BiggerPockets Money Podcast - 549: Is FIRE Dead? No, But Here’s Why Most WON’T Achieve It

Starting point is 00:00:00 It goes without saying that in the last couple of years, life just costs more. Inflation is high, and it's harder than ever to keep your costs and expenses low. So what does this mean for the fire movement? Is it the end of early retirement? Today, we're going to find out. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and with me, as always, is my young at heart co-host, Scott Trench. Great to be here, Mindy, you never miss a beat.

Starting point is 00:00:27 Aw. Yeah, you see what I did there, yeah. Bigger Pockets has a goal of creating 1 million millionaires. You are in the right place here at Bigger Pockets money if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting or which financial influencers are telling you that the fire movement's dead to get some clicks. Oh, that's a good one. You know, Scott, since today's episode is called Is the Fire Movement Dead? Let me start off with you. Do you think the fire movement is dead? Nope. All right. Well, that wraps up this episode. Just kidding. Scott, let's go back to the beginning and let's talk to our listeners about what the fire movement is, just very briefly and how it got started. Yeah, I mean, where it got started, wow, I think that the history of the fire movement, some people would maybe call it beginning with your money or your life, maybe rich dad, poor dad. They might go back in time to Richest Man in Babylon.

Starting point is 00:01:22 It might even go back to think and grow rich in the early 1900s, maybe even before that. So this concept of building wealth has been around forever. The concept of financial independence retire early, I think really gained a lot of traction, or at least it appeared to me that it was really blossoming maybe in the early 2010, maybe by 2012, 2013, 2014. I think that an early mover that really kind of ballooned interest in financial independence, I got to give credit to Mr. Money Mustache. Maybe it's just my personal experience, but it seemed like a lot of people,

Starting point is 00:01:56 who got into this 10, 12 years ago when things really began as well, cite him as a source of inspiration there. So I think that that's kind of where I would say the groundswell really got going. Of course, he would never say he invented it. He would look up to Jacob Lundfisker from early retirement extreme, for example, as some of the folks that he would have learned from, I believe. But this thing's been going for a while. And it's evolved in the sense that people have taken the base concepts and found permutations and evolutions of it, right? Ten years ago, there was fire. Now there's barista fire, lean fire, fire, chubby fire, fat fire, you know, all these different coast fire, right? You know, whatever with all this. Everyone's taken it and made a spin or

Starting point is 00:02:43 an evolution of it or whatever. Gen Z is going to completely reinvent it. They're going to call it quiet quitting or whatever they called. You know, my daughter and Gen A will figure out a new term for it at some point. thing, this concept has been around forever. And I think that that's my perspective on the evolution of it, at least. Okay, I think that's really interesting that you mentioned two books specifically, Think and Grow Rich, written by Napoleon Hill, was not written in this century. It was written in 1937. The richest man in Babylon was written in 1926. And first of all, I love the richest man in Babylon. If you haven't read this book, you absolutely should. It's available in the Bigger Pockets Bookstore at biggerpockets.com slash store.

Starting point is 00:03:26 But also, this book is, it's written in kind of Shakespearean language, which I love, and it's nothing new. It is, well, maybe at the time it was new, but it was spend less than you earn. Invest wisely with people who know what they're doing. You know, prioritize saving. And for something to be 98 years old and still be relevant, like that's a time. timeless classic that is always going to be relevant. And therefore, the fire movement isn't going to die. Because people are going to take the lessons from these books and all the other ones that you listed.

Starting point is 00:04:02 And the bloggers and the podcast and everything. And they're going to be like, oh, I don't have to work until I'm 65. I can work until I'm 65, but I don't have to. And now a whole world just opens up. So with that in mind, how could this movement ever die? Scott, can you define fire? Fire is financial independence, the feeling of one being able to leave their job and stop working. Typically, this end state is phrased as achieving the 4% rule, which we've covered exhaustively on previous Bigger Pockets Money episodes. The 4% rule discusses, hey, if you want to spend $100,000 a year, you need to get 25 times that amount, $2.5 million, so you can withdraw $4,000, $100,000 per year safely.

