a solid framework of how money works and how to generate personal wealth. In my opinion, this is one of the biggest downfalls of our current educational system.
Here’s how things eventually play out for these kids.
If you live in a society like the USA, you might end up going in the direction of one or two extremes.
The USA is a very strong capitalist society where consumerism reigns; there is an “American dream” mentality where everyone believes they can make it big. This is a positive thing, and if you end up having some good mentors or somehow inspire yourself from successful entrepreneurs, you can become hugely wealthy.
On the other hand, because it is such a consumerist society where people are constantly encouraged to buy more stuff, you can very easily go to the other extreme and spend more money than you earn on a monthly basis, driving yourself and your family deeper and deeper into debt.
In Europe, on the other hand, I don’t see these two stark extremes. It is much more likely that young adults will join the rat race and make a good living if they work hard and smart. Living beyond your means is not as common in Europe, so we don’t see extreme poverty but neither do we see the extreme riches because we are not accustomed to thinking as audaciously as our American counterparts.
I think it’s important to make this distinction between Europe and the United States before I continue.
This is because one of my biggest criticisms of the FIRE movement is that it focuses too much on saving. I would concede that this makes sense in the United States where mismanagement of personal finance and living beyond one’s means is rampant, but it is a mistake for European FIRE bloggers and seekers to adopt the same mentality.
In my opinion, the focus to achieve FIRE in Europe is to concentrate on thinking more like an entrepreneur and focus on generating more money for your family. Most people have a good grasp on their saving habits, and yes, you can learn how to keep a budget and other basic personal finance skills, but it shouldn’t be your main focus if you want to FIRE.
I see so many blogs advocating extreme frugality, like saving on your daily coffee habit, cutting your hair/beard yourself instead of going to the barber, etc etc. In my opinion, this is quite silly and does not lead to serious long-term wealth.
Let’s keep in mind that by reducing our spending we are also shrinking the economy, and your local coffee barista and barber are also trying to make some money and perhaps achieve FIRE themselves. The solution is not to turn off those small taps, but to be creative and industrious and create businesses that contribute to grow the economy and thus your personal wealth.
The second and related aspect I don’t like is that of generating a big sum of money that one can then live off for the rest of their lives. So many FIRE bloggers focus on working their ass off until say they are 45, while living an extremely frugal life, so that at that age they have a good sum saved and can then retire and live off that money by investing it in passive investments like index funds and real estate.
The big downside? In my opinion, they are losing out on the best years of their lives and possibly compromising their health, relationships and education by focusing on saving obsessively and working long hours during this period.
The alternative? I’ll discuss that in the next section.
My Approach to FIRE
I never had a specific moment where I decided to FIRE. Rather, I had always adopted a freedom-focused mentality in life that naturally leads to financial freedom. My dad spent his whole career as an accountant working long hours and climbing up the corporate ladder. He made decent money but never owned any income-producing assets, so ultimately he just traded more and more of his time and energy for more money.
The result was that he had almost no time for his family and his many interests.
As a teenager, seeing the very restricted amount of quality time with him, I vowed that I wouldn’t follow the same path and that there had to be a better way of living. At the same time, the internet revolution was taking place and I was devouring early blogs and books from the US about building websites and online businesses, and I quickly figured that that would be my ticket to freedom.
I defined freedom as primarily a concept related to time. I wanted to be free to work at the times I wanted to and ideally as much as I wanted to, so I would be able to spend as much time on my passions and family as possible. In order to achieve this time freedom, I would need to generate good income streams that did not depend on me actively trading my hours for money.
The solution was to build an online business, which is exactly what I did. My thoughts were that if I built online products that would have a worldwide market and could be sold 24/7, then I would eventually be able to build a business machine that would work without me being present.
Fast forward several years, that dream was achieved, and that brings me to my alternative thinking about the saving + lump sum generation favored by many FIRE bloggers.
My idea is that it is better to build a machine or system that can generate a nice sum every month and that allows you to live a comfortable life plus have some money left over to invest.
If you manage to build that and be diligent for a decade, you should be in a very nice position where you will be able to work whenever you want and focus on your passions. You will have a good amount of extra money that you can invest and obtain good returns on, but it is key that your most important major income stream is a real business.
In this way, you can invest with limited pressure. This has the potential to help you invest in a much better way than you would otherwise do. In my experience, investing is all about learning as much as you can about a certain topic, and then managing your emotions as you go through the market’s rollercoaster ride. If the fear of loss or the pressure to make money is present, it can make you buy or sell at the wrong time. On the other hand, if your living expenses are covered by your regular business, you don’t have this pressure and can keep a zen-like investment focus.
With this framework, if you start building in your twenties, by the time you’re in your thirties you can be in a very nice position in life, but more importantly, you would have enjoyed the journey all along the way. This is not only my story; countless others have gone down the same route and ended up in similar positions, so I know it’s a repeatable system.
Two books I encourage you to read if you fancy this idea but are hesitant about the building of the business machine: Built to Sell and The E-Myth.
I also think that this post by BowTiedBull is excellent on the topic of mainstream FIRE ideas, and a more recent one even more.
FIRE Bloggers in Europe
The FIRE concept has been established in the United States for a very long time, and there are some very successful bloggers there who make millions from their blogs. Europe is heating up as well and there are now many bloggers writing in several languages about their FIRE experiences. You will find many of these bloggers and their latest articles on Euro Finance Blogs, which is an aggregator of European finance blogs.
Over to You
What do you think of my thoughts on FIRE? Let me know in the comments section below.
