Playing with FIRE
October 17, 2017 9:38 AM   Subscribe

The internet subculture of FIRE (Financial Independence and Retiring Early) is a community of people working to retire (or achieve financial independence) at aggressively young ages using some unconventional methods.

Individuals pursuing FI (Financial Independence) are working off the principle of setting up their lives so that their passive income exceeds their day-to-day expenses. In order to achieve that, they focus on keeping household expenses low with the pursuit of unorthodox, often extreme methods of frugality and amassing anomalous assets for their age, stage, and income.

The culture, of course, has its celebrities: Mr. Money Mustache [previously] who enjoys doling out "face punches" about clown cars and tiny details exaggeration syndrome in a framework that he claims is not about the money at all, the Frugalwoods, who take a more compassionate tack as they celebrate the joys of being frugal weirdos, the Mad Fientist, who focuses on optimizations and runs a "laboratory" for others to track their progress toward FIRE, and Early Retirement Extreme, who focuses on cutting expenses to four figures a year in order to retire on modest savings. They’ve spawned numerous blogs and forums of people working toward their own financial independence at a wide variety of ages, locations, and incomes (though most successful early retirement evangelists are doing it on pretty high incomes).
posted by mosst (69 comments total) 50 users marked this as a favorite
 
Obligatory acknowledgement that living frugally is not optional or joyful for many, many people in many situations and that being able to live below one’s means is a privilege not open to everyone. While the more extreme strategies and optimizations may be interesting or useful for a wide variety of people, many of the writers in this genre can have some big blind spots and can take an unnecessarily patronizing approach so approach at your own risk.
posted by mosst at 9:38 AM on October 17, 2017 [52 favorites]


Is it like the Rapture?
posted by runcifex at 9:44 AM on October 17, 2017 [5 favorites]


I was briefly tempted by this approach, until I realized that it might be unwise to deprive myself of small joys in the short term since I could, in fact, keel over at any moment.
posted by delight at 9:50 AM on October 17, 2017 [47 favorites]


It also seems kind of weird to subject your kids to privation that is voluntary for the adults but not for them.
posted by delight at 9:52 AM on October 17, 2017 [42 favorites]


I've seen most of the financial independence ideas summarized as "live like you're poor now, so you can live like you're poor for the rest of your life". Having actually lived poor I think I'll pass thanks.
posted by Sternmeyer at 9:52 AM on October 17, 2017 [109 favorites]


That last link is really good, and I think underemphasized too much. You need extra money to save money, and a huge swath of Americans (much less worldwide) don't make enough to cover day-to-day expenses much less put some aside.
posted by larthegreat at 9:54 AM on October 17, 2017 [24 favorites]


This seems like yet another in the long line of "Internet subcultures built around a relatively reasonable and admirable kernel (saving money and planning for the future) that will inevitably/already has begun to spiral into a weirdly abusive cult".
posted by Sangermaine at 9:56 AM on October 17, 2017 [59 favorites]


"Internet subcultures built around a relatively reasonable and admirable kernel (saving money and planning for the future) that will inevitably/already has begun to spiral into a weirdly abusive cult".

Subtract the part about saving money, and this is a good precis of how I'm quickly coming to feel about the internet as a whole.
posted by ryanshepard at 10:00 AM on October 17, 2017 [14 favorites]


Man, people really hate working
posted by kittens for breakfast at 10:00 AM on October 17, 2017 [33 favorites]


metafilter: will inevitably/already has begun to spiral into a weirdly abusive cult
posted by idiopath at 10:01 AM on October 17, 2017 [21 favorites]


It also seems kind of weird to subject your kids to privation that is voluntary for the adults but not for them.

I agree. Whenever I read about hardcore frugality, I grouchily mutter, "you know what's expensive? kids. You know what's really frugal? not having kids."

In my observation, there is a certain type of person - often, but not always male - who is about ME and MY dreams and MY lifestyle and dammit the kids need to adapt! I think there's a feeling of family as duty, that blood is blood and faaaaaaamily, and that having kids is an obligation but so is loving your family no matter how toxic they are. And I wonder how many of their kids flee to r/raisedbynarcissists, etc. the minute they grow up.
posted by Rosie M. Banks at 10:03 AM on October 17, 2017 [24 favorites]


I admit to harbouring an intense fascination with this subculture. There are all sorts of acronyms, and there's math, and I already am the type of person who gets a kick out of squirrelling money away so overall it's just catnip to me.

re: abusiveness, the main FIRE subreddits have the misfortune of being linked to from some of the MRA subreddits. In response people have set up communities for FIRE specifically aimed at women, so that's a thing.
posted by quaking fajita at 10:04 AM on October 17, 2017 [3 favorites]


I have a love/hate relationship with the FIRE community. Love, because I grew up lower to lower-middle class with a parent who was not inclined to reassure me that 40-hour work weeks, which sounded horrifying, were all right actually; so when I discovered FIRE in college, it gave me a new way forward, and now I'm, uh, several years out of college, eating a lot of potatoes, wearing second-hand clothing, and working my way down to a 30-hour work week within the next few years, I hope. Maybe 20 the decade after.

And hate, because I know I have lucked out in myriad ways to reach this point, and every FIRE writer I've come across tends to at least occasionally spout out-of-touch bullshit about how, for instance, 40k incomes are so average, so doable, basically what you'd start out making in your twenties. Like, really, guys? Come on.
posted by Thermopsis sp. at 10:04 AM on October 17, 2017 [15 favorites]


that will inevitably/already has begun to spiral into a weirdly abusive cult"

Yes, inevitably they will all get into one big group marriage and register as a church to save even more money and then retire early as a group by buying some cheap property overseas and building their own community.