Starting point is 00:04:47 And a large body of exhaustive research has been done on this. Bill Bingen did a study, Michael Kemp. kids us did a study, we've had both of them on the podcast to discuss their approaches at length, which was the treat of a lifetime for Mindy and I, because we're huge nerds. The math is sound, but Mindy, why do you think a lot of these, you know, financial influencers are having podcasts and YouTube videos talking about how the fire movement is dead and getting clicks and comments that agree with them on these things? Like, what is it that is, they're not debating the math. They're not saying the 4% rule doesn't work, most of them with that. It's something else. Why do you

Starting point is 00:05:27 think this theme of the fire movement being dead is coming up? I think that people overwhelmingly just want a sure thing. And the 4% rule has a 4% margin of error, which is not why it's called the 4% rule. But it has a 4% margin of error. If we had a 4% rule that had a 100% success rate, I think people would still question it because you're thinking outside the box, you're doing what other people aren't doing, and you are choosing to walk away from a job and live off of your investments. And that's not the norm. The norm is to work until you're 65, but you can retire early at 62 and a half.

Starting point is 00:06:11 Who does that? Not a lot of people do that because there's this one more year syndrome and there's this what if syndrome and, oh, do I really have enough money? And yeah, the answer is probably yes if you're retiring through the 4% rule. But why are people making articles and episodes about it to reassure people or for clickbait to freak people out. But I think it's more to just keep answering the question because there's so many people that just aren't quite tour.

Starting point is 00:06:39 Mindy, I think that I'd be this very respectfully. I think you're dead wrong. Oh, well, I would love to hear what you have to say. Like, what is fire? How do you achieve it? right? Well, you earn a high income. These are people who earn a hundred plus thousand dollars a year, right? If you're not, if you're not on track to earn $100,000 plus a year, while it's possible to achieve financial independence early, not likely. Those are outlier situations. Everyone's

Starting point is 00:07:06 looking for the story of the person who earns $50,000 a year, has no side hustle, has no luck, has no inheritance, has no friends, has no family to help them out to defray any expenses, and does it completely on their own in a position of extreme lack of privilege, right? And while that exists, it just doesn't happen very often. That's not the story of fire, right? That's not how it works in the world. Many people start in that position, but something goes right. They might have a real estate investment or a crypto investment or a stock investment or a

Starting point is 00:07:36 career change or a business they start or whatever it is that powers them to financial independence. And people, I think, struggle with the reality of either they're going to have to do that, and spend nights and weekends finding ways, reading books, you know, working second jobs, sacrificing their life, the lifestyle that they want to live in order to accumulate wealth, or they're going to have to earn a really high income and live way below their means for a very extended period of time, five, seven, ten years. And most people are not willing to do that. You and I are crazy enough to do that. You've live and flipped 15 times.

Starting point is 00:08:16 When I met my wife, she moved into my duplex that had no heater in it because it was April. And I don't need a heater in the duplex until October, of course, because it's Colorado. We got the heater a few days later, okay? Like, that's kind of the mentality. I think that a lot of people who actually move along the path to fire have is they're going to like really burdened on the income front or they're going to really cut back on expense front. or they're going to find ways, again, sort of on the income front to power assets, like live in flips or whatever. And people don't want to do that. And they realize they're giving up a lot to get to fire.

Starting point is 00:08:55 And I think that while the idea of fire sounds so great, that lived reality is not worth it to a lot of people. And most people will never attain it. Most people should never try. And it's only us money nerds that will actually get there. And the benefits are absolutely worth it for us. Right. Like, Mindy, you approach the problem as people don't believe the math, right? Like, that's, like, because that's how our brains work. Like, why wouldn't everyone work this? But I don't think that's right. I think other people's brains just work differently. And they're like, that math, I believe it all day. But the lived reality of spending Tuesday night reading another business book to get to 50 a year so that I can increase my income is not their idea of fun. Right? The idea of, you know, um, of selling their car, that's $25,000 with a $17,000 note, and then using that cash to buy an $8,000 car with $1,000 note is insane to them. The idea of selling their house and moving into a rental

Starting point is 00:09:58 is not practicable. And so it's, and those are the choices that lead people to financial independence. If you don't make them and you earn a median income and you make no other changes, you will not achieve financial independence in an early fashion. You have to do them, and you have to do it long after you've piled up $500,000 in assets to actually cross the border to true financial independence. And again, most people just aren't willing to do that. And I think that is why there's such a backlash against this is because so many people like the idea of it, but then the lived reality of grinding for five, seven or ten years to achieve it, a different story.

