F.I.R.E. is the acronym for “financial independence, retire early,” an idea that is catching on with young adults thanks to the popularity of a personal finance book called Your Money or Your Life: Nine Steps to Transforming Your Relationship with Money and Achieving Financial Independence, by Vicki Robin and Joe Dominguez.
Your Money or Your Life was first published in 1992 and has recently been updated and re-released. The book is about gaining financial independence by being mindful of your spending and consumption. Reviewers comment on an underlying theme of minimalism – if you buy less stuff, it’s easier to be financially independent enough that you no longer have to work.
The book’s message seems to resonate with young adults in particular. In fact, Time’s Money blog called Ms. Robin a “millennial icon.” For some perspective on this, I consulted financial planner Shannon Lee Simmons, herself a millennial. She said the F.I.R.E. concept could resonate with many young people because of their growing resentment about their financial situation.
“People are frustrated with the tough grind of daily life,” Ms. Simmons said in an e-mail exchange. “People work really hard, but it can often feel financially fruitless.”
In a recent column, I discussed the results of a recent poll showing a significant level of discontent among millennials about how their lives are playing out in a financial/economic sense. So there’s definitely something to the idea that millennials are looking for a work-around in an economy that sometimes won’t let them in the front door.
But Ms. Simmons worries that people trying to achieve financial independence and retire early could be setting people up for more disappointment. “I think the message about wanting less, mindful purchases, buying less and setting realistic expectations for what ‘enough’ means is very important,” she wrote. “But the promise of early retirement could set many up to fail.”
Note: On May 16, I’ll be doing a Smart Money 101 session in Toronto for young adult Globe and Mail subscribers with Ms. Simmons, author of Worry-Free Money: The Guilt-free Approach to Managing Your Money and Your Life. We’ll cover topics such as how to be financially successful as a life-long renter and how people who will never be part of a company pension should save for retirement.
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Rob’s personal finance reading list…
How much will you spend in retirement?
Retirement planning often focuses on how much income you’ll need. But I have recently seen financial planners emphasizing a different question: How much will you spend? Here’s some analysis by financial planner Jason Heath of how your retirement spending will compare to your working life.
Better read this if you’re investing in a condo
Many of the people buying condos in Toronto have surprisingly high interest rates on their mortgage. As this analysis notes, paying a hefty rate makes it a lot tougher to sell a condo for a profit.
Why women need to save more than men
Answers to this important question and lot of other good personal finance talk in this interview with Leslie-Anne Scorgie, founder of the money coaching firm MeVest and author of The Modern Couple’s Money Guide.
A beginner’s guide to crypto currencies
I’ve seen a lot of guides to bitcoin and other crypto-currencies in the past year, and this is one of the clearest and most informative.
Today’s featured financial tool
ETF investors, you’ll find some useful tools and tutorials on the Canadian Portfolio Manager website. In particular, check out the model portfolios. ETF investors often stumble at first in trying to blend a few good funds into a coherent portfolio.
Ask Rob
Q: “A senior citizen friend inquired if he should buy or lease a car. Can you share some insight into the decision making for this?”
A: “Assuming a car is for personal and not business use, buying is the more cost-efficient way to go in most cases. There are some arguments for a senior to consider leasing, though. For one thing, leasing cars for three years offers a chance to drive vehicles that will always be under warranty and thus incur no repair bills. Also, newer vehicles may offer safety features that make them more comfortable and secure. One final benefit is that the expiry of a lease gives a senior a clean exit from the world of vehicle ownership. The flip side is that it’s tricky to extricate yourself from a lease before it expires. Generally, buying makes sense if a senior will acquire a vehicle they could imagine driving for a long time, and not just a few years.”
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.
In case you missed these Globe and Mail personal finance stories
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Rob Carrick