So, what are the political leanings of FIRE folks usually? I imagine they would be more inclined for low taxes in order to maximize their own earnings and thus be more right-leaning.
posted by FJT at 10:05 AM on October 17, 2017 [4 favorites]


Pfft.
The late Joe Dominguez and Vicki Rubin were preaching about that decades ago, in "Your Money or Your Life". I assume that the updated version somehow includes monetizing your financial or frugality blog, making a shit ton of money, and then trying to teach others how to be frugal.
Voluntary simplicity goes all the way back to Walden, if you want it to, and even Thoreau needed to fudge it a bit to make it palatable.
posted by Major Matt Mason Dixon at 10:08 AM on October 17, 2017 [8 favorites]


From what I've seen they tend towards support of single payer healthcare, as paying out of pocket for 40+ years at non-ACA rates is a problem.
posted by quaking fajita at 10:09 AM on October 17, 2017 [12 favorites]


Every time this subject gets posted to mefi it gets a lot of hate, for exactly the reasons mosst acknowledged in the very first comment. But even if overall you don't agree with this or it is not for you or it's not even feasible for you due to your income level, the general takeaway is valuable, at least for me: you don't have to work so hard if you let go of the need to consume things.

Humans are extremely susceptible to the (I think it's called) happiness plateau, where you can run after trying to attain a thing you want, get it, and then shortly find yourself growing unsatisfied even though you have the thing. This is good for evolution in general, but really bad for normal people living in a society. It takes a lot of (emotional) work? discipline? to keep reminding yourself that, ultimately, things are ok, you're ok, and that if you have enough to get through your days in modest comfort, you really do have enough. You don't need the next thing. Learning to be happy with what you have is a skill, but a good one, and especially worthwhile when trying to get your finances in a healthy place.

Like with anything, this attitude can manifest in irrational ways, especially for folks with addictive personalities or who are aggressive or just generally smug little shits about life in general, so the underlying heart of the message can get lost. But go over to the green on any random day and see how many people suggest askers start keeping a gratitude journal. This is really fundamentally the exact same thing, except with numbers.

Figure out what you need, what you actually need, determine how much money you need to maintain it, and if you realize you don't have to run so damn hard on the hamster wheel (or you can get off it all together), embrace it.
posted by phunniemee at 10:10 AM on October 17, 2017 [62 favorites]


re: abusiveness, the main FIRE subreddits have the misfortune of being linked to from some of the MRA subreddits.

Ugh, and that's another thing that sometimes goes along with the frugality cults: a hefty dose of anti-feminist sentiment, along the lines of "women are frivolous and parasitical!" Which is an amplification of ideas found in mainstream culture, actually.

This is one reason I like the idea of a mincome, a maxcome, a WPA, and a caregiving WPA - people would be less dependent on abusive others who just happen to be spouses or faaaamily, it would provide more of a "village" for children, and maybe it would reduce some of the fear around money and not having enough that drives people to abusive extremes in the course of "FIRE" etc.
posted by Rosie M. Banks at 10:11 AM on October 17, 2017 [12 favorites]


Man, people really hate working

and yet are willing to work very, very hard to avoid it
posted by philip-random at 10:12 AM on October 17, 2017 [10 favorites]


MeFi: "Internet subcultures built around a relatively reasonable and admirable kernel[...] that will inevitably/already has begun to spiral into a weirdly abusive cult".

Can I change my username to an URL because if there was a link I would link to everywhere it's this one: How Web Forums Make Neuroticism Viral
posted by Apocryphon at 10:13 AM on October 17, 2017 [11 favorites]


I remember doing the math in 2006 or so (bored in a college math class) and realizing that if I saved and invested half my net income over the next 10 years, I'd be a millionaire. While I didn't make nearly as much as I was hoping to early on, the stock market took a huge hit in 2008, and we took a pretty big hit on a very dilapidated tiny house that we stupidly bought, it more or less went according to plan.

Obviously this depended on a lot of good luck: help getting started from parents, living in a low-COL area, marrying someone who is similarly frugal, investing before the recent long bull market, and avoiding some other potentially expensive life circumstances. It also depended on delaying having kids, driving old beaters, living in said dilapidated house for 8 years, not really taking any vacations or eating out much, and only doing hobbies that are free or nearly free. But again: it worked.

A big part of it is hanging out with people who don't spend a lot of money. If you're always hanging out with people who spend a lot, you're going to feel pretty deprived. If you live basically the same as your circle of friends, you'll feel like the big spender when you bring $100 of snacks to a party.

I've got absolutely zero desire to retire (first it's not enough money yet; second I'm pretty sure I'd literally go insane). But I've done the math and if I really wanted to, it would be just barely feasible. I still save 50% of my net income, too. I wouldn't particularly recommend doing this for anyone else, but it's not like becoming an astronaut or something, it's a real goal you can accomplish in a decade or so.
posted by miyabo at 10:19 AM on October 17, 2017 [9 favorites]


... even Thoreau needed to fudge it a bit to make it palatable.

The thick vein of parody in Walden regularly gets missed - Thoreau was, in part, mocking the self-help / proto-Horatio Alger / FIRE-type writers of his day.
posted by ryanshepard at 10:21 AM on October 17, 2017 [4 favorites]


There's another angle to this besides financial independence. Building a financial cushion, one that will see you through a year or two of bad luck, can save your life and the lives of the ones you love. It's good to have the means to survive unexpected setbacks and to avoid compromising your morals when faced with them. Not so much financial independence as financial resilience.
posted by storybored at 10:30 AM on October 17, 2017 [19 favorites]


I think most of these people radically underestimate the risk they are exposed to over time, and radically overestimate the longevity of some of the frothy techniques for generating "passive income." As usual, a few people will do well out of it, primarily by selling other people on how to do well out of it, who will then not actually do so well.
posted by praemunire at 10:31 AM on October 17, 2017 [6 favorites]


I've read a few of MMM's blogs and I always get the quote in my head-- "You're not wrong, Walter, you're just an asshole."
posted by thewumpusisdead at 10:31 AM on October 17, 2017 [9 favorites]


Praemunire - from what I've seen most people are fairly focused on index fund investing and the Trinity Study 4% safe withdrawal rate. Do you think that a 4% withdrawal rate counts under that radical underestimation of risks? Though I don't expect I'll ever retire early or implement those techniques to sustain my life, I find them intriguing.
posted by mosst at 10:37 AM on October 17, 2017 [1 favorite]


I actually tried to read the MMM blog a month or two ago, and this was the first article that was presented to me: "Introducing The MMM World Headquarters Building".
I stopped reading shortly thereafter, and dug out my dog-eared, dusty copy of Your Money or Your Life.
posted by Major Matt Mason Dixon at 10:40 AM on October 17, 2017 [1 favorite]


Do you think that a 4% withdrawal rate counts under that radical underestimation of risks?