Starting point is 00:10:39 How's that? Okay. So you started off saying that they need a high income. And I was like, oh, now look who's dead wrong, Scott. You don't necessarily have to have a high income, but you absolutely have to live differently than you have been if you haven't been already accumulating a lot of money. So when Carl and I first discovered the financial independence movement, we really had to make zero changes because we were already doing all of the things. That's just our natural way of

Starting point is 00:11:09 spending money and our natural way of looking at the income that we had. We didn't know that we could retire before age 65 until we stumbled upon this schmuck named Mr. Money Mustache who's like, yeah, you can totally retire early. And Carl's like, this is such a scam. But it's not. The numbers do work. Math doesn't lie. But you're right that other people's brains, work differently. Nobody wants to give up their comforts. I don't know if you remember this, Scott, but several years ago, you did a presentation on the concept of financial independence for work. And somebody in the, like, just the employees of bigger pockets. And somebody raised their hand and said, but I don't want to give up my comforts. I don't want to give up all of these

Starting point is 00:11:55 things. I'm young. I want to live my life. At the time, I was like, oh, that makes me sad that you didn't get the message of this this conversation. But then on the other hand, that is absolutely 99% of Americans who aren't in the fire movement. And I think a lot of, how do I say this, non-fire movement Americans, like regular Americans, aren't thinking about, well, what I have is fine. They're thinking about, I need the bigger, better thing. And to get that, you have to spend a lot of money. And you know, you have a great life, Scott. I have a great life. I don't feel like I'm depriving myself of anything. Not anymore. That phrase you threw it afterwards is it. Yes, not anymore. I have all the things I could ever want in my lifestyle at this point. And the reason I have that

Starting point is 00:12:49 is because I spent 10 years living in duplexes, driving a paid off corolla, not going out, and spending money, making lunches, all those kinds of things to accumulate wealth, working 80 hours a week here at Bigger Pockets, you know, saying yes to every opportunity. I would literally show up at Bigger Pockets. I would wake up in the morning. I would bike to work after making an omelette for myself on there, packed my lunch in my little bike bag, go to work at 8.30, work all day. Josh would not allow me to be right for the blog, and I wanted to hear myself talk just

Starting point is 00:13:24 like I am right now on this. And so I would stay late from five to seven writing them for the blog. I would bike to rugby practice. I would attend rugby practice. I would bike home. Right. That was my day. On the route, I was listening to educational audiobooks.

Starting point is 00:13:39 I did this for years, right, in a row. Like, I'm sure other people have sacrificed way harder than that and are not able to get ahead. But that's what I did. And many of my peers who had the same income levels at that point in time were not doing that same activity set. And that, I think, is it. right is I spent like like that sacrifice that 10 years we'd had a minority mindset um jasprey

Starting point is 00:14:03 on and he talked about this the decade of sacrifice it's that decorated decade of sacrifice that there's a backlash against and there should be right the fire movement should not be something that every american pursues not every american can be early retired only those who are willing to create an extreme differential between their production and their consumption and invest wisely are going to have that opportunity to actually retire, retire early, and it is a major, major sacrifice. I think that is why there's such a backlash going on against this, right? We do have to take a quick break to hear a word from our sponsors, but how can the average person achieve fire today? We're going to cover this and more when we return.

