Why throw cold wa­ter on FIRE move­ment?

South Florida Sun-Sentinel Palm Beach (Sunday) - - MONEY -

There’s a FIRE spread­ing in the world of per­sonal fi­nance.

FIRE stands for Fi­nan­cial In­de­pen­dence, Re­tire Early. It’s pop­u­lar with mil­len­ni­als who want to es­cape soul-suck­ing jobs that don’t re­flect their val­ues.

The move­ment has added to the cho­rus of naysay­ers, who com­plain about the gen­er­a­tion’s work ethic, but I be­lieve that FIRE fol­low­ers are do­ing what they should be do­ing: tak­ing con­trol of their fi­nan­cial lives.

The ideas be­hind FIRE are pretty sim­ple: Don’t spend more than you earn, re­duce ma­jor ex­penses with cheaper al­ter­na­tives, avoid debt, cul­ti­vate side hus­tles or part-time work, in­vest in low-cost in­dex funds and do not with­draw too much from your re­tire­ment ac­count. Yes, a fi­nan­cial life will likely be­come more com­pli­cated over time, but these steps are a great start for the vast ma­jor­ity of Amer­i­cans.

But crit­ics say the FIRE move­ment re­quires ad­her­ents to live very fru­gally and em­brace a worka­holic mind­set to make real progress on re­tire­ment sav­ings goals. Crit­ics also say the FIRE fans are un­der­es­ti­mat­ing how much money they’ll need and are naïve about re­tire­ment ex­penses.

But Peter Adeney, aka blog­ger Mr. Money Mus­tache, is a fan of fru­gal­ity as a path to fi­nan­cial free­dom. “Every­body uses the FIRE acro­nym be­cause it is catchy and early re­tire­ment sounds de­sir­able.”

But for most peo­ple who get there, fi­nan­cial in­de­pen­dence does not mean the end of their work­ing ca­reers. In­stead it means: “Com­plete free­dom to be the best, most pow­er­ful, en­er­getic, hap­pi­est and most gen­er­ous ver­sion of you that you can pos­si­bly be,” he says.

I’m not sure why any­one wants to ar­gue with that sen­ti­ment, but haters abound. Be­fore you cast judg­ment, let’s re­mem­ber that a huge num­ber of mil­len­ni­als ran head first into a once-in-a-life­time (hope­fully) fi­nan­cial cri­sis and re­ces­sion.

Many dili­gently went off to col­lege and then grad­u­ated, of­ten with sig­nif­i­cant student loan debt, only to face a hor­ri­ble em­ploy­ment land­scape. As a re­sult, they were forced to take any job that would ser­vice that debt.

Al­though the Great Re­ces­sion was tough on every­one, The Fed­eral Re­serve Bank of St. Louis found that younger work­ers, es­pe­cially those born in the 1980s, suf­fered the most se­vere set­backs and have re­bounded at a snail’s pace.

“This co­hort has been the slow­est to re­cover from the Great Re­ces­sion. In fact, its wealth short­falls (rel­a­tive to the age-spe­cific bench­mark lev­els we pre­dicted) were the only ones to worsen from 2010 to 2016. ... There are rea­sons to be very con­cerned about the fi­nan­cial out­look for many young Amer­i­cans.”

It’s not sur­pris­ing these younger folks have a com­pli­cated re­la­tion­ship with money. The re­cently re­leased Mil­len­ni­als with Money re­port from com­mu­ni­ca­tions mar­ket­ing firm Edel­man, found that 54 per­cent of those sur­veyed who strug­gle with fi­nan­cial de­ci­sions say it’s be­cause think­ing about money makes them stressed and anx­ious.

Three-quar­ters of the mil­len­ni­als who are wealthy (at least $50,000 in in­vestable as­sets or $100,000 in in­di­vid­ual or joint in­come) be­lieve it’s just a mat­ter of time be­fore bad be­hav­ior in the fi­nan­cial sec­tor leads to an­other fi­nan­cial melt­down.

With all of this be­ing said, why would any­one dis­cour­age these peo­ple from try­ing to grab hold of their fi­nan­cial fu­tures? As long as FIRE ad­her­ents stick to the num­bers and do not fool them­selves with pie-in-the sky fore­casts, they are on the right track.

Jill Sch­lesinger, CFP, is a CBS News busi­ness an­a­lyst. A for­mer op­tions trader and CIO of an in­vest­ment ad­vi­sory firm, she wel­comes com­ments and ques­tions at askjill@jil­lon­money .com.

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