For someone looking to retire at, say, 40, yes, I absolutely do. There are a number of people now who think that may be too aggressive a figure even for people retiring at the usual time, given increased lifespans.

I think people tend to assume, also, that they are more or less guaranteed the average. But a single person never is. And the average will give you no comfort (or help) if you're stuck out on the miserable tail. It's one thing to base general life planning on assumptions about average returns, it's another to stake your very financial existence on them, if you understand what I mean.
posted by praemunire at 10:41 AM on October 17, 2017 [4 favorites]


I too have an obsession with FI stuff, mostly because I was raised in a house absolutely lousy with money. Never answering the phone if it was a number we didn't recognize (creditors!), never having any savings (ask my mom how that is going, especially post losing my stepdad a few weeks ago), always overdrawn and writing cheques for the simplest of things.

I don't want that. I was fortunate in marrying a partner who grew up poor but had parents who were careful and wise about money. We have no debt, but not enough savings, and I am trying like hell to end up like my in-laws when I get old and not my mom. I like Frugalwoods best because they are kinder and their way of doing things is not too unlike what I would do.

Of course, in order to reach FI, I'd have to have a job. And I do not.
posted by Kitteh at 10:42 AM on October 17, 2017 [4 favorites]


Do you think that a 4% withdrawal rate counts under that radical underestimation of risks?

If you browse around the FIRE forums, people who are "retired" early aren't sitting on the beach sipping Mai Tais. They're starting side businesses, adjunct teaching college classes, doing occasional contract work, managing property, selling stuff on the Internet. Maybe that stuff doesn't make as much as a 9-5 job, but combined with investment income, it should be enough to not be destitute even if the economy tanks for a few years.
posted by miyabo at 10:58 AM on October 17, 2017 [4 favorites]


I still save 50% of my net income, too. I wouldn't particularly recommend doing this for anyone else, but it's not like becoming an astronaut or something, it's a real goal you can accomplish in a decade or so.

It is absolutely not a "real goal (I) can accomplish in a decade or so."

You do realize that saving $1M requires saving roughly $75-80K and investing that soundly, or saving less, but getting very lucky with the market?

Even if we low-ball it at $60K/year, and that's "half your net income," that means your net income is $120K, and depending on where you live and the taxes and deductions and so forth, you're probably looking at earning $150-$200K/year in salary.

Very, very few people earn that. Very, very few people *can* earn that, because let's be honest, we're still struggling to even get people $15/hr in some jobs.

"It's easy to save a million dollars (if you earn $160,000 per year)" may be technically correct, but it's so demoralizing to see someone have such privilege and not realize that most of us will never earn what you're apparently earning in your 20s or 30s.
posted by explosion at 10:59 AM on October 17, 2017 [46 favorites]


1. Living below your means implies you are likely consuming far less stuff than the average person, which tends towards sustainability and resilience.
2. Automation is likely to eliminate jobs as a thing... we're all going to end up having to hustle to stay alive, this is one way to transition into it.
3. Hoarding is a thing, this is the opposite, in my view.
posted by MikeWarot at 11:04 AM on October 17, 2017 [2 favorites]


if you earn $160,000 per year

I've never made that on my own, but that is about the combined income for my wife and I. We also had some windfalls in there (an inheritance and an unexpectedly large stock options payout) that helped a lot. The stock market going up 230% since we started seriously investing has obviously helped a lot too.

demoralizing to see someone have such privilege

Even though I still work full time, I spend 8-10 hours a week volunteering teaching low-income kids to code and running a coding conference at the local community college, so...
posted by miyabo at 11:19 AM on October 17, 2017 [3 favorites]


"live like you're poor now, so you can live like you're poor for the rest of your life". Having actually lived poor I think I'll pass thanks.
Don't take "like you're poor" completely literally.

E.g. the financial difference between "I'd better not ever eat out" and "I'd better not eat out every month" is less than 5% , so you don't need to be an absolutist about it. Even if you are, the psychological difference between "because it's something I can't do" and "because it's something I don't do" is significant.

Much more importantly, even if your expenditures are indistinguishable from those of a poor person, just knowing that your savings are not makes an unavoidable positive difference. Isn't Metafilter usually quick to point this out, when someone from a wealthy family superficially appears to take a "self-made", "by their bootstraps" career path? Walking on a tightrope is much less stressful if you know you have a nice safety net ready in case you slip. Even if you make your best effort to live pseudo-poor, having enough savings to protect you from disaster means you're still going to be more comfortable than an actual poor person, in a way that isn't measurable as consumption spending.

Finally, there is one big difference that does show up in your budget: if you're only pseudo-poor, you don't have to suffer from the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness like actual poor people do. You don't have to buy cheap things that cost you in the end by wearing out, you don't have to get shafted by high interest rates on temporary expenses, you can live in actual affordable-monthly-rent apartments which require deposits rather than exorbitant-weekly-rent motels which don't. In the long run you might even own the place you live, and save money doing so, since in some housing markets the barrier is the down payment, not the cost of the mortgage. For that matter, being pseudo-poor works better than being poor on the income side too. You can afford to negotiate harder. You can afford to job-hunt longer to find a better salary. You can afford to move to better job markets. You could even afford to take the time to retrain for a different career.

