
I Tested the Saving Technique That Promises Retirement at 40 - mooreds
https://www.vice.com/en_us/article/gya8bx/i-tested-the-saving-technique-that-promises-retirement-at-40
======
ahelwer
This article isn't very good. The author tried being frugal and saving 50% of
his salary for a month, got bored (no drinks with friends or dates with
girlfriend). The first half-year of FIRE living isn't even representative,
because you can still live off the largesse of your past life. It's certainly
true that your friend group changes, though, from meeting up over weekly
drinks/dinners to meeting up to do a sport with low marginal costs like
backpacking or rock climbing or basketball.

I've been more or less on the FIRE train for three years now. It's very easy
when you have a software engineer's salary in Seattle. In my best year I only
spent $21,000, but was fairly unhappy - saving money is a lot of work! All
chores take longer and require more mental effort to figure out the least-
expensive way of accomplishing your goal.

At this point I've actually found areas of technical interest I can expect to
get paid for in the future, so I'm not as laser-focused on the goal. If you
manage to bring in even a bit of cash in retirement, the safe withdrawal rate
calculus tilts considerably in your favor.

To head off people saying "but you won't really be retired!" you should know
the in-group has a term for you: the retirement police. The real goal is
freedom, and not the type where you're lying to yourself that this is what you
want to be doing.

~~~
INTPenis
Came here to agree with you and also add that while I've never heard of this
movement over here in Europe I do know of a certain type of loosely based
community of blogs, forums and people who invest hundreds of dollars each
month into stock.

Special stock (I'm at a loss of english financial terms here) that give off a
certain percentage of value back to you each year or month.

So the goal is the same, once you own enough of these stock you're supposed to
live off the accumulated winnings from them. And of course these stock can be
sold off too if you want to free some money. Or if the company announces that
they're going to lower their percentage of value that they give out.

I've been doing this for a couple of years now, started late compared to my
peers. I'm a slacker and so far haven't calculated much of anything. Simply
jumped on a bandwagon, read some blog posts and got started.

But a co-worker who tipped me off to this "movement" claims he's calculated
that he will be able to live off his return in 10 years.

This all depends on how much you're putting into your stock each month of
course. Personally I buffer money and only buy stock every 3-4 months.

The trick is to find old well established businesses whose stock has been
stable for many years, many of them fluctuate up and down over decades.

New companies do not tend to give off this return. I don't know the details
but only certain companies give a return on their stock just by owning them.
My stock trading app shows this info when you click on a stock.

Once you've bought into some company you might get a letter home saying that
they're going to lower or raise the return depending on how well they're
doing.

~~~
jamornh
I believe you are referring to dividend investing? Investing in a portfolio of
stocks that pay higher than average dividends. I'm not an expert in this, but
dividend stocks don't normally have as high of a growth potential so the math
may be different. Usually when the FIRE community refers to investing, they
usually refer to an index fund that includes either the S&P500 or global stock
index so you can track the movement of the broader economy and count on the
economy growing year over year.

With dividend investing, it's not really the same thing and the math likely
won't work out the same.

~~~
FabHK
Also, depending on your jurisdiction, you pay taxes on dividends. So, it makes
sense (while you earn) to invest in shares or funds that don't give you income
(they pay dividends that you have to pay tax on), but capital gains (they
increase in value, but you don't have to pay tax on that until you realise the
gain, ie sell).

Once you're retired, you can switch from a capital growth portfolio to an
income providing portfolio.

------
ak39
There is truth in the notion that the saving mindset only heightens financial
anxiety. And this, in my experience, can lead to poor financial decisions (the
old "penny wise pound foolish" behaviour).

I have also experienced an involuted perspective to money itself when on the
saving mindset. Instead of seeking expansive [sic] opportunities, with an
always-on savings mindset I often stop taking risks altogether. The FIRE
movement, it seems, is only for those who have a reliable and predictable
monthly income, or for those who can assume somewhat 100% employment till 40.
If you're an entrepreneur, this arbitrary 50% saving of income won't work.
You're more likely already forced to save for the next 3 months's just for
wages and electric bills.

~~~
rabbadabba_99
Not sure why you're being downvoted.

What isn't addressed in this 20-year plan is the _risk_ of the many things
outside of your control: health, local economy, unexpected family members,
etc.

This isn't a risk-free option, it's an attempt to minimize risk in exchange
for minimal financial independence. The margin for error is very low.

