If you’re into personal finance, you’ve probably already heard about the FIRE movement. FIRE stands for financial independence, retire early.
Usually, the people who follow it are in their 20s and 30s, see a lifetime of drudgery in the workplace ahead of them, and have decided to do something about it by cutting back, saving hard, and retiring long before their hair turns grey.
They’re having a reasonable human reaction to a truly awful time – the pensions we pay into are no longer worth the paper they’re written on, the state retirement age gets pushed further and further back, and where once a job was for life, now companies don’t expect you to hang around for long and pay you accordingly.
The FIRE warriors march onward, paying down credit cards, cancelling nights out to save that beer money for the retirement pot, and living on rice and beans.
But is there another way? Achieving financial freedom by cutting back is one way, sure, but we aren’t doing it this way, and we’re almost certainly closer to financial freedom in our early 30s than most FIRE disciples at that age. FIRE vs the Multiple Incomes philosophy: let’s check it out!
Editors note: Don’t forget to check the Offers Page and grab free shares worth up to £200 plus £50/£75 cash backs when you open new investment accounts through the affiliate links there!
YouTube Video > > >
FIRE vs MORE
In place of “Financial Independence; Retire Early”, we’d change it to MORE: “Multiply Opportunities; Retire Early”.
We just made this acronym up, but it sums up nicely our philosophy for financial freedom: more effort, more people helped, more income streams, more enjoyable retirement! Multiple growing income streams.
Multiply opportunities means having your fingers in a lot of pies; multiple efforts in multiple projects creating you multiple income streams.
Where FIRE Falls Down
The FIRE movement uses cutting back and limiting your expenses as its main levers to achieve the goal of financial freedom. We agree that this can be really useful when saving for your first few investments, but isn’t sustainable long term. FIRE can take many years, maybe decades, to run its course. The problem with living an enforced life of poverty and drudgery is that it will change you, and you won’t be the same person at the end of the journey.
You probably want to retire young to allow you to live a life of exploration, travelling, days out and enjoying the finer things in life without being chained to a desk. But 20 years of severe scrimping could leave you mean, friendless, and poor in experiences. So let’s see how our Multiply Opportunities philosophy compares…
Side Hustles/Passive Income Assets/Property
A job just won’t cut it as your only income source if you want financial freedom without the enforced poverty. You need to work a job during the day, come home, and work on money-making side projects in the evenings and weekends.
Known in the money world as side-hustles, these small businesses are meant to grow to make you a decent income alongside your job, one day replacing the need for it. The money you save from your job and from your side projects should be invested into assets that pay you an income NOW, instead of investing solely in growth assets like some stocks.
Passive Income assets include high dividend ETF portfolios, as well as Peer To Peer Lending and REITs. REITs are companies that own and manage properties that have to pay the shareholders 90% of their property profits by law. Investing into property directly in the Buy-To-Let sector can be another very lucrative income stream if you set it up right, though it’s not without its problems.
Ben gets a big chunk of his income from buy-to-let properties, which took effort to set up and continued small amounts of effort to manage. Assaulting financial freedom from many angles by directing our efforts into creating multiple growing income streams of jobs, side-hustles, passive paper assets and property is our way of reaching financial freedom.
Unlimited Upside of Multiple Incomes
Extreme cut-backs under the FIRE ideology sets a ceiling on how much you can save each month towards retirement: the difference between your job income and your outgoings.
Alternatively, putting your efforts into establishing multiple growing income streams has no such ceiling. By shifting the focus from money-out to money-in, your potential is unlimited.
Harder to Achieve
Setting up income streams is hard and takes a lot of time. You don’t have enough freedom already, and now we’re asking you to give up your evenings and weekends too. What are we on?
It’s up to you. Sacrifice and hard work now for faster retirement and better living later. But your time doesn’t need to be wasted.
Setting up a rental property or scaleable business takes time and effort, but once it’s established and making money you can hand it over to a manager or agent to run all the time-consuming bits for you. Or it might even be something you enjoy doing, in which case do you even need to retire at 30? Was your goal of retirement centred around escaping a career you hate?
Running your own business, investment portfolio or property empire might be the answer for you.
FIRE Still Has Good Points
We think FIRE takes it too far, but cutting back in a sensible way on excessive spending is a good thing. If you can save hundreds a month by swapping Sky TV for Netflix, holidays to Australia for package trips to Majorca, your new BMW 3 series for a used Ford Focus, then do it.
The true FIRE warrior would sell their car and walk everywhere, but time is money and who has the time to walk home from work when you have a side-hustle to set up?
Keep your debt under control, but don’t cut up your credit cards if you can manage debt sensibly. Debt can be useful. Avoid the extremes, don’t make your life miserable, build those multiple income streams, and get the financial freedom the direct way!