I'd agree, it's probably unrealistic for most people to plan on retiring early this way, but don't neglect the potential benefits even for people who don't.
posted by roystgnr at 11:20 AM on October 17, 2017 [12 favorites]


I used to be all about the Personal Finance bloggers in 2005-2007, which was great motivation to dump some of our young-people's earnings into the bear market, but stopped reading when it seemed like a lot of the bloggers managed to sell their blog & brand for a windfall, and their posts went into maintenance-mode (remember The Simple Dollar or Get Rich Slowly?)

Now we are privileged to be in white collar jobs, and in that weird sweet spot of genX-mellenials which allowed us to navigate through the financial rough waters of the recession. We are also going to be working for many more years. But I'm now looking for books about strategies for asset allocations and safe withdrawals of accounts with required minimum distributions, and am having a rough time, since most of the advice is either "set up accounts and save more for retirement!" or "use SS with your accounts and withdraw as little as possible!" or "TAX AVOIDANCE!", and that is not the actual advice I'm looking for. I suppose some FIRE blogger as that one weird trick for long-term money withdrawal, but I don't feel like getting sucked back into those types of blogs again.
posted by Hermeowne Grangepurr at 11:23 AM on October 17, 2017 [3 favorites]


Living below your means implies you are likely consuming far less stuff than the average person, which tends towards sustainability and resilience.

No, it really, really, doesn't. Housing and medical expenses, for example, are two of the single largest categories of spending for many households (and individuals). I suppose you could argue that living in high-COL areas or requiring medical attention are "consuming more stuff than the average person," but taking steps to minimize those expenses would be a move towards greater instability or death rather than "sustainability and resilience." There is a point at which there's no more fat to trim, and it's a higher number than many people make in the first place. Did you read the last article in the post?

(The thing that always gets to me, personally, about these blogs is how handwave-y they are about housing. Even YNAB does this on their blog - I love their software but have stopped paying attention to most of their other materials because so many of the stories that they highlight about younger folks or couples trying to pay down debt involve moving in with family for months or years at a time while continuing to work and/or starting a side hustle.)
posted by Anita Bath at 11:26 AM on October 17, 2017 [11 favorites]


Even though I still work full time, I spend 8-10 hours a week volunteering teaching low-income kids to code and running a coding conference at the local community college, so...

I didn't mean for it to come across as a "screw you for having wealth." I'm sure you're doing plenty of good, or at least I hope so.

My point was just that your account of financial independence should be a lot more "we got ridiculously lucky and only just made it this far," and not "it's within anyone's reach."
posted by explosion at 11:38 AM on October 17, 2017 [13 favorites]


> It also seems kind of weird to subject your kids to privation that is voluntary for the adults but not for them.

But doesn't every parent do this to some extent? When I was a kid my friends all had Star Wars figures, but no way was my mother "spending $2 on twenty cents worth of plastic!" We didn't get a VCR until my teens, and cabe some time after that. Video games were a waste of money, and if I wanted something they felt was frivolous I had to get a job to get it. So I had paper routes, and walked beans, detassled corn, bussed tables, shoveled walks, mowed lawns. Seriously, pretty much anything for a buck. Hell, I even joined the military at 17 just for the signing bonus.

We lived well below the poverty line for much of my childhood. Some of the privation was forced on us, but even after we stopped being so damn poor, a lot of those habits stuck with my family.

A work ethic was instilled at an early age. What I wish had also been instilled was even a modicum of financial literacy. I worked hard, played harder, but never saved a dime. Work was to earn so I could spend! I had to learn the hard way that student loans have to be paid back, that 100% mortgages are shit, that banks don't care if you get over extended, that credit cards are only for the highly responsible, and collection agencies are fucking evil. I like to believe I can learn from the mistakes of others, but when it came to money, I pretty much had to learn every lesson the hard way.

I'm 47 and I live like these guys. I am shoveling large amounts of cash into my retirement and living as frugally as I can, but not because I want to retire early. That boat has sailed, but because I feel I have to in order to retire at all.
posted by cjorgensen at 11:40 AM on October 17, 2017 [5 favorites]


First I thought that some of the FIRE stuff could at least be a good way to stealthily lay a little environmentalist message on upper-middle-class folk who (judging by their consumption patterns, not their stated beliefs) generally don't want to hear it. (I think this might be what MMM is actually driving at). But I bet the negative environmental effect of a bunch of high-salary workers quitting their jobs and starting to feel identified with the investor class (and voting accordingly) is greater than the positive effect of those same people switching to bicycles and installing energy-saving lightbulbs in their still-ostentatious (did you see the pictures of MMM's place!?) houses.
posted by busted_crayons at 11:46 AM on October 17, 2017 [1 favorite]


My point was just that your account of financial independence should be a lot more "we got ridiculously lucky and only just made it this far," and not "it's within anyone's reach."

Yes, absolutely, we got ridiculously lucky. Most people are not this lucky. But if you do happen to be this lucky, you can turn it into a lifetime of lucky, instead of buying a couple of nice new cars and a nice house and feeling comfortable for a few years.
posted by miyabo at 11:55 AM on October 17, 2017 [3 favorites]


If you browse around the FIRE forums, people who are "retired" early aren't sitting on the beach sipping Mai Tais. They're starting side businesses, adjunct teaching college classes, doing occasional contract work, managing property, selling stuff on the Internet. Maybe that stuff doesn't make as much as a 9-5 job, but combined with investment income, it should be enough to not be destitute even if the economy tanks for a few years.