If you want to achieve financial independence in a more robust manner:

1\. Save up 1-3 years of living expenses. This quickly gives you the financial
independence of a _practically_ unlimited runway. It's much more useful to
have financial independence _early_ in your career.

2\. Use that independence to find the best possible way to make money for you
-- retrain, start a business, etc.

3\. Invest. Take as much (calculated) risk as possible while you're young and
become more conservative over time.

People who front-load this in their careers often (in my experience) not only
retire early but do so with significant wealth.

~~~
mrhappyunhappy
I’m trying hard to save enough for my son so he can be FI when he enters
college (If he chooses to). I want him to have the choices I never had - not
to spoil but pursue any path he desires without the mounting pressure of
having to earn an income. I know this could go wrong if not done right so I
hope to do it right by planning far in advance.

~~~
mooreds
That's very interesting. I feel like being handed FI at a very young age could
go either way. Either he realizes what a gift he's been given, or he squanders
it because he doesn't. I don't think that I would have appreciated it at that
age myself.

Of course, it's your choice to make (and I definitely don't know your
situation or your son's situation), but it seems to me that a big part of FI
is the mindset, not the money, and I'm not sure you can acquire the mindset
without going through the frugal living.

~~~
mrhappyunhappy
Sure. My goal is to instill the mindset far in advance of handing down any
sums of money. Basically, if I don’t observe the type of behavior I’m looking
for such as managing your own finances in an intelligent manner, I’ll probably
do something else with that money or just let it accrue interest until he is
ready.

------
diarmuidc
That was a pretty poor article. If all your free time activities involve
spending money, mostly socialising in the pub from the sound of it, then maybe
you should start by addressing that first. I don't follow the FIRE method but
most of my free time is spent, without spending much or any money.

He also claims he got bored of eating the same chicken sandwich for lunch each
day. Then prepare your own lunch before you go to work! It's not hard. Max 5
minutes

~~~
tmaier
Just visit London once and see what people do at 6 p.m. Then you know how
important pubs are in this society.

~~~
jamornh
How much is a pint of beer? Pubs here in Singapore is not affordable at all.
Going to one everyday after work will really land you in the poor house.

~~~
rwmj
In London? Really expensive these days. Over £5 in some places.

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beefield
If you fancy for retirement at 40, why not first save money so much that you
can do what you think you would do when retired for one year? It is quite
likely that after this experiment:

1\. You realize that actually having a work is quite nice and being retired
for extended time periods is boring

2\. If you one day find something you really want to do instead of your day
job, the treshold to quit your job and give a try is much lower because you
already have faced the anxiety and uncertainty that means.

Obviously, this is easier to do if you do not have massive mortgage, student
loan, car loan and four kids. Also it helps if your retirement plans do not
include flying around with a private jet.

~~~
mattnewport
> You realize that actually having a work is quite nice and being retired for
> extended time periods is boring

Have you actually done this? I have and that was not my experience. I took a
year off and it was great, I was never bored and the only reason I returned to
work is because I need more saved before I could afford to make it permanent.

~~~
Zanni
I have, and it was absolutely my experience. I "retired" at 28. Before that, I
loathed my job and couldn't wait to quit. After? I realized that satisfying
work is one of the main ingredients of happiness. If I had figured that out
sooner, I could have found a job I enjoyed more, rather than quitting,
bumbling around for years trying to figure out what to _do_ with my life.

I do think a significant hazard of a real job is not nearly enough time off
(precluding extended travel and so on), but again, if that's the sticking
point, negotiate _that_.

~~~
mattnewport
I've heard this type of thing before but it seems to set up something of a
false dichotomy to me. Not having to work a full time job doesn't mean doing
nothing, it means financial independence to pursue whatever projects are
meaningful to you. I don't really resonate with the approach described in the
article because for me those projects tend to require a bit more than a
subsistence level of income. There are endless interesting projects to pursue
that aren't the most viable options when you have to worry about paying the
bills however.

~~~
rdiddly
Sometimes all it means is continuing in the same job, but saying what you're
really thinking more often!

------
millstone
FIRE requires gamification:

1\. Dave-Ramsey-style "list your debts smallest to largest, knock them out
till you reach the last level!"

2\. Mr-Money-Mustache-style "dial down your spending, try to beat my high
score!"

etc, what-have-you.

Beneficial advice, yet follow all the steps and you achieve a vacuum. You've
arrived, there's no more debts to pay, spending is under control: now what?
It's up to you, but perhaps your identity has been consumed by the journey.
What were you living for all along?