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Starting point is 00:17:39 Let's jump right back in. Another part of this is fire is really great. Like, I think that a lot of 20-somethings should go all out for fire. But, like, I have a two-year-old daughter right now. And, you know, I don't know if I would have house hacked. There's no way I would have house hacked in the same environment that I lived in when I was first house hacking. Right. We don't, we're not going to play gunshots or fireworks in the evenings during the

Starting point is 00:18:09 the summer with my two-year-old daughter. Like, that game, that game's not going to happen around all this, right? So, like, that's the difference, right? Is, is at 33, I'm not doing the same things, and I shouldn't, and people shouldn't do that. It should be a longer trajectory to fire, and that's more sustainable. And guess what? Like, burning the midnight oil, working a second job, my daughter's two now. She's not going to be two in 10 years and I'm fire if I'm starting from scratch, right? And so that's another backlash is like these parts of the journey that really require that all out are really great for, you know, people early in life and adulthood and maybe people that are trying to catch up to financial independence.

Starting point is 00:18:49 Less extreme measures like rental property investing, for example, are probably more appropriate for higher income earners in the midst of seeing their families come up. And I think that's a pushback that's happening here because a lot, very few people are achieving fire with a family of three kids in a middle class life because none of those, none of the things that really drive fire forward like explosive career growth by burning the midnight oil or really extreme frugality and all these other things are congruent with that approach. There are plenty of exceptions, but that's not the typical journey. And those people are rightfully, I think, pushing back against fire and the extreme items

Starting point is 00:19:28 around. It's not good advice for them. Now I'm going to disagree with you. You're saying they're pushing back against fire and rightfully so. I think you can still pursue financial independence and you should be pursuing financial independence just for the peace of mind and the big safety net that it gives you. I have been let go from jobs in the past. I say that like it's all happening all the time. Two jobs. And both times I deserved it. And one time I had the safety net of living with my parents because I was, you know,

Starting point is 00:20:03 in my teens, and the other time I had the safety net of being married to somebody who had a high-paying job and we spent less than we earned. But if I had been on my own, out in the world by myself, living paycheck to paycheck, and lost my job, I would be really, really in a pinch. So pursuing the concept of having a big emergency fund, that's also going to take time. But that doesn't mean you shouldn't do it just because it's going to take time. somebody was, they posted on one of my Facebook friends posted, I want to go back to college and change my career, but, you know, I'm already 46. If I'm going to be 50 by the time I graduate, okay, well, how old are you going to be in four years if you don't go back to college?

Starting point is 00:20:54 You're still going to be 50. So do what you want to do. Pursue financial independence and don't sit there and say, oh, well, it's not for me because I started too late. Yeah, and please, you know, my statement that what I say fire, I think what people are backlashing against is the more extreme approaches to fire that try to approach it in five, 10, maybe 15 years. And a middle class family in their mid-30s starting from around scratch, you know, they shouldn't be in an unsustainable financial position. They should definitely be sacrificing to build an emergency fund that could be because where a job, like otherwise a job loss or something like that. could disrupt their way of life. But I'm saying that person probably shouldn't sell their house, move into an up-and-coming neighborhood, taking their kids into a new school to try to achieve a 50-plus percent savings rate. They should have a 10 percent or 15 percent savings rate at least,

Starting point is 00:21:50 because if you have no margin to safety, that is going to be very disruptive to your family's life potentially. That's just a blow-up waiting to happen for you. So sound personal finance and fire are different, I think. 15 years to fire is a 50% savings rate. It's at 17 years, right, for the fire math, and they're at the 4% roll with 7% returns on there. So a 50% savings rate is really kind of that starting point for a lot of fire folks to achieve.

Starting point is 00:22:16 That may be unreasonable for huge portions of the American population that didn't get there, you know, from an earlier standpoint. Some people may find it worth it, right? If you're making $300K a year and you just, and you want to live a middle class lifestyle, you can still achieve fire in there. You're not going to live like your peers making $300,000 a year,

Starting point is 00:22:37 but you live as well as most people in the country and still achieve fire. That could be well worth it. But I think that for a lot of middle class Americans, that the extraordinary links one has to go to to really ratchet up that savings rate are not congruent with what really matters in life, especially while you're rearing kids or in your 30s and 40s. This sounds a little negative. I want to encourage people to look at their life, look at their spending, look at their savings,

