Ask the expert: What is Financial Independence Retire Early (FIRE)?
FIRE, or Financial Independence Retire Early, has caught the mainstream’s attention for making early retirement a reality for those who adhere to the movement’s loose set of financial principles.
In its Ask the Expert series, Cashay reporters connect with experts on vexing personal finance topics surrounding all of life’s milestones: education, marriage, parenthood, divorce, retirement, and even death.
Not only does Michael L. Sangirardi, a New York City-based financial advisor with Ameriprise Financial, advise clients on how to achieve FIRE, he is also a FIRE subscriber.
Stephanie Asymkos talked with Sangirardi on his take on FIRE and what the future of employment and retirement should look like.
[Interview has been edited for clarity and length.]
When did FIRE gain traction and what's your interpretation?
The movement really started in the 1990s with Vicki Robinson and her book, "Your Money or Your Life." It really took hold in the last decade.
When I think about it, it starts with the philosophical question of what do we want. And then how do we want to live with the limited time we have?
The simple question of how much is enough not just in terms of money, but in terms of choices. Our society will continue to push us to the breaking point, but to ask the question of how much is enough in terms of what we buy and how we live.
What are FIRE’s rules?
There are no rules. You have to think about your financial life for yourself and think about your life and what it is that you want, and then try to piece together how to make that happen.
Some want tradition, some don't. And if they don't, figure out within that context what can be different. Is it an early retirement situation? Is it a version of financial independence? Is it career breaks? I don't think we need to live under a set of rules that were created by other people that don't apply to us.
Is FIRE for everyone? Does it have to be all or nothing?
It's not necessarily for everyone. I think there are different versions of it. I think the retire early piece is certainly not for everyone. I think financial independence is a more powerful point. It's more about how people can be most efficient with their choices and retiring early isn't always the solution. You have to evaluate what version of it makes sense for you.
In my practice, it's people trying to figure out how to have career breaks, so it's creating financial independence in order to have 6, 12, or 18-month career breaks for them to think about what they want to do in the next phase of their lives. A lot of people are in creative fields and feel that finances get in the way of their ability to be creative. They want to take a step back to get creative juices flowing again. It's difficult to do that when you're working constantly or feeling financially pressed.
This generation is really educated and spends years becoming experts in their fields. I slightly reject the idea of those people not utilizing those skills more in the future and being able to use the education that they spent years acquiring. You have to choose what you want and not be put in a box. Maybe as a society, we need to revisit workforce expectations and realize that people need different things.
What drew you to FIRE and what elements of it are you planning to adhere to?
I fall more into the category of financial independence-seeking, as opposed to retire early. I love the idea of work, I just would like to do it more strategically, more carefully, and own my time.
I've been driven my whole life for a level of freedom and independence. I've never bought much into traditional corporate structures or traditional expectations of life. I think I naturally rejected some of it. And as a result, I became self-employed with the idea that over time I would extend the business in a way that people can help take over some of the work from me, where I'd be able to work but not necessarily be doing all the work.
I don't want to mislead you; I've been working lots and lots of hours, and I'm not at the place where this is actually 100% there yet but I work toward it, with understanding what expenses are mandatory and which ones aren't, and finding various tools to accumulate money in tax-efficient ways, and investing. I don't leave a lot of cash on the sidelines. I like the idea of money always earning money and having a strategy. I'm deeply attuned to knowing and asking myself what is that I really want.
Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. She can be reached at stephanie.asymkos@yahoofinance.com. Follow her on Twitter @SJAsymkos.
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