Is FIRE impossible for reasonable people?

“Whether you think you can, or you think you can’t ― you’re right.”
― Henry Ford

Retiring in your 30s or 40s seems like an impossible dream for most people. But the FIRE (Financial Independence Retire Early) movement is filled with people whose goal is to retire well before the usual retirement age. Critics say these FIRE penny-pinchers deprive themselves of any joy in their lives, and that FIRE is impossible for reasonable people. There is some truth to this, but not much.

The truth is that most adults have created a life for themselves that makes FIRE impossible without huge changes. They bought a big house far from where they work and own cars for commuting. They’ve committed almost all their income for the foreseeable future to a lifestyle they’ve chosen. No amount of eating in or other penny-pinching will make a big enough change to make FIRE possible.

That isn’t to say that smaller changes don’t help. Cutting out small amounts of spending here and there can improve your life tremendously. The key is to identify spending that isn’t bringing you happiness. But this type of change won’t shorten your working life by decades.

Best to start FIRE before making huge financial commitments

For FIRE to be a reality, it’s best to start before you make huge financial commitments. Instead of buying a big house far from where you work, you choose to rent or buy a modest place close to work. The savings can be huge. Reducing your commute by 25 km each way saves about $5,000 per year. Renting or owning a smaller place can save much more. By avoiding building an expensive life, it’s possible to save much more of your income and build toward early financial independence.

If you’ve already built an expensive life, changing to the FIRE path requires big changes. It likely means selling your home, selling expensive cars, and moving to a modest place closer to work. Few people are willing to make these changes.

None of this means it’s wrong to buy a big house for your family in the suburbs and commute a long way to work. It’s just that this choice precludes early retirement. Life is about choices. FIRE is not impossible; it just requires the right set of choices on the most expensive things in life. However, most people tend to push big choices like houses and cars right up to the limit of their income supports.

Some critics say FIRE is impossible unless you have an enormous income. This isn’t true. FIRE is certainly easier with a big income, but it’s still possible to avoid making lifestyle choices that consume most of your future income. Some incomes really are too low for FIRE, but the lower limit is well below $100k/year.

Other critics say FIRE isn’t possible in certain expensive cities. Staying in an expensive city is a choice. You’re free to do as you please. But if your income is too low for FIRE in downtown Toronto, then FIRE may be possible somewhere else. You may not want to find a new job and a new home, and that’s your business. But you’re then choosing the status quo over FIRE.

The truth is that most people like the idea of being financially independent and retiring early, but they’re not willing to do what it takes to get there. Instead of admitting that this is a choice they’re making, they want to deride those who seek FIRE, and declare it impossible for reasonable people. But this just isn’t true. My own path is only mildly FIRE-like. I could have retired much earlier by spending less, but didn’t. That was my choice.

Michael J. Wiener runs the web site Michael James on Money, where he looks for the right answers to personal finance and investing questions. He’s retired from work as a “math guy in high tech” and has been running his website since 2007.  He’s a former mutual fund investor, former stock picker, now index investor. This blog originally appeared on his site on March 16, 2019 and is republished on the Hub with his permission