Stingy, The New Cool As FIRE Movement Spreads

Stingy, The New Cool As FIRE Movement Spreads

When I was growing up, my mother was stingy by necessity and
bought the cheapest food and clothes she could find. I was embarrassed by this,
as in those days it was not cool to be frugal.

Fast forward to the present and it has become fashionable
and even cool to be stingy, frugal and penny pinching.

Even the middle classes shops at discount stores like Aldi
and Lidl, even if they do make the excuse that they are trying to find a cheeky
little Bordeaux for £10 a bottle!

Shops like Primark, money saving comparison sites and online
stores like Amazon have all boomed in the last few years.

In my book, Yes, money
can buy happiness, and my Money Tips podcasts, I obviously promote saving
and investment and earning more than you spend. However, a movement in America called
F.I.R.E. takes stinginess to a whole new level.

The seeds of the FIRE movement can be traced back to the
1992 best-selling book Your Money or Your Life written
by Vicki Robin and Joe Dominguez, and the 2010 book Early
Retirement Extreme by Jacob Lund Fisker.

Followers of the F.I.R.E. or “financial independence” and
“retire early”, movement, originating in the US, practice extreme forms of
money saving to achieve their goal of early retirement and financial independence.

Devotees target savings of up to 70% of their annual income,
which they invest for the long term. Their aim is to build a savings pot of 30
years’ worth of living expenses which they typically keep invested in low-cost
tracker funds, withdrawing a maximum 4% every year in the hope they will never spend
their capital.

After years subsisting on next to nothing, their thrifty
habits become second nature by retirement that cheap lifestyle is easy to
maintain. Some extreme F.I.R.E. disciples aspire to quit their jobs in their
30s or 40s, or at least attain the freedom of a greater work/life balance.

Whilst young people all over the internet rave about Fire,
it is glorified and extreme retirement saving cleverly wrapped up as some sort
of lifestyle movement.

Whilst I agree that young, and older, people need to start
saving instead of spending on consumer goods, I feel that the flames of their fire
may need a little more fuel to keep them warm for 30 or 40 years in retirement.

There are a number of obvious flaws in the F.I.R.E. plan.

To begin with, like me in my early working life, young
people find it hard to save for retirement when they have to save to buy a
property. This is made even harder when more than 50% of their disposable
income goes towards rent. Those who do save, probably still live with their
parents, who would naturally encourage them to put all their savings towards a deposit
on a property, which they need now, rather than for a pension which they will
need much later.

Secondly, when I got married and started a family life got
tougher on one income with a mortgage and children, which is part of life for
most people.

Finally, I think the “4 per cent rule” based on tracker fund
returns is optimistic and outdated, not least because global growth is slowing
and bond yields going south. Low-cost trackers are find when the market is
rising and being tracked upwards, but the same tracking principle applies when
the market is on one of its periodic downturns, which could come soon.

Having a goal to stash away 70% of your income to retire in
your 40s, after 20 years of productive work, is not easy, but retiring in your
60s after 40 years of saving and investing is achievable.

Not everyone finds the lifelong frugal lifestyle attractive
or practical. Some of the recommended money saving tactics they employ are impractical
and time-consuming. Can you really walk everywhere, only shop for “yellow
sticker” items on a limited range of foods just before closing time? Can you
make your own clothes, which you would find hard to do at a cheaper price than
the likes of Primark anyway, or live low-cost pulses for the rest of your life?

Retiring young and financially free is a great idea if you
can live the life of your dreams, or at least a decent lifestyle with money to
travel and enjoy. Without sufficient money, what sort of life will you have to
look forward to for the next 40 years?

The financial services industry (where I once worked) and governments
must make saving more attractive, less complicated and expensive if they are
going to get millions of people over the retirement winning line by age 65, let
along earlier, since the majority are not even saving 10% of income.

In reality, scrimping and saving alone will not make you
rich, and will probably leave you feeling stressed and miserable. Think of
yourself as a business, a money-making machine. Like any business, you need to
generate income, capital and investment returns, as well as keeping an eye on
the purse strings.

There are more examples and practical steps to getting rich and
being happy in my book,
Yes, money can buy happiness, I cover
the 3 R’s of Money Management, the Money B.E.L.I.E.F System and much more.
Check it out on Amazon http://bit.ly/2MoneyBook.