The virus pandemic has greatly shocked the economy, putting millions of people out of work. This left countless people around the globe grappling to maintain their finances.
Younger generations today, the majority of which are millennials, are especially faced with additional challenges, especially with the FIRE finance movement becoming more fragile than ever. Early retirees or those who are seeking to retire early with this program are also vulnerable given today’s economy.
If you are a member of the FIRE movement, chances are you’re concerned about the economic and financial landscape most are facing today. After all, these are unprecedented times. To know more about the future of the FIRE finance movement, read on.
What is the FIRE Finance Movement?
FIRE stands for Financial Independence, Retire Early. This is considered a more extreme financial movement that banks on a combination of living off of reduced living expenses, frugality, and highlighting the importance of having high savings and investments.
Under this program, individuals are urged to allocate up to 70% of their income as part of their savings and investments, thereby allowing beneficiaries to retire at an earlier age. Following the user’s retirement, individuals would be given access to small withdrawals to live off the accumulated funds.
Brief History and Background of the FIRE Movement
The FIRE finance movement was born from 1992 from a concept put forward by two financial gurus, namely Joe Dominguez and Vicki Robin in their book titled, “Your Money or Your Life.”
The book’s main premise was to compare the time a person spends at work and put this against expenses, giving the individual a unique perspective on how much time they spend at work to buy their needs and wants.
Although the concept banked on the 1992 best-selling book by Dominguez and Robin, the movement only gained traction and popularity during the past few years. It was reportedly born during the Great Recession in 2008.
After this movement was introduced to the public, this program became more popular around the 2010s with the millennial community. The same trend can be seen today as more and more people are re-evaluating their lifestyles in light of the economic slowdown.
There have been testimonials of people who have taken mini-retirements and full-on retirements because of their respective economic circumstances.
Some individuals were able to save enough to make several mini-retirements, while others have invested their income to help them retire fully at a younger age.
FIRE Finance Today: Will it Still Work in Today’s Economy?
Historically-speaking, FIRE Finance became more popular during periods of recession. As the globe is facing an economic slowdown due to the virus pandemic, more and more individuals are forced to get out of or take a break from the workforce.
As individuals are faced with this challenge, they are compelled to confront and come to a sort of reckoning regarding their current finances and early retirement plans.
On the one hand, this is an ideal option for working individuals as FIRE would allow them to achieve their retirement goals at an earlier time compared to the traditional retirement age of 65.
For those who are on track with their financial goals, it may take them a few more years to reach FIRE status.
However, it is important to remember that deciding to jump onto this trend during a recession would make it difficult for them to set aside money for this financial plan. Significant changes should be made to accommodate their goals.
Moreover, even without a recession or other similar disadvantageous situations, not every individual has the luxury and extra money to allocate into such an endeavor.
This is true given that the economic conditions of many working individuals today compel them to live paycheck to paycheck what with the high cost of living and exploitative employment conditions.
Add this to the fact that the government will no longer provide stimulus checks to individuals affected by the current public health crisis.
The Bottom Line
The FIRE finance movement may be a great strategy for some individuals, but reaching this status is definitely challenging to many, given the current economic landscape. Those who have the capability to allocate money toward this plan can certainly benefit them in the long-run.