how the FIRE community has changed over the past three years

Hello! This is the service team for secure deals with freelancers Solar Staff. In this article, we will talk about the FIRE movement and why young people are eager to retire as soon as possible.

FIRE is an acronym for “Financial Independence, Retire Early”, which translates to “Financial Independence, Early Retirement”. Supporters of this movement are trying to finish working in 35-40 years. To do this, they save money, put aside more than half of their salary and invest to accumulate retirement capital – about 25-30 annual expenses.

The meaning of FIRE is not only in the early dismissal, but also in the opportunity to devote more time to a hobby or family instead of a job that is not always loved.

The movement became popular in the 2010s in the US amid the financial crisis. At that moment, real estate prices were skyrocketing – Americans were worried that they would be paying mortgages all their lives. At the same time, after the collapse of the securities market, many successful investors appeared who managed to buy shares when they were at the bottom.

Who are the followers of FIRE?

Reddit.com has an active community of FIRE followers from different countries, mainly from the USA, where the movement is most developed. It was created in 2011, and in 11 years the audience has grown to 1.3 million. In recent years, participants have conducted surveys about whether someone has managed to retire early or they are still in the process, how much money is needed for financial independence, how far they are from it, etc.

• 81% of the community are men, the average age of community members is 26-35 years. Most of them work in IT or the financial sector and have higher education – bachelor’s or master’s degree.

• Nearly half of FIRE’s followers are married or in a relationship. 27% of respondents have children, and another 27% plan to have them.

• Most community members – 86% – live in the United States. There are also many people from Canada and Australia.

How are the plans of FIRE followers changing?

We analyzed the results surveys 2018 and 2021 to highlight the changes that have taken place in the community over the past few years:

• 12% of those surveyed have already achieved financial independence by 2021. In 2018, there were about 7% of such people.

• For 3 years, the number of survey participants has grown by 66% – this indicates that people are more often interested in the FIRE movement.

• Recently, the value of FI number has increased – this is the amount needed for early retirement.

  Usually it is equal to 25 annual expenses of a person. For example, in 2018, people needed an average of $2.2 million for a comfortable life in retirement, in 2021 – already $2.5 million. 22% of respondents believe that the pandemic affected the growth of this amount.

• People plan to retire at an earlier age (RE number) than a few years ago.

  In 2018, most wanted to leave their jobs at 49-53. In 2021, people were more likely to plan to retire at 41-45.

• According to the respondents themselves, due to the pandemic, 28% of the followers of the movement have increased their income, and only 5% fell. For the remaining 67%, incomes remained at the same level.

• During the pandemic, 46% of those surveyed began to invest more in stocks. Another 27% of survey participants purchased cryptocurrencies, meme stocks, or other speculative investments.

FIRE types

There are several ways to bring FIRE to life. They differ in the way the required amount is accumulated and in the amount of expenses for pensions:

• Traditional FIRE (“Traditional FIRE”) – with it, a person seeks to accumulate 25 annual expenses in an investment portfolio as soon as possible – it is believed that this amount will allow him to receive sufficient income in retirement. To do this, he saves, cuts costs, simplifies lifestyle, invests. This path is suitable for people with different income levels.

  This is the most popular approach in 2018 (48%) and 2021 (46%) among survey participants.

• Chubby FIRE (“Full FIRE”) – an option for people with incomes above average. For this approach, there is no specific way to accumulate the required amount. More importantly, followers of this type of FIRE seek a comfortable but not rich retirement. For example, they travel, but do not live in the elite areas of the city.

  This approach won 26% of the vote in 2021.

• Fat FIRE is suitable for people with high incomes who plan to continue spending large amounts after retirement. In this case, people can also accumulate capital in any convenient way, as long as it is enough for a comfortable pension.

  This is the most difficult way to achieve FIRE, but nevertheless in 2018 it was chosen by 19% of respondents.

• Lean FIRE (“Thrifty FIRE”) – in this case, a person saves on everything in order to accumulate the necessary amount as soon as possible and leave a permanent job. In retirement, he also plans to live a “simple” life and spend less than the average person.

  This is the least common approach: in 2018 and 2021, it scored 8% and 5%, respectively.

• Coast FIRE (“Side FIRE”). Followers of this approach try to invest a large amount at an early age, accumulate income from investments in order to use it as capital for retirement.

• Barista FIRE (“Barista FIRE”) – people who choose this path prefer to have flexible income (for example, freelancing) in order to receive at least a small income in retirement.

  In 2018, the Coast and Barista FIRE approaches were chosen by 15%. After 3 years, their performance decreased by almost 2 times – up to 8%.

FIRE in Russia

Russian economists believethat FIRE is inaccessible to most of the Russian population due to an undeveloped investment culture. According to a survey from SuperJobRussians need monthly payments of more than 45 thousand rubles for a comfortable pension and accumulation from 20 to 50 million rubles. However, 59% of people in Russia savings do not reach and 100 thousand rubles, and 21% have no savings at all. This may indicate that many have enough salaries only for life, but not for savings.

This hypothesis is supported by data on the cost of living index, which is significantly lower in Russia than in countries where FIRE is popular. The indicator reflects the ratio of the income of the population and the cost of living. If in Australia, the USA and Canada it ranges from 61 to 90, then in Russia the highest values ​​are in St. Petersburg – 53 and Moscow – 51.

conclusions

• The popularity of the movement and the number of followers of FIRE is growing every year.

• The plans of the followers of FIRE were significantly affected by the pandemic – now people need more money for financial independence.

• People are trying to retire at an even younger age than a few years ago.

• The most common approach to saving the necessary amount for a comfortable life in retirement is Traditional FIRE. Under it, people seek to earn capital through investments and live on passive income.

What else to read on the topic FIRE

You can study the stories of people from Russia and the Baltics: Alexei (investor, 26 years old, on the way to FIRE), Alexander (geoinformatician, 34, on the way to FIRE, leads Telegram channel about FIRE) and Artem (former director of an oil and gas plant, aged 34, implemented FIRE).

Count on “Retirement calculator» the amount of your savings by the time you want to retire. Or use calculator from Vertex42 translated by Alexander Eliseev.

If you are interested in the topic, you can read the book “Trick or Treat?” Vicki Robin, Monica Tilford and Joe Dominguez. Originally “Your Money or Your Life”. The FIRE movement is based on the findings of this book.

Released in 2019 documentary about movement, literally translated – “Playing with fire.”