What indeed? You can answer that today!

~~~
mooreds
> What indeed? You can answer that today!

That is true, but sometimes in the grind of the every day it can be hard to
look up and take the time to really think about what you want. And it can be
scary to think about upending everything to get what you think you might want.

That's why gamification is easier--concrete goals that don't take a lot of
deep thinking about your purpose on earth are easier to achieve when you're in
the daily grind.

Not saying it's better--as a sibling comment says, you should aim to build the
life you want as soon as you can, rather than save save save and then arrive
someplace you weren't aiming for. But the gamification is easier to grasp and
less scary to aim for, in my opinion.

------
yks
I really enjoy working and see myself doing that all my life but then I have a
certain anxiety that the good times will be over rather sooner than later
because (1) maybe we’re living through the peak SWE salary times and (2) I’ll
become unemployed due to ageism. This anxiety forces me to contemplate FIRE
tactics.

------
jaclaz
With all due respect to all opinions expressed and to the (still IMHO "poor")
article it is not like "FIRE" is a "revolution" of "any kind" it is more or
less what "normal" people using "common sense" (an extremely uncommon thing
BTW) have always used.

Though retiring by 40 is pure _bullshit_ unless you have exceptionally high
earnings/income.

The good ol' advice was:

[https://news.ycombinator.com/item?id=14594858](https://news.ycombinator.com/item?id=14594858)

------
flunhat
Possibly a stupid question: what happens if the American economy (or whatever
the index fund you invest in reflects) doesn't grow for a sustained period of
time? The article kind of addresses this, but doesn't clarify if FIRE
advocates have a proper rebuttal (I get the feeling that there isn't one).

~~~
VBprogrammer
In an economic downturn having a few hundred thousand pounds / dollars sitting
in the bank they will have more options than your average person.

The economy would have to be completely screwy for there not to be a way of
making money from capital. Even if the currency goes into hyper inflation you
are much more likely to be able to get it out into a safer currency when you
have enough of it lying around.

~~~
rwmj
Brexit says hi! Fortunately I can invest in overseas stocks and bonds to
defray some of the problems, but don't count on "having a few hundred
thousand" in the bank as being worth much if your country decides to leap off
a cliff.

~~~
benj111
But surely Brexit is an argument for building a nest egg.

The Boris Johnsons and Jacob Reece-Moggs of the world aren't worried about the
financial aspects of Brexit, because they have a 'nest egg'.

------
retrac98
The author doesn’t make enough money to do this well. £34k seems like a low
salary for an educated 28 year old in London.

~~~
RasputinsBro
What do you mean by educated?

This is a person who is only able to entertain themselves by spending money.
That doesn't sound educated to me.

"Entertainment", in the sense that it's commonly used, should really be called
"paid entertainment". There's plenty of free entertainment. Read a book, good
for a walk, or my favourite: learn something new that is complementary to your
current skills and that might make you more econmically valuable. But he
doesn't like these things, he just likes being with friends in the pub and
playing FIFA. I promise you that I know a lot of educated people and their
lives look nothing like that.

~~~
retrac98
I mean it as in its definition, which has nothing to do with how someone
entertains themself.

~~~
RasputinsBro
You haven't answered the question. What is your definition?

------
IanCal
> and eating a Tesco meal deal for lunch (£3) [$4]. I know I should be
> preparing my own lunches to save an extra bit of cash, but the effort
> required to save an extra dollar a day doesn't quite cut it for me

This for me is a wonderful little example of how costs build up.

If you're not familiar with a "meal deal" in the UK, they're a
sandwich/snack/drink combo. They are almost universally pretty poor.

The author talks of the effort to prepare lunch, when compared to a _basic
sandwich_ and thinks this would still cost about £2 per day.

If they could cut the lunch cost in half it'd be equivalent to them getting a
£500/year payrise.

Edit - oh, the meal deal was them trying to save money. Then making at home
you can have something a lot better _and_ cheaper and if they were spending
5-6 per day before (easy to do) it may be worth £2k/year in salary, up to 2500
of they have a student loan too.

> As I spend my lunch break stolidly working my way through a seventh straight
> chicken sandwich,

But you weren't limited to that sandwich, and the sandwich wasn't part of your
savings!

As usual, it's a fairly lazy look at the concept. Take a moderate salary in a
high cost of living place and try vaguely to cut it drastically, then sum up
by saying you might die anyway so why bother.

Here's a quick simpler rundown:

Keep track of what you're spending, it's a simple habit that can pay off well.

Spend less on things that don't improve your life.

Spend more on the things that do.

If one of the things that would improve your life is more financial safety or
being able to not have to work, spend some of your money on that.

Other than "earn more money if it's worth the change in job satisfaction"
that's a recipe for making your life better whether you want to retire early
or not.

------
speedplane
Real economic freedom varies by the area you live in, but if you live in major
metro areas, where you want to take advantage of all the cultural and
entertainment offerings they have and also raise children, real economic
freedom starts kicking in at around $700,000/year +/\- $200k.

To make that much without a job, you need roughly $10M in the bank (yielding
~7% growth). That's a lot. A $500k/yr job w/o taxes or spending anything would
take 20 years. The only way to get there is to have family money or hit the
startup lotto (or actual lotto).

These articles are not about true economic freedom at 40, they're about
limiting your consumption and being happy about it.