Starting point is 00:23:08 look at their income, look at what they want down the road. Scott Rickens, in playing with fire, challenged his wife to make a list of her top 10 things. And her top 10 things did not include living by the beach. In fact, most of her top 10 things were really inexpensive. And he's like, then why are we? paying so much money to live by the beach when this isn't even in your top 10. Let's change our life. Let's take a drastic measure and move from Southern California up to Oregon so that we can

Starting point is 00:23:41 be able to save more money and put more money away. And I think that a lot of people who are just coming into the concept of fire are maybe not living like Carl and I were living. And it's going to be a big shift. You don't have to change everything at once. And I would encourage you not to change everything at once because that makes it a whole lot harder to stick to. Mindy, I completely agree. Our show is to make financial freedom attainable for anyone no matter when or where they're starting. We truly believe that. But I think what is happening, why we're seeing this backlash against the fire movement with all of these Finfluensers talking about this stuff, is the fact that to get there, you have to make changes that are going to come at the expense of your current lifestyle to some degree, right?

Starting point is 00:24:35 All of those changes you made, yes, there can be small, they can compound, but that's what you have to do. And so I would caveat that for anyone, regardless of winner where they're starting, if you want it. And I would say if you want it badly. Fire movement, I think, is for people who want it badly and are going to find that combination of income, expense reduction, aggressive investment portfolios or businesses. that's going to go after it. And I think that's where people are realizing seven, you know, three years, 18 months, seven years into the journey, you know, I'm going to lighten up. I don't really want fire so badly that I'm going to continue to create this environment

Starting point is 00:25:11 of artificial scarcity in my life to live below my means. For me, totally worth it. For most people listening to this podcast on Bigger Pockets Money, totally worth it. It is going to, there's a huge advantages. Once you cross the line of fire, you know, early in life, especially, the compounding effect is just ridiculous. And you can really, it's like, you know, Mr. Money Monastash put this in article 10 years ago. I didn't really get it until now. It's like money is like a tap water, right? You know, you don't waste it. But it's just like you don't obsess over it

Starting point is 00:25:41 anymore because it's just, it's just a resource when you need it. You turn on the spigot. You fill up your cup. You turn it, put it back and you go there. Like that's what you want to get to. It's a wonderful, it's a powerful, powerful feeling and it's a very worthwhile reward for some. other people may not want to go all out. And absolutely, like, if you're 35 and you're not really willing to make all those changes because you're in a good spot in your life or whatever, make some good personal financial decisions. And in five, 10 years, those can compound to get you very close to the finish line. Absolutely, we should do that.

Starting point is 00:26:11 But that's what I'm trying to say is like, I think the concept of today is why is there this backlash? Why are people saying the fire movement that's where, that's my response to it at the highest level. Okay. I'm going to give you one link that is a bit self-promotional. My husband has a blog called 1500 Days, and he wrote an article in 2017 called My Death March to Financial Independence. And he shares our story where it was just like this all-out push foregoing everything fun. And it was not a really super awesome experience. I mean, we still had fun. But it was this like just push, push, push over and over again.

Starting point is 00:26:56 And I wish we would have done it differently. Because if you could get your financial independence journey down to eight years, but you had to give up all your fun stuff. Or you could work for another couple of years, take 10 years and have 10 enjoyable years, that's so much better. I really wish that we would have done that. And that is one of my biggest regrets is that we just cranked it out instead of enjoying the journey. All right.

Starting point is 00:27:25 We got to take one final break, but stick with us more on fire in 2024 after this. While we're away, make sure to hit that follow button so you never miss an episode of Bigger Pockets Money. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress.

Starting point is 00:27:55 Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all-in-one tool that makes money management simple.

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Starting point is 00:31:05 Welcome back to the show. Scott, tagging off of that, in this. this environment, how can the average person still achieve fire? Yeah, I mean, it's the same approach as always, right? Fire is about building a sustainable long-term asset base, right? You're trying to retire early. So if you retire in your 40s, for example, and you plan to live to be 100, because why wouldn't you?

Starting point is 00:31:33 You're going to be fire. You're going to be all you got your energy enjoying life and trying to do that. So you need resources to last 55 years, right? So whatever you invest in now has to last 55 years plus, maybe even longer in most cases. And I think that people lose sight of that because they're like, oh, the market's overpriced or, you know, the real estate is overpriced. Well, no, it's just are you going to accumulate 25 times your spending, right? The investments at their simplest level just need to hold their value against inflation, right? If you are no returns, just hold your value against inflation.

