Why I’m Not on FIRE (Yet)

You might have heard of FIRE before – it’s a movement that has caught on with millennials who are more in touch with personal finance. FIRE is an acronym for Financial Independence, Retire Early and it is characterised by aggressive savings through decreasing expenses and/or increasing income. The savings are channeled towards investments to build passive income, making retirement much earlier than the typical retirement age possible.

The plan is to have return-generating assets 25 times of your annual expenses. That way, an investment with 4% pa returns provides enough interest to cover your living costs, making paid work optional.

I’m a fan of the concept and and its philosophy, but here are a few reasons why I am not fully on FIRE yet.

1. I have a business

As some of you may know, my income comes primarily from my business. While it’s been around for quite a few years now, it still experiences some turbulence here and there, and sometimes cash flow is a little more unpredictable. It is a lot easier to stick to a monthly investment regime when you know exactly when your paycheque comes in, and how much it is going to be. It also helps a lot when you don’t have business costs to manage.

This isn’t a really big point though, since I expect the turbulences to clear up, and eventually my business would be the thing that provides me with passive income. Ultimately, building a business also achieves FIRE in some way, just that it’s quite a different path from the save and invest method most salaried FIRE people employ.

2. I want to enjoy what’s left of my youth

If we define millennials to be those born between 1996 to 1981, I’m practically a middle-aged one, and I want to hang on to whatever youth and energy I have left right now. Perhaps I’m being a bit melodramatic about being old and tired, but I do think that sacrificing your quality of life as a young individual to achieve FIRE is an opportunity cost that many FIRE proponents underestimate.

Many practitioners of FIRE cut non-essential expenditure to the bare minimum and practise extreme frugality. Movies? Too expensive. Eating out? Blasphemous. Holidays? NO. It sounds a little crazy, but one of the fastest ways to achieve FIRE is to cut non-essential spending to the bare minimum such that you simultaneously have more money to invest, and less annual expenses to cover, reaching the magical 25X figure much faster.

I do understand that one of the reasons of FIRE is precisely because its proponents want to retire and enjoy life before they are too old to do so, but it’s clear to me that there’s a balance to be struck. Cliché, but work hard, play hard is going to be the adage I’ll live by. If I have to spend some money on a massage for stress relief because I’ve been working hard, it’s money well spent even if it doesn’t directly go towards retiring early.

Even before FIRE was a formalised concept, I was already quite an aggressive saver. I managed to save, even when I was a full-time national serviceman with a paltry allowance, and survived a few years of my life sustaining on a $1,000 monthly income while still managing to add to my savings.

2019, however, made me think a little differently about my frugality. Increasingly, I have noticed people in their twenties and thirties passing away, and I simply don’t want to be the guy who only worked and scrimped, only to end up sick or dead before enjoying any of the fruits of my labour. I’m still thrifty, but this tweak in my frugality meter is moving the knob away from FIRE, even if it’s just a little.

3. I want to get my own place

I think if one really wants to FIRE very quickly in Singapore, the best way would be to continue living with parents. The rent is non-existent, meals are usually included, chores are often done by our loving parents, and I’m guessing most of us give a household allowance that isn’t even close to the market rate of what a modest HDB room would cost in rent.

That’s really financially prudent, but not what I want for myself, and an aspiration to live alone comes with a hefty price tag. A mortgage would easily take up a huge chunk of my salary, not forgetting other expenses like utilities, broadband, condo maintenance fees among other miscellaneous expenses that come with getting my own place.

It’s an expensive desire which stems from Point 2 above, and I find it really difficult to argue against my own mortality.

I’ll start burning, soon

Here’s how I see I’ll eventually get around to FIRE: instead of trying to cut my expenses to the bone (when I feel it is already quite modest relative to my peers), I will focus on growing my income, which is something a business owner can set forth on doing. Why try to cut expenses by half if the same effort can be used to double your income? I’ll talk numbers and my game plan in my next article on this.

What about you? Are you a proponent of FIRE and have thoughts about my resistance to FIRE? What is your desired retirement age and how would you get there? I’ll like to hear from you below.