I can hardly believe there are people who make this claim in all seriousness rather than being forced to act like these "jobs" can reliably earn them even half a living because the changing economy has left them with nothing else and they have to pretend they're staying afloat, which is what most people involved with them do. Not only are these mostly desperation or unrealistic (to the extent they might earn actual money, they will be like real jobs) or unethical (I don't want to hear about your un-degreed adjuncting at Corinthian College to kids being lied to about placement rates, thanks) gigs, they're often the kind that will go away if the economy DOES tank. (Ask older people how much "occasional contract work" was available during the dot-com bust.) And none of them offer benefits, so those first middle-aged health scares are going to be very, very fun.

There will always be a few lucky and/or well-positioned (usually both) people who will manage to pull this off, often by selling it rather than by living it. But this line of thinking tends to attract exactly the kind of people who overestimate their ability to perform tasks outside their specialization and underestimate risk. I don't really have anything to say to people who want to live super-frugally; we all have to choose our own priorities, and at the very least I think it's sensible to try to avoid waste and be thoughtful about getting value for money. I've found useful advice on some personal finance blogs from time to time, for sure. But I hate to think of people doing it just with the dream of being able to take a huge and in some ways irretrievable risk with their financial future.
posted by praemunire at 11:57 AM on October 17, 2017 [5 favorites]


Humans are extremely susceptible to the (I think it's called) happiness plateau

The term you want is Hedonic Adaptation/Hedonic Treadmill.
posted by srboisvert at 12:14 PM on October 17, 2017 [3 favorites]


Yes, absolutely, we got ridiculously lucky.

Thinking about it, I'm also lucky. But also lucky that my parents and extended family are healthy and can take care of themselves. I've noticed older coworkers have to take care of parents and other relatives due to age or other chronic issues and I think that's caused me to take saving (and being healthy) more seriously. To get ready for that and not just necessarily retirement, whatever that means.
posted by FJT at 12:23 PM on October 17, 2017 [1 favorite]


that 100% mortgages are shit

The housing market may be shit, but in a shit housing market, a mortgage is the only way a lot of us can afford a home. I'm still astonished that anyone was willing to lend me and my wife over $300,000 at 3.27% interest.

Suddenly we're paying the same to the bank as we were paying to a landlord? Building equity and knowing the "rent" will never go up?

Hell, if I magically found myself with the money to pay down the principal of the loan, I'd probably still invest it, since I could likely get a better return than 3.27%, and mortgage interest is tax-deductible.

As far as financial products go, the home mortgage is definitely far from shit.

Why my property cost over $300K though...
posted by explosion at 12:25 PM on October 17, 2017 [6 favorites]


Saving $4,457 annually for 30 years @ 4% return = $250,000
posted by storybored at 12:27 PM on October 17, 2017 [2 favorites]


If you get lucky and buy into a stupid market like DC in the early oughts, or SF 10 years ago, you can make a mint on your home.

For the period 1890-2005, inflation-adjusted home prices rose just 103 percent, or less than 1 percent a year.

Home ownership for most of us is an expense, not an investment. Yes, payment stability, setting down roots, and all that are valuable and aren't measured in the ROI. They are all perfectly good reasons to buy a home, maybe the only good reasons, because when you add up what you actually spend as a home owner, you probably aren't going to make much.
posted by COD at 12:35 PM on October 17, 2017 [2 favorites]


Oh the Reddit frugal jerks. A bunch of over-privileged stemlords who honestly believe that they are the first people in the history of the world to discover the concept of saving money.

"My family puts aside a modest $12k every month, just like everyone could if they weren't so wasteful."
posted by FakeFreyja at 12:39 PM on October 17, 2017 [6 favorites]


Meanwhile they’re living with their parents until they’re 35 and not paying anything to their own upkeep, while working full-time at well-paying white collar jobs.

Like yeah, if I had someone paying all my bills for me, I’d be able to save a lot of money too.
posted by Autumnheart at 12:42 PM on October 17, 2017 [7 favorites]


that 100% mortgages are shit

As far as financial products go, the home mortgage is definitely far from shit.

To clarify, I think the original statement is not that 100% of mortgages are shit or that mortgages are 100% shit, but rather that mortgages with zero down payment (so that you're mortgaging for 100% of the price of the home) are shit--such mortgages come with worse terms because you've initially got no skin in the game, no reason not to walk away.
posted by Four Ds at 1:05 PM on October 17, 2017 [7 favorites]


Man, people really hate working
I don't hate doing mental or physical work and I have grown out of hating the forced socialization at work, but what I still hate is the time it takes away from me. I am very jealous of my own free time. I don't think I will ever grow out of that. The only way I have been able to hold down a full time job for 20+ years is the generous vacation they give us. I get physically angry when I hear that other people have to beg for or explain to their boss why they need time off, especially when it is part of their salary.

That is part of the reason this lifestyle does not appeal to me: it doesn't seem to increase their net free time. I need a hard line between work time, chore time and free time. This seems to turn most of their old work time into chore time and not really increase free time.
posted by soelo at 1:11 PM on October 17, 2017 [11 favorites]


Saving $4,457 annually for 30 years @ 4% return = $250,000

Which, if inflation remains the same as it was for the previous 30-year period (1987-2017), would equal about $150K in 2107 dollars, which is not a lot of money for someone to live off of for very long.
posted by eustacescrubb at 1:18 PM on October 17, 2017 [3 favorites]


I always heard that the 4% takes inflation into account, though I'm not sure whether that's assuming a 7% stock market return minus 3% inflation or what.
posted by Thermopsis sp. at 1:32 PM on October 17, 2017 [1 favorite]


Over the long run the stock market has returned about 6.5% (subtracting inflation and adding dividends -- everyone always forgets about dividends). If you're withdrawing over time you need to withdraw a lot less than that each year though because you'll be taking money out even when the market is way down. 4% seems to be the current consensus "safe withdrawal rate".
posted by miyabo at 1:48 PM on October 17, 2017 [1 favorite]


The 4% rule of thumb is from the Trinity study, which:

- Assumed that the portfolio only needs to last 30 years
- Only looked at data between 1925 and 1995 (since the study was done in 1998)
- Actually recommended a withdrawal rate of 3-4%
- Only worked 95% of the time

I don't think it's in any way a "safe" number for the type of extreme early retirement people are doing.
posted by quaking fajita at 1:55 PM on October 17, 2017 [2 favorites]


This is a topic dear to my heart.
If you're poor
A) many frugality techniques you do by necessity
B) many financial strategies are out of reach because you don't have surplus
C) its not wrong to live for the moment because life ia hard, the future uncertain, and the sysyem is out to get you.