Starting point is 00:32:05 The 4% rule says you're going to, if you have 25 times your expenses, you would run out of money in 25 years. You only have to beat inflation by this tiny little sliver with your stock market or real estate or whatever other investments. The game is really a function of income less expenses. And the investments need to be thought of as how they're going to return over 10, 20, 30 years. Maybe the next decade is as bad as a lot of the pundits say. And the stock market goes nowhere. Real estate goes nowhere and other assets go nowhere. It doesn't matter for someone starting out.

Starting point is 00:32:37 You still have to get the spread between your income and expenses. as large as possible and put it somewhere. And I think that's the fundamental game that this comes down to, and that's the really hard part to get started. That is the really hard part to get started. Scott, let's say that our average person has gotten started and now they're in the grind. How are they going to get through that grind? What advice do you have for the person in the accumulation phase? You know, again, I'm going to quote another Mr. Money Mustash article from from, from, from, way back in the day here. You know, he wrote an article.

Starting point is 00:33:14 A reader submitted a question to the effect of, hey, I feel like I'm doing all the right things. My income is relatively good. I got a good job. It's stable. I have very low expenses. My car is paid off. I have no consumer debt.

Starting point is 00:33:28 I shop at Aldi. I do all the right things, it seems like. It just, you know, time is passing. It's, my money's piling, but like, what am I doing wrong? How can I accelerate this situation? And his response, I think, was. congratulations, that boring feeling of having everything optimized and automated and starting to accumulate is the feeling of getting rich. So the two problems for fire are getting that started,

Starting point is 00:33:53 right? And like, this is work, right? It's a year to get your expenses into a position where they're as low as is reasonable for the lifestyle you want to live. It is years and decades to get to the career that you want from an ideal perspective. It is, you know, years to really understand and intuit why you're making the investment in portfolio decisions you're making. And then it's just years of grinding it out on there. Those can happen concurrently in many cases, and they do for a lot of people who pursue fire. But that's it. And that's the simple and super hard, you know, reality of this for a lot of folks.

Starting point is 00:34:27 And by the way, there's plenty of folks out there who do not have the privilege or the ability to go after fire in a practical sense in the near term. It might take them several years to get back into a position where they can begin to pursue. something like this. But for everyone who does have that privilege, who has the option to cut back their lifestyle or an option to get to take on more hours or increase income or whatever, you know, that's it. That's the game, I think. What do you think, Mindy? I think that that's pretty spot on. I think that when you're in the accumulation phase, it is, you've gotten to the point where you're kind of on autopilot. You are saving here and saving there. You've got your expenses pretty dialed in. And now's the time to start thinking about

Starting point is 00:35:11 what happens after you reach financial independence. I'm a big proponent of having a bucket list and put all sorts of interesting things on there. Have it on your phone on a note-taking app so you can just continue to add to it all the time. But also, look into what's on your bucket list and take time to enjoy that journey. And if you can take take it. take like, let's call an African safari something on your bucket list. It's not on my bucket list, but maybe it's on somebody else's bucket list. That's like $10, $15,000, $20,000 for an African safari. Maybe that's not something you can afford today. But if you're in year two of a 12 year journey, you don't have to wait until year 12 to take that $20,000 trip either. So start looking at ways you can

Starting point is 00:36:01 incorporate your bucket list items into your life, along the journey. Many of your bucket list items will cost money, but many of them will be low cost or even free. So look for ways to take the low cost or even free items and start putting them in your life now so that your journey of 12 years is an enjoyable journey, not this like death march to the end result, where then you can start thinking about what you're going to do. Mindy, how have the strategies changed to approach fire and what do you think the strategy is today? Okay, so I think that when I first joined the financial independence movement back in 2012, it was all about frugality. Keep your expenses low, take your income as high as you can, and invest as much money as you possibly can into the stock market.