If you truly want to improve your financial situation, I suggest the following:
- Read as many books on the topic as you can.
- Network with other investors and find masterminds of like-minded people.
- Get coached and mentored by an experienced investor.
Jean re investors taking stock / not understanding investments:
Absolutely, yet, Jørgen failed more so than anybody else. The point isnt about the high risk nature. We invested in risky loans and assets. Which we knew and Jørgen’s documented understanding was the same. Platform’s would have minimal costs while striking up commissions from loan originators. Most investors didn’t realize the scale of affiliate commissions to bloggers and the fantastic impact on platform’s balance sheets. Forgive us we didn’t realise we were paying vast sums to bloggers from deposits (definition of Ponzi)
Jean I am sorry to break it to you yet Jørgen acted very much maliciously indeed. He surely knew at some point that he was getting paid by platforms that it was becoming immoral to recommend them for FIRE. Yet he continued. To date, he has yet to admit that FIRE through his documented investment strategy failed, dramatically. Except for his buy-to-let properties. He hides the astonishing amount of money he made through affiliate bonuses. An honest FIRE conclusion from him would be: forget investing, affiliate marketing is the way. He doesn’t, of course, as he knows how immoral it was. Instead, he continues approaching the community as if nothing happened; your podcast, Jean, for starters. He is not a scapegoat, he is targeted as he received vast sums of Ponzi cash; just as guilty as the scammers. A very dishonest and immoral individual indeed
Hi Daniel, I understand your points and feelings. I am not here to defend Jorgen or the countless other bloggers who did the exact same thing (but perhaps weren’t as popular). I hope that going forward investors will be more diligent and bloggers will also not be blinded by affiliate commissions, as long-term it’s not a good strategy to recommend bad platforms – you will end up ruining your reputation and hence see a drastic decrease in visits to your blog and the associated affiliate commissions.
There are many investment opportunities out there but I kid you not when I say Jørgen Wolf is not a real investor. He made alot of money by promoting p2p platforms earning referral fees and other kickbacks.
Real investors have many options: p2p but also stocks, bonds, real estate and other passive income to reach FIRE.
Hi Gianni, thanks for your comment.
My thoughts:
I don’t think the fact that someone focuses on one asset class makes him a fake investor. Moreover, Jorgen also invests in real estate. He might also invest in other assets for all we know.
In a separate post, I have already spoken at length at the fact that people should use finance blogs like Jorgen’s as part of their research process, but shouldn’t rely on their numbers or actions exclusively. That would definitely be irresponsible investing. Bloggers can share whatever they want to share, and there is no way of verifying the numbers nor any way of knowing what their overall net worth is and what assets it comprises.
I am also of the opinion that the best way to reach FIRE (a term I don’t particularly like anyway) is to start your own business, and Jorgen did a great job at that. He used his knowledge of P2P investing to generate a significant income stream in his life and thus be able to leave his job and achieve a better lifestyle, and in my view, that is something that he must be applauded for.
Having said that, I would also agree that having a diversified portfolio including the assets you mention is generally a good recommendation and something that most of us should strive for. For those who have extremely strong knowledge in one area, though, they might prefer to go all in on that area and make a ton of money, before they look into diversification. I know several people who made a killing by spending all their energy and money on building a startup that they eventually sold for millions, or putting a lot of their cash into cryptos in the early days.
In conclusion, there are many ways to make money, and one way is not necessarily better than the other, provided we do things ethically.
You are taking the piss? Baltic’s never ending P2P scams have put EU on the map with even bigger mass P2P scamalanche in China. Affliate Jørgen Wolf has been the single biggest source of destruction within our supposedly well shielded European project. Some references https://kristapsmors.substack.com/p/p2p-platform-summary-for-2020 and https://kristapsmors.substack.com/p/how-much-did-jrgen-wolf-earn-by-promoting
I’ve already written at length about bad P2P platforms in Europe, as well as the fact that prospective investors shouldn’t rely on bloggers’ income reports and advice.
Having said that, I think that Jørgen was made a scapegoat by many investors who lost their shirts with the platforms that failed. The main reason was that his content and blog was highly ranked at the time, but many other bloggers were promoting those same platforms that failed without any discrepancies. It is definitely true that Jørgen made more money from affiliate commissions than his investments, but that doesn’t mean he acted maliciously.
The people who should be targeted for this debacle are the criminals behind the platforms that ran away with investors money, as well as the general incompetence of people behind other platforms that simply went out of business. Those investors who followed Jørgen and other bloggers blindingly into these platforms would also do well to take stock of their actions and learn the lesson that investing is a risky business and you shouldn’t be putting your money into investments that you don’t thoroughly understand and have absolute conviction in.
Hi Jean,
From my perspective as a 28 y.o. Indonesian citizen, this FIRE movement never gains traction in EM Asia. Why is that so?
You see, wages in EM Asia are smaller than in DM Europe/North America. Therefore my generation and their parents think it’s impossible to attain FIRE. Their strategy is instead to marry and have children (who they expect will take care of them).
Personally, I can achieve FIRE on my own. Marriage with a girl of the same mindset could assist both of us in achieving FIRE. But if children come, it’s a completely different stuff…
Thanks for sharing your perspective James, that’s quite interesting.
James, why would you say you people in SE Asia can’t achieve FIRE. Income is significantly lower. However, expenses are also significantly lower.
Also, becoming FIRE is not related to how many kids you have. Yes, the expenses will grow but also your investments and income streams over time.