If you're rich
A) live frugally
B) help the poor
C) have your children do the same
D) support political change to a more sustainable and equitable economy

If you think you're middle class, and you don't live in a western European style welfare state or an east asian tiger economy, your life is precarious and frugality is at worst
A) an ethical and sane way to navigate a capitalist to find non material happiness
B) you are one accident or mistake away from being poor -medical condition?, fired whistleblower? DUI? cat accident? Frugality is living insurance.
posted by Anchorite_of_Palgrave at 1:59 PM on October 17, 2017 [12 favorites]


You are absolutely right, FIRECalc gives a success rate of 80.4% for a 50-year retirement at 4% withdrawal rate. Also you have to remember that a lot of the gains are taxable if you're doing early retirement, which makes things considerably worse. I really think people who are doing this are trying to escape the 9-5 grind, not escape work altogether.
posted by miyabo at 2:09 PM on October 17, 2017


B) you are one accident or mistake away from being poor -medical condition?, fired whistleblower? DUI? cat accident?


Please tell me that was intentional.
posted by darkstar at 2:41 PM on October 17, 2017 [23 favorites]


One thing I think this field needs is a longitudinal study, to see how these "early retirees" really fare as they age. For one thing, I fear they're really getting screwed on social security. Your social security benefit is calculated based on your income during your 30 highest-earning years; if you have fewer than 30 years of earned income, the extra years are assumed to be zeroes for the averaging calculation. For example, if you make exactly $60K / year for exactly 20 years, your average social security income is $40K ((60 * 20 + 0 * 10) / 30). And passive income does NOT count - only wages on which you pay social security tax, or contractor income where you pay self-employment tax. So I think a lot of these guys are on pace to get like $100/month in social security when they turn 62 (FWIW the average benefit is about $1200/month).

... UNLESS their advice actually breaks down to replacing your steady income with a bunch of part-time hustles, in which case no thank you. I did that in my early twenties and it totally sucked. I had no insurance, I worked from my shitty apartment and was bored out of my skull, I lacked social connections, and I made like $5K/mo during good months and NOTHING during bad months. Oh yeah, and part of that was running websites, c.f. Mr. Money Mustache, which was one aspect I was specifically trying to escape by going back to school. If this kind of life seems liberating to you, by all means try it. But for god's sake have a backup plan.
posted by Joey Buttafoucault at 4:25 PM on October 17, 2017 [3 favorites]


This fascinates me because I have so little trust in anything ever being stable for more than 2-3 weeks out that I just live my life like in 3 weeks we’ll all probably be dead so why care.

I’m probably very broken in this regard.
posted by Annika Cicada at 6:48 PM on October 17, 2017 [4 favorites]


1) Cat accidents: buy one fat cat, get 1 skinny cat and 5 kittens *bang* poverty!
(Also cars can be as bad as cats)
2) Social security? Been raised told that there would be none for my generation, and demographics and republicans and global climatic catastrophe make me think that there isn't much faith in social security. (indeed there is no security, not in paper money, or useless metals, or stocks etc) while the casino is open why not gamble, but if all you have are the promises of governments and corporations to live on, your f*ed. Family, friends, neighbors, community, and siezing the means of production, or at least a homestead... thats security)
3) child abuse? not vaccinating your kids is child abuse; giving todlers unrestricted access to electronics is child abuse; teaching them an invisible being hates how they want to use their genitals is child abuse. Buying a child's clothes at thrift store instead of a department store is not child abuse. I grew up without a nintendo -oh the horror! Not abuse.
4) Frugality allows you to divest as much as possible from corrupt corporations both from being their consumer and their employee/capo.
Frugality lets you reduce your environmental impact.
Frugality and early retirement lets you volunteer or work for NGOs and charities that others "can't afford" to do.

I agree, its not a silver bullet, but its a useful tool. While most of the other FI people ive met tend to be libertarian instead of communitarian or socialist, there are some of us that aren't just lazy selfish misanthropes and misogynists.
posted by Anchorite_of_Palgrave at 6:51 PM on October 17, 2017 [5 favorites]


Of course, it's not like FI has to be a lifetime path. You can spend five years pretending that your income is {$YourIncome - 10000} and investing the difference. If you decide, at the end of that time, that frugal living and early retirement aren't for you, you can always take your $70,000 and buy a few new cars or something.
posted by Hatashran at 8:02 PM on October 17, 2017 [4 favorites]


If there's any one life lesson my dad emphasized, it was the work ethic. Start work young, work hard, and learn more to get paid more. He literally worked until the day he died. I don't even remember his dad. Stroke/heart attacks, but if I wasn't too busy for genealogy, there's probably a more manly crushed-on-the-job story in the family tree.

I really hate working. To this thread, FIRE means privation for yourself and your kids, a weird cult, selfishness, toxic narcissism, MRA, right-wing politics, 21st century informercial (monetizing your FIRE blog being your only real path to FIRE), etc, etc. To me, FIRE is some backronym meaning "fuck working until you die."

