What do you think of when you think of retirement? Sleeping in? Sipping drinks on the beach?
Until recently, almost every retired person I knew was over 65 years old. I’ve met a few people who managed to retire early – in their late 50’s or early 60’s – but they are the rare exception. The rule I had learned from an early age was that if you work hard, save money, and spend 40 years in the workforce, you can retire.
That’s why, when I first heard about the FIRE movement, I was confused. FIRE, which is short for Financial Independence Retire Early, continues to gain momentum. In fact, there’s even a new documentary called Playing with FIRE, which chronicles one family’s quest to reach early retirement.
Playing with FIRE follows 35-year-old Scott Rieckens, his wife Taylor, and their toddler Jovie. I watched this movie as a skeptic (I mean, how can they really retire?) But, by the end, I was re-thinking some of my own financial decisions.
Here is what this movie taught me about money:
Question your biggest three expenses
Americans spend the majority of their income on housing, transportation, and food. That’s really not surprising — we need somewhere to sleep, we have to eat, and we need a way to get to work. But, I’ve always considered these expenses to be out of my control. I thought I needed to spend money on housing, food and transportation. That meant I’d have to save money on the less impactful areas of my life – things like cutting out that latte and avoiding excessive shopping.
Yet, Playing with FIRE showcases people who have reached financial independence by deciding to live differently than the norm. The highlighted family, in fact, ditched buying a home to travel the world instead. They proved that changing one of your major fixed costs can make a huge impact on your financial situation.
Are you spending on what makes you happy?
Early in the movie, Scott and Taylor had just discovered the idea of FIRE, and they were decades away from retiring. Their monthly expenses in the big three were high: They lived in a beach community, spent $2,000 per month on food, and each drove a nice car.
Before they changed any of their spending, they did a simple exercise. They each separately made a list of the things that made them happy on a weekly basis.
This was Scott and Taylor’s first epiphany: Most of the things on their list didn’t cost any money. Neither of them mentioned the beach, driving their cars, or going out to pricey sushi dinners on their happiness list. Why were they spending so much each month on things that didn’t really make them happy?
Viewing your money choices through the lens of what makes you happiest makes perfect sense. A quote from The Minimalists in this movie really drove this idea home: “We spend money we don’t have to buy things we don’t need to impress people we don’t like.”
Small changes can buy back years of your life
Understanding how current spending choices can impact your future financial situation is difficult. How often do you weigh the cost of going out to dinner, buying a new jacket, or driving a certain car against how much longer you need to work?
Like many people, Scott and Taylor struggled to see how the choices they were making now could impact their future life. At one point, they sit down with a financial calculator and determine what would happen if they ditched one of their luxury car payments. Technically, they could afford the monthly car payments. However, by forgoing that cost, they could shave five years off their working lives.
Your savings rate holds the key to financial independence
The movie lays out some startling facts: 34% of Americans have no savings and 78% live paycheck to paycheck. It’s clear we could all use a lesson in saving more money.
But how to do this? The folks in the FIRE community focus on your savings rate as a simple way to understand how many years you’ll need to work before you retire.
To calculate your savings rate, take the amount you save and divide it by your income. For example, if you earn $4,000 per month and save $300, your savings rate is 7.5%.
According to calculations in the movie:
If you save five percent of your income, it will take you 62 years of work to reach retirement
If you save 10% of your income, it will take you 51 years to reach retirement
If you save 20% of your income, it will take you 37 years to reach retirement
If you save 50% of your income, it will take you 17 years to reach retirement
For your savings rate to change, you either need to earn more, spend less, or do both. In Scott and Taylor’s case, they start out with an eight percent savings rate. By the time the movie ends, they’ve made enough changes to their spending to achieve a 50% (or more) savings rate.
This isn’t about money
FIRE isn’t really about money. It’s not even really about retirement. What I failed to understand before watching the movie is that FIRE is about having the ability to make choices in your life.
The movie asks you to imagine what it would feel like if you didn’t live paycheck to paycheck. Imagine if you were debt-free, or if you had a full year’s worth of expenses saved. How would that financial freedom change the decisions you make?
Even if you don’t want to retire early, you can probably get behind the idea of financial freedom. Wouldn’t it be nice to breathe just a little easier between paychecks, change careers if you want, and not panic if lost your job? That’s the freedom that FIRE creates.
Perhaps the thing that struck me most about the movie was this piece of wisdom: “It’s not about having all the money in the world. It’s about doing the best that you can with the money that you do have.”
This inspired me to think about how the financial choices I make today can impact my freedom tomorrow.
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