Starting point is 00:36:54 I didn't have, there wasn't a lot of content around index funds. So we were doing individual stocks at the time. But it was all about how little could you spend. You look at the early fire bloggers, Jacob Lundfisker from early retirement extreme. I think he ate beans and rice every evening and like peanut butter and jelly sandwiches for lunch. And some people look at that and say, well, that's not for me. I would rather live my life. Well, you don't have to do it like that.

Starting point is 00:37:25 He didn't value delicious, amazing meals, clearly, because he's eating beans. and rice. I mean, pizza rice is great. But that wasn't where his priorities were. So he didn't put any money towards those. Mr. Money Mustache is also a huge proponent of being frugal. And he's one of the biggest names in this space. So when you come to this space, you happen upon Mr. Money Mustash, and he's telling you, I live off $24,000 a year. You could be like, uh, maybe this isn't for me. And I think now there's more focus on living a healthy life, living your rich life, Rameet, living a balanced life, incorporating more things so that your journey is enjoyable. And it's not so much, let's get to financial independence as fast as we can so that we can quit our jobs.

Starting point is 00:38:19 It's more, let's be conscious of where our money's going, let's be conscious of our spending, let's do some really great investing. And let's see what kind of life we really want, as opposed to the only way to retire is to retire early with a million dollars in the bank and then you only spend $40,000. There's like you referred to earlier, there's lean fi and fat fi and barista fi and, you know, barista fi means I have enough money that I only have to work a small job. My retirement is taken care of and I don't have to work for. time until that retirement matures. Same with, it's similar to Coast Phi, where you're going to

Starting point is 00:39:01 keep working, but your retirement, your traditional retirement age, is secure. And fat fi means I want to spend all the money that I want to spend and I am going to live this very luxurious lifestyle. So again, choose your own adventure and connect with the kind of life you want to have. I think that is really the main message now is what is your desired life? and how can you take some of these principles to get there? I think there are four options. Spend less, earn more, invest or create. Those are the four things you can do to approach financial independence.

Starting point is 00:39:38 And I think that investing was crazy the last 10 years, huge bull market. I think that income growth was correlated with that. Lots of people saw their incomes explode. And I think that wealth really, enables the creation that, you know, someone to focus full time on the creation of an asset, like a business, a book, a, you know, purchasing a business, those types of things, really enables as options. And I think that over the last 10 years, there's been a subtle but powerful shift away from frugality is the way to get going on the journey to financial independence.

Starting point is 00:40:18 And yet, I think what's happening right now is people are realizing like, hmm, I'm a little bit more skeptical of the market. Maybe that's true. Maybe it doesn't, you know, stock market. It's a little harder to buy cash flow and real estate for all this. You know, buying a business, you know, is a little harder when I can't refinance my rental property or otherwise get access to liquidity without saving up tens or hundreds of thousands of dollars. And so I think what's happening here as well as frugality as all of the sudden quietly become so important to the strategy for those pursuing financial independence in today in 2024, that that that's, creating a backlash because it's so, like, it's relative power in moving people there is

Starting point is 00:40:58 so incredible. I looked this up while we were talking here. I was like, I bought a Corolla in 2014 for $17,000, a brand new 2014 Corolla L.A., the fancy model, right? $17,000. If I buy the 2024 model today, it's $24,000. So that's, you know, a 25-ish percent increase in inflation. The used bicycle I purchased. in 2014 around that time, which was my main mode of transportation, was $200. And a similar model goes for $200 today and requires no gas. And so I'm like, okay, inflation is real. But for those who are serious about fire and those types of things, there are certain

Starting point is 00:41:38 inflation you can't avoid, right? Especially housing costs if you're a renter, for example, or, you know, food, you know, healthy food, you know, the kinds of things you want to do there are certain types a fun and entertainment. But some of those expenses that are killing American household budgets are avoidable with major strategic choices at the beginning. And a focus on frugality is so is powerful. And I think that people don't like that because it requires a reduction in standard of living in there. So I would say that that's what's changed. It started with frugality. We're kind of back there. And that may be a reason for some of the backlash against fire in the last year or two.

