The FIRE movement, which stands for Financial Independence and Retire Early, has become quite big in the United States where many people who have achieved FI have turned their hand to blogging, podcasting and YouTubing about the subject with some of their spare time. For many it is their main post retirement activity.
Mathematically achieving FI is simple. Reduce your expenditure save and invest the the money you save into a nest egg. Then wait until the passive income generated by the nest egg is enough for you to live on. So you would think there isn’t much to talk about.
However, it is the psychology of this lifestyle and the fact that it is so counter intuitive and counter culture that make it difficult. As a result the are literally plenty of books, blogs, podcasts, YouTube videos, a documentary movie and even camps and conferences on the subject. It is almost like a cult or religion but it a good way.
The Fire Movement in the UK
Here in the UK things are very different. Whilst there are are a few people/converts, there aren’t many. The quantity of content out there for UK proponents of FIRE is tiny in comparison to what is available to their US counterparts. This is a great shame because it is a message that we need in the UK just as much as our friends in the US. In my last post and YouTube video, I talked about some of the main concepts of the FIRE movement and these apply to the UK too. But the options available to us and laws regarding saving and investing are very different.
Much of this blog and my YouTube channel are going to be devoted to the fire movement but from a UK perspective. However, in this post I want to look back at how it all got started over the pond and how it has grown to what it is today.
Your money or your life: The beginning of the FIRE movement
Most people trace the origins of the FI movement to a 1992 book called Your Money or Your life by Vicki Robin and Jo Dominguez.
This updated version was released in 2008.
In it they lay out the ideas that modern day FIRE movement is based on. That the only real asset we have is our time, the number of hours that we have left before death. This is the only currency that really matters. For the most part we sell our best hours in return for work and spend many of the remaining hours and a lot of the money recovering from the work.
They outline 9 steps to achieving financial and early retirement. Although, they are not necessarily required to be carried out in this order. Rather, you will find yourself continuing to work on all steps right the way up to the day you achieve FI and some of them into retirement as well.
Step 1: Make peace with your past.
Most of us have a bad relationship with money. This is normal in our culture. There is nothing wrong with this. Many people feel ashamed of how they spend their money and this becomes an excuse for not doing any kind of self analysis. Don’t let this be the reason that you put off getting started.
Step 2: Calculate your real hourly wage. Get started in the Fire Movement
Whatever your salary is, it is not the same as what you actually get to spend on yourself. Obviously you pay tax and national insurance, but you will also have other work related costs. Things like travel costs, lunches and drinks at work and work specific clothing. Additionally, the hours you are paid for are not the same as the time you spend on work related activities. Time spent commuting and time spent training studying all need to be factored in. So your real hourly wage is; Take home pay after tax and National Insurance minus all work related costs divided by hours spent at work other work related activities. The number you arrive at is what you actually earn and it will be a lot less than what you think you earn.
Step 3: Track your expenses and convert into hours.
When you know that although the cost of the Starbucks coffee you are considering having is £4 but that equates to having to do another 45 minutes of work, it should become easier to cut down on these unnecessary luxuries and start building your wealth. These hours, the only currency that matters, they refer to as life energy.
Step 4: Ask yourself 3 Questions.
- 1: Did I receive fulfilment, satisfaction and value in proportion to life energy spent?
- 2: Is this expense of life energy aligned with my values and purpose?
- 3: How might this change if I didn’t have to work for money?
Step 5: Chart your money. Motivation for the Fire Movement.
It is easier to understand our situation and see our progress if we can visualise it. If we plot a line for our monthly income and a line for our monthly expenditure, then the space between these two lines is our savings.
Step 6: Spend less.
It is the expenditure line that we have most control over and that we can work to bring down. Frugality doesn’t mean depriving ourselves of luxuries. It is about making sure we get maximum value from our purchases and the things we have use of that cost us nothing.
Step 7: Redefine work.
Once we start getting money working for us instead of working for money, we need to redefine what it means to work. When we don’t need to work for money, our work is how we contribute to our community and humanity. It is the ways in which we leave the world a better place than when we found it. These might be things we make money from but they don’t have to be.
Step 8: Find your crossover point.
The crossover point is when the income from you nest egg is enough to cover your expenses. The point at which you can theoretically stop working for money. You will probably choose not to stop working, especially if you have completed the previous step. But you will be able to be more selective about what work you do. You wont value that work just by how much you are paid to do it but by the contribution that you feel it makes to humanity.
Step 9: Invest
As I said you don’t need to wait to complete all the other steps to start this one. In fact you should probably start this one first.
So it is an important book and it is worth reading. Much of the advice is transferable to the UK especially in the updated edition. However, the Fire Movement is different for everyone. In this book they go into a lot of details for ideas to save money which will not be for everyone.
The fire movement has moved on a long way since 1992 and there are many more books and blogs and YouTube channels that you can read to get inspired. If you are in the UK make sure you are subscribe to my blog and my YouTube channel and let me know what you think of this post in the comments section below.