Playing with FIRE Summary
One Paragraph Summary Playing with FIRE (Financial Independence Retire Early) is a book about the movement to get to financial independence early in your life so that you can own the most valuable asset you have—your time.
Playing with FIRE (Financial Independence Retire Early)—How Far Would You Go for Financial Freedom?
A book by Scott Rieckens
By writing this book summary, I learned the following three things:
- You do not have to work until your mid-sixties
- You do not have to retire
- We do not have financial intelligence
We buy things we don't need with money, we don't have to impress people we don't like.—Chuck Palahniuk
Financial Independence Retire Early is a community for people who want to retire early by making the right financial decisions in their lives. The community has been started accidentally by Mr. Money Moustache.
The promise is that by leaving a luxurious lifestyle, that anyway won't make you happy, behind, and invest the money in assets instead.
Rieckens, the author of the book, accidentally stumbled upon the FIIRE movement. It changed his life. He started to make a documentary about the community. Only two years later, he's on his way to financial independence and will retire within the next ten years.
In Riecken's book, you will learn to make the most of your finances. The good thing is that anyone can use the tips. Your income is not essential.
And the promise is that you will your most precious resource again—time.
Most of us have the notion that we need to work until our mid-sixties. At least this is what all the people around us are doing. But do you need to walk down that path?
There might be a better idea to spend your time.
Pete Adeney, known as Mr. Money Mustache on the internet, retired when he was only thirty years old. And he accidentally started a movement when he shared on his blog his tricks which allowed him to pull this off. The growing movement is called FIRE, and their community members call themselves Mustachians.
Mustachians advocate a frugal lifestyle to make aggressive savings.
The author used a simple online retirement calculator after he cut is expenses in half and found out that he will be able to retire within the next ten years.
You do not have to retire when you reach financial independence. The important thing is that financial independence allows you to own your time again. The retire early in FIRE only means that you do not have to make a living anymore. You will have enough money to cover your monthly expenses.
Having enough wealth means that you can then make intentional choices about how you want to spend your time.
But how much money do you need to retire early?
According to a formula well known within the FIRE community, you need twenty-five times your annual expenses.
Rieckens cut down monthly expenses to 5000 dollars. Therefore he needs to save 1.5 million dollars (5000 x 12 x 25). When they make five percent through their invested assets, the investment income will make them 75,000 dollars per year.
The trick will be later only to take the money you need to cover your expenses and leave the rest invested so that your 1.5 million dollars in savings will not get lower over time. You can achieve this by following the four percent rule also documented on the Mr. Money Mustache blog.
The concept offered by FIRE is simple. Cut down your expenses and invest the savings in assets. When you have enough wealth, you can live off the returns from your wealth.
Most members within the FIRE community save between 50 to 70 percent of their income. This savings rate is enormous. The first question that arises is how one can achieve such a high percentage. To start, you should look at the areas where you spend the most. In the majority of households, this is housing, transportation, and food.
When you cut back on your spending, it is time to start to invest the savings in assets. There are a lot of possibilities of how you can invest in assets. Low-cost index funds and real estate are probably the most favored.
Low-cost index funds are what Warren Buffett recommends as the better alternative to paying a money manager.
Most people do not live in isolation and can decide to make such a radical lifestyle change on their own. So if you want to try FIRE, you need to find a way to align your vision with that of your partner and family.
The author recommends the Ten Things Exercise. Write down the ten things that make you happiest every week. Ask your partner and family members to do the same. If you all have similar items on your lists, a change to the FIRE lifestyle will be much smoother.
The author advises keeping a low profile when you talk to your friends about your new life. If you are enthusiastic and want to share all the insight you gained, it is a good thing but carries the danger of being too preachy. So be careful because the FIRE lifestyle is probably overwhelming most of the people around you.
If you do not earn that much, you might ask yourself if FIRE is for you because you will never be able to save twenty-five times your annual expenses.
Well, it is not necessary to have a high income to practice FIRE. It is not that important when you reach financial independence. The choice that FIRE proposes is that one values happiness over materialism. And if you make that choice today, you will start profiting from FIRE today.
FIRE can be an isolating experience if you are not careful. It is probably a good idea to join a FIRE community or online forum first. Talk about your finances in those forums to find out if FIRE is for you.
That you do not have to live the same lifestyle as everybody else has been a big revelation in my life. I know this sounds stupid, but I was just not thinking about alternatives.
Humans are social animals, we are looking for social proof, and if that proof is there, we often don't look for alternatives. In my family, everybody followed the same pattern. Go to school, go to university, find a job, and do the 9 to 5 dance.
We all live in an environment formed by capitalism and consumerism. But we do not have to become victims of this environment. There is a way out of the rat race. The FIRE formula shows how you can change your life. And FIRE is offering a real alternative to the current lifestyle.
Do yourself a favor and spend some time on the blog of Mr. Money Mustache and similar forums of the community. I have linked to some websites in the resources section below.
Many people who have never heard about FIRE before confuse retire early with the retirement of older people. Spending the rest of your life between golf courses in Florida is not the promise of FIRE. The hope is that you get back the control over your most precious asset, time.
When you are retired, it just means that you do not have to work in a job you do not like only to cover your monthly living expenses. You will be able to spend your time however you like. You can travel, you can spend more time with your family, you can start a company, you can do whatever you want. The time is yours.
Most of us do not have financial intelligence. We never learned how to handle money in the first place. No subject in school will prepare your kids to develop financial intelligence.
The rich know how to handle money wisely. Usually, wealthy families pass that wisdom to the next generation.
But if you do not have wealthy parents who taught you how to handle money, then the FIRE community is an excellent way to start that learning process. The earlier you do this, the better.
When I first heard about the FIRE movement, I spent nearly two full days reading everything I could about it in online forums. It is good to see that there are now books emerging where you can learn the basics about reaching financial independence.
Remember, you do not have to embrace the FIRE lifestyle fully. You can start small and dive deeper into the subject as you learn.
- Simplify your life
- Life a more intentional life
- Choose a sustainable lifestyle
- Find out what is essential to living a happy life
- Ditch was is not important
- Reduce your expenses
- Invest the money you save in assets
- Follow the four-percent rule
- Use the Ten Things Exercise to align your values with the values of your loved ones
- Do not be preach FIRE
Read more about Scott Rieckens on the Playing With FIRE website.
If you liked reading the Playing with FIRE Summary, you should also read The Art Of Non-Conformity Book Summary.