Starting point is 00:42:18 Scott, you mentioned inflation. I mentioned inflation at the beginning of the show. Do you think people will start to need to adjust their retirement age goals and their retirement numbers due to the inflation that we're seeing right now? Look, the 4% rule already bakes in inflation. Inflation is the reason we have the 4% rule because anything higher than 4%. There were periods in the 70s and 80s where inflation, even though the stock market and bonds actually return reasonably well. inflation just eroded the actual real purchasing power. So the 4% rule incorporates inflation, and it is not lower because high inflationary environments erode that. So it already factors that in. If you have the 4% rule, you are able to retire per the 4% rule, and you will not run out out of money for the next 30 years. You may have to pay some attention for the 4% of situations where your portfolio could diminish over 30 years. If you don't want it to diminish, you may need to supplement it with other sources of income and those types of things, but it already

Starting point is 00:43:20 covers that. That said, I think that, again, inflation is the biggest driver. If you want to protect against it still further, there are options for part-time work. There are ways, like, think about paying off your house, right? Inflation works, increases the value of the home, but it's not going to increase your cost of living outside of the utilities, taxes, and insurance around there. So you can defray some of those things, paying off vehicles. for example, owning vehicles.

Starting point is 00:43:47 So what are these expenses in your life that you can eliminate as you approach fire that make you a little bit more inflation resistant? And so those are the types of things I would be thinking about if you're worried about inflation on top of the fact that the 4% rule already incorporates that consideration. Yeah, I think that's really important to note. The 4% rule takes into account inflation. And I mean, I do this too, but I think a lot of people just read the headlines and they don't dive deep into it. So I'm going to announce again, I have a copy of Bill Bagan's original 4% Rule article that appeared in the 1996 print-only version of the Journal of Financial Planners, or I think that was the magazine.

Starting point is 00:44:36 It was difficult for me to find. I would love to share it with anybody. Email Mindy at BiggerPockets.com, and I will send you this so you can. can read it yourself. Bill Bangan was a literal rocket scientist who then decided that he was going to be a CFP and he did the math so you don't have to. So definitely read that article if you have not already. Give it another perusal if you still have read it and are not quite sure. Mindy, thank you for a wonderful discussion today. I think that the fire movement is not dead. it's just always been for a small core of fairly hardcore people in this country who are willing to

Starting point is 00:45:18 seriously delay gratification or move things forward. And it's going as strong as ever among that cohort. I think a lot of people who thought they wanted fire are realizing, oh, maybe I don't actually want to grind it out for a decade or two to achieve this. And I'm totally comfortable with retiring on a normal, more normal trajectory by doing basic sound personal finance. And that's totally okay. I think that's what we're really seeing in the community here. I'm going to slightly disagree with you, Scott. I think fire is for everyone, but just not everyone will pursue it. I think that it could be for everyone. But yeah, you have to do the work or it's not going to happen. I agree with you 100% that the fire movement is not dead. But I think it's going to continually

Starting point is 00:46:07 evolve, like you alluded to in the beginning, where your daughter is going to do things differently than we did. And that's okay. She's going to be conscious of money because she's your kid. And that, I think, is the most important. If folks are not improving on the things that were done a few years ago, something's wrong. So we love to see that. Everyone takes all these concepts and they make them their own and they improve upon them. And that's what makes 24 a wonderful time to be alive. 24 is a wonderful time to be alive and it's a wonderful time to pursue fire. All right. Thank you so much for our dear listeners for listening to our show today.

Starting point is 00:46:45 As a reminder, we do have a website with even more information about investing on it. If you'd like to learn more, go to biggerpockets.com. All right, Scott, should get out of here? Let's do it. That wraps up this episode at the Bigger Pockets Money podcast. Of course, he is the Scott Trench. And I am Mindy Jensen saying, take care, little bear. Bigger Pocket's Money was created by Mindy Jensen and Scott Trench.

Starting point is 00:47:09 This episode was produced by Eric Knudson, copywriting by Calico Content. Post production by Exodus Media and Chris McKin. Thanks for listening.

BiggerPockets Money Podcast - 549: Is FIRE Dead? No, But Here’s Why Most WON’T Achieve It

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