~~~
brians
Not quite. For one thing, that +/\- 200k matters a lot. Start out making $100k
out of college. Get a 10% raise per year. Save half of everything you make
over that initial $100k—like pretending you only got a 5% raise. You’ll be
able to retire with $10M in the bank in your early 50s. At 40, you’ll have a
couple million in the bank, kids in school, and be able to take modest family
vacations without worrying about it. You can absorb health problems, needs for
therapy of various sorts—give your kids a great launch.

The trick is finding ways to keep that compensation number moving up 10%/year.
The first decade is easy. The second... can be done. Past that, I dunno.

~~~
speedplane
> Start out making $100k out of college. Get a 10% raise per year. Save half
> of everything you make over that initial $100k—like pretending you only got
> a 5% raise.

Do the math, it doesn't work. Starting with $100k at 20, with 5% raises every
year gets you to $430k/yr at 50. You're still nowhere near $10M.

~~~
brians
Get a 10% raise. At 50 you’re at $1.7M/yr. You save 0.8M that year, spend
900k—including paying off your kids’ education. Assuming 5% returns, your
savings tick over to $11118263.51.

But you’re right that it’s not pretending you only got 5% raises.

------
rwmj
"monthly subscriptions like Netflix and Spotify" ... I can see a problem right
there. Somehow I have managed to live my life without either of those things,
and I still manage to watch series, films and listen to tons of music.

~~~
benj111
That's not necessarily a problem. Its the next paragraph where they complain
they're bored despite the subscriptions that's the problem.

------
Aegaeus10111
I'm new to HK - just read the guidelines. I clicked this post because the
title screamed _scam( to me and I was curious. I was happily surprised to see
a post that makes sense.

I've never heard of FIRE. I'm always skeptical of things with names like that
- and some of the rules may or may not be ideal - but the conc3ept behind it
is fantastic. I'm old and tried living this way way back in my 20's - then i
got a family. Without a wife with the same ideals - forget it.

_But* - if it could be gamified ... I always want to design something :-)

------
ulisesrmzroche
Waste of time to waste your youth like that, as a frugal shut-in. Plus, this
strategy of earning a living thru speculating and miserly living aint so fun
when bull-market dead and percentages drop. Best to not worry bout money in
your twenties and build your career and make your mistakes and make lots of
friends and enjoy drinking as much as you want while not getting fat.

------
RickJWagner
It's always good to live beneath your means. Not just for financial reasons,
but because you'll be happier if you do.

------
Zebfross
FIRE doesn't have to be miserable. Read Mr. Money Mustache and see how saving
can be fun, fulfilling, and even luxurious. Spending >90% of your paycheck is
a good way to have to work a long time with not much to show for it.

------
CarelessSmirch
I think there are two unethical aspects to this: Firstly, less money spent
will harm the economy, and, secondly, if lots of people do it, the system will
adjust to lower salaries until it is not feasible anymore, i.e. this cheatcode
depends on most other people still working their entire lives and constantly
spending lots of their incomes.

~~~
Fredej
Honestly I found none of that unethical.

If you're able to live with a lower consumption you should not increase it
just to "not harm the economy". On the contrary I would find it unethical to
increase your consumption beyond your need.

To your second point, I don't find it compelling either. First off, the FIRE
way requires some amount of restraint and discipline - in many ways it's like
dieting. It's good for you, but that doesn't mean people will do it - it will
continue to be only a subset of people. Secondly, how would the system would
adjust? What would be the driver for lower wages? The method is basically to
save and invest half your income - that doesn't depend on your income. The
people are still equally skilled, working equally hard during their working
years. The output at their work while they work remains unchanged.

If anything it might drive wages _up_, as people would require increasingly
higher compensation to stay at work, if the alternative is to live happily and
safely without working.