Economic Possibilities for our Grandchildren had the math right: rich countries could be slacking off by now. The world per-person GDP of $16k is enough for everyone everywhere to have a decent if not affluent life. We haven't chosen that path collectively. FIRE is an individual, privileged path, but it depends on recognizing and accepting the privilege of making more than average instead of barely scraping by no matter what you make.
posted by netowl at 11:10 PM on October 17, 2017 [7 favorites]


My parents grew up in the Great Depression. Neither of them at all poor, but they saw financial ruin all around them and their families were affected. I grew up understanding that frugality is Good and debt is Bad. I'm the 3rd girl so I grew up wearing hand-me-downs from my sisters and neighbors. That means I had plenty of clothes, but seldom of my choosing. I still get most of my clothes at thrift shops and I like the way I dress. I usually buy used cars. I will happily stop the car and snag a chair off the street. I have always applied the lessons and habits of frugality. I now have a small house that's paid for, very little debt and some savings, enough for a reasonable retirement. When I have earned well, I saved as much as I could, and when I haven't earned a lot, I've made do. I will note that I have the tremendous privilege of never having student debt (thanks Mom & Dad), and having some inherited money (@ 50K, over time) that allowed me to have better options. I had luck, and made the most of it. Not all good luck; I raised my son with no child support.

Being frugal is generally better for the environment. I don't buy lots of consumer goods, so I don't have a lot of crap to discard. I try to get good quality stuff and take care of it. I don't have a great big house to heat and cool.

The really great thing about financial independence is the ability to say Fuck You to a shitty employer, a shitty marriage. I would truly hate the stress of living paycheck-to-paycheck.

I don't know how to not sound smug about this. I have been broke and I have lived on quite low income - my son got free lunches at school. Keeping him clothed and fed and shoes for kids cost the earth, you can't really buy used, and the cheap ones are truly crap, to say nothing of poverty signalling that is awful for school kids. My ex- is a hand-to-mouth spender, a grasshopper to my ant, and my son always thought Dad was poor and Mom was fine. He was genuinely shocked to learn that some of those years were really lean. He did not experience how we lived as privation. He is more apt to complain that I made pancakes with whole wheat than about lack of toys, books, etc.

The American way of of life is driven by advertising and corporate profit and consumer debt. I see people buy a new car and they're shackled to payments for 6 years. People with a big pile of credit card debt at usurious rates. And now that years of inequality have aggregated wealth in the pockets of the few, that wealth gets invested, for wealth must beget wealth. That apartment complex is owned by a real estate trust in turn owned by investors who require maximized profits. With their profits, they're buying up as much real estate as they can. Rent and housing is skyrocketing. I opted out of the idea that I need a car for status, brand new clothes that meet this year's trend I like to go out to eat at good restaurants, but I'm happy having a beer at the local joint. I'll join the gang when they go for an expensive drink at the new, over-priced place, but only some of the time.

Shoot your tv and reduce magazine subscriptions and use adblockers and cut off marketing emails. Decide what constitutes a good life for you. Don't stint on enjoyment of life, but choose at least some options that don't require lots of money. Poverty buys misery, but spending doesn't buy happiness. I'll repeat myself: The really great thing about financial independence is the ability to say Fuck You to a shitty employer, a shitty marriage.
posted by theora55 at 6:49 AM on October 18, 2017 [13 favorites]


> As far as financial products go, the home mortgage is definitely far from shit.

As Four Ds pointed out, I meant "nothing down" mortgages or 100% financing.

Mortgages are wonderful most of the time. They are the single best path into the middle-class.

PMI (Private Mortgage Insurance) is evil though, and if you can't get a mortgage without PMI then I'd suggest saving for more of a down payment (or if this is not possible fighting like mad to get out from under PMI).

Like I said, I've made every financial mistake one can make. I had $25k in savings when I went to buy my first house. The lender talked me out of putting that money down, since "You'll need things to finish that house," and "You qualify for 100% financing. You would be silly not to take advantage of it when rates are so low."

This seemed like good advice. But suddenly I had a slightly higher monthly nut than we'd been discussing all along (an additional $25k on the loan). Add in the $200 or so for PMI (that was just being pissed away), escrow, and other fees and suddenly we were like $300 or more above the numbers I'd been running during the whole process. I still get livid when I think of her talking me out of putting that money down.

I did indeed spend like $10k furnishing the house. I would have been way better served with this money in my downpayment and living out of crates like a college kid. The PMI was killing me. That plus my student loans, plus I got into a house slightly out of my price range (and they qualified me for twice the amount this one cost), and fairly quickly I was house poor.

And even after I got to the 20% equity they would not remove the PMI because I'd had a couple of late payments (more due to clerical irresponsibility than to a lack of funds).

Defaulted student loans, massive credit card debt, over-extended on the house...like I said, every mistake possible. Two decades on I am finally out of that hole.

So again, I engage in a lot of the activities mentioned on these sites, but this is from past experience. I'm like one of those people who lived through the Depression, who now refuses to waste food, even though they are now rich. I'm hustling and scrambling to pile up cash for retirement, but not so I can retire early, but so I feel like I can retire at all.

I'm fairly lucky these days. I have a higher income than I've ever had (which makes sense, since I have been slowly progressing in my career), and I have a partner who is even more frugal than I. wWhen we argue it's about how we'll save our money, not how we're spending it.

But I never want to go back to being so poor that I have to decide which utility is the most likely to cut me off or choosing between eating and cigarettes (I no longer smoke).
posted by cjorgensen at 8:51 AM on October 18, 2017 [5 favorites]


This tread is so full of questionable advice it reads like one of the recent political threads from the Republican point of view. First of all, how 'safe' a retirement is determined to be is relative to other types of safety. Is retiring early safer than growing up as a disenfranchised minority based on an 85-90% likely hood that you would run out of money and have to go back to work? By definition you had excess money and that puts you ahead of most of the people in the US. Is the supposition that it would be better to never have that money in the first place? Or that these people aren't retiring with enough money, which seems relative to society, personal, and judgemental. Are you aware that a 'safe withdrawal rate' is adjustable, and if the economy tanks, then the retiree has the ability to lower that withdrawal rate? Or that changing that risk profile (from 85%-95%-100%) has a real cost, which may be retiring later, as though 'early' doesn't have a fungible definition of anytime before 65 or so? What does 100% safety look like? What are those costs?

It's also interesting that a 4% $4k average return investment for 30 years is not questioned, but a 4% withdrawal rate is. Invest in VTSMX (Vanguard Total Stock Market fund) and I feel pretty confident that you will beat that 4% and more likely double it, as my 23 years of investing have shown. Fine, that's not a retirement timeframe, but it doesn't matter, the math is the same. Yeah, there have been some downturns in the past 23 years. And if you do double it, then that $500k you have will lead to about $20k a year at 4%, which is more than the average individual gets in Social Security every year. Also $4k is not even the max a single person can invest in a tax advantaged IRA. That would be $5500.

Abstractly, the idea that people would even want to retire early or jump from gig to gig is like a talking point against a Universal Basic Income. People enjoy their jobs and want to work! They wouldn't be able to deal with free money!

Again, also abstractly, that 4% safe withdrawal rate is mentioned to be unsustainable due to medical expenses and major life events ruining it. What would fix that? Affordable universal healthcare maybe? How about ways to better manage non-genetic conditions via walking or eating less calories, both of which are strongly encouraged by FIRE folks? How about living closer to work and driving less?

Less abstractly, PMI is insurance. It is not evil, anymore than having healthy people buy health insurance is. Bank takes a risk. They get insurance on 20% of their asset back in the chance of a default. And that's where our interest in the bank's risks begin and end. A 100% mortgage is not evil or a special risk, any more than asking someone to front 20% of their college education or a medical bill is. Who cares if someone returns their house to the bank because circumstances changed and they can no longer afford it? Their bank, and no-one else.

I hate to speak to individual people's circumstances, but with a 100% mortgage, $300 a month higher payments and $15k in cash, but you could have paid 50 mortgage payments uplift of $300 for $15,000 in spare cash. That's fully 15% of a 30 year mortgage, which if you'd rather pay that upfront is an individual choice, but it's the same outlay. Paying off a mortgage early is fine, but that money is locked into the house and the only way you can access it is by paying a bank (again) to get some of it back if you need it. It really depends on the interest rate whether that will be a good or bad deal.

I get that FIRE advice isn't for people with low incomes. The people who most need it really can't be helped by it. But in my opinion that it's only real downside.
posted by The_Vegetables at 11:09 AM on October 18, 2017 [1 favorite]


Maybe we should call it a DIY UBI.
posted by miyabo at 1:47 PM on October 18, 2017 [1 favorite]


Less abstractly, PMI is insurance. It is not evil, anymore than having healthy people buy health insurance is.
For this analogy to work, you'd have to also advise the healthy people to make a major unhealthy lifestyle change, on the theory that their health insurance is a fair deal, while glossing over the change to their insurance premiums due to the company knowing about the lifestyle change and its risks. The insurer might not be evil in this scenario, but the adviser would be!

I still have the loan officer's comparison spreadsheet from when I bought my first house. A $6920 difference in down payments corresponded to a $46/month difference in PMI. That's about 8% APR, or enough to raise the marginal cost on that $7K from "historical low mortgage interest" levels to "might as well be on a credit card" levels.

And that's just the *initial* effective interest rate! With an normal loan, the interest goes down as you pay it off. With PMI, you're stuck with it until it can get canceled entirely when you've paid down enough mortgage principal (with conventional PMI, as in the example above), which roughly doubles the effective interest rate.

cjorgensen reports $200 a month PMI on a $25K down payment, which is 9.6% initial APR (i.e. more like 24% marginal APR when the non-decreasing payment and the mortgage interest are considered), so I don't think I was looking at an exceptionally bad deal. Even considering that we're glossing over a few things (tax deductability of PMI, etc), we're at a point where furniture store credit cards start looking competitive!

That said, I don't want to say you should never get a loan with PMI - I did with that first house, for what in hindsight I still think was good reason. But if you get stuck in the same situation, at least try to keep amassing savings earmarked "pay down mortgage principal and get PMI canceled early". Doing so can have better returns than the stock market, with lower risk to boot.
posted by roystgnr at 2:18 PM on October 18, 2017 [1 favorite]


Who cares if someone returns their house to the bank because circumstances changed and they can no longer afford it? Their bank, and no-one else.

Pretty much everybody that may ever want to extend you credit will care, a lot. Your car insurance company will care too, as credit rating impacts your premiums. Increasingly, you may not be able to get a job with that kind of black mark on your credit report. The government may care if you need a security clearance.

I'll agree it shouldn't matter, but in the gold 'ole USA, your credit rating is insanely important for all sorts of reasons that should have nothing to do with it.
posted by COD at 2:29 PM on October 18, 2017 [1 favorite]


Yeah, of course there are individual ramifications. But they are not for us as a society to be concerned about, as solving them - surprise we have! - has locked lower income people out of buying houses completely, put them at the mercy of rising rents, and driven up the price of existing housing nationwide even as the rate of default has fallen dramatically. Sure a low rate of default is nice, but non-wealthy people being able to buy houses is nice too.


For this analogy to work, you'd have to also advise the healthy people to make a major unhealthy lifestyle change, on the theory that their health insurance is a fair deal, while glossing over the change to their insurance premiums due to the company knowing about the lifestyle change and its risks.

Not sure I fully follow, but I can think of quite a few lifestyle changes that are not exactly healthy and result in increased costs. We advice people to have kids don't we for example? Maybe that doesn't square but again I don't exactly follow. Also PMI is not interest, and comparing it to interest is incorrect, any more than declaring property tax or the other types of insurance you must buy have effects on the interest rate. It completely goes away at about 20% equity of home ownership. Flood insurance or property tax does not. It in fact increases.

Assuming your home is increasing in value (a generally safe assumption), you can also refinance to get rid of PMI without fully putting 20% of your own cash into paying your house, which may also raise or lower your interest rate.
posted by The_Vegetables at 11:42 AM on October 19, 2017


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