Tuesdays our Eye on money series looks at financial issues Americans face. This morning, we’re focusing on a fast-growing trend saving aggressively to retire early. The movement is called F.I.R.E. And it stands for Financial Independence Retire Early.
The idea is to live a frugal life now, so you can take control of your financial future. 34-year-old Kiersten Saunders and her husband, Julian, embraced the movement. They say F.I.R.E is helping them achieve financial independence.
Kiersten “We are on target to hit our financial independence number, our F.I.R.E number in 2021. Our number is 1.3 million. The intuition behind it is fairly simple. It’s saved your money so that you don’t have to work forever. For me, the step for F.I.R.E was to eliminate the debt. I was a huge sender and I was just spending way more than I earned”.
Julian: “Housing, transportation and food for most people are the largest expenses that you have. And so if you can do whatever it takes to keep that cost low or eliminate it altogether, that’s going to be a huge way to boost your savings over time”.
Kiersten: “We obviously invest in index funds and in the market, but we have two rental homes that are income-generating investments. And then we continue to invest in vehicles like 401ks, IRAs, HSAs”.
Julian: “I think the biggest misconception of the F.I.R,E movement would be how extreme it is. We have the average or national savings rate is incredibly low. And so we look at that and say that that’s actually pretty extreme that people aren’t preparing for their future”.
Kiersten: “So retirement for us is meaningful work.
Interviewer: CBS news, Business Analyst, Jill Schlesinger is here with what financial strategies we can learn from this movement.
Interviewer: “Jill good morning”.
Jill: “Good morning”
Interviewer: How did this get started?
Jill: You know, it was really a reaction against the great recession. A lot of the older millennials had suffered so much, and they saw what happened to their parents. They said, Oh, we got to get going. And so the philosophy is really interesting: as we saw in that piece, it’s let me live frugally today.
Let me save it as much as I can. And then I may retire early. But I think really what they’re talking about is having control, be able to have maybe a second career that is meaningful. A lot of the founders of this movement really talk about this is around happiness and you don’t find happiness by buying a lot of stuff”.
Interviewer: It seems impressive to me what they’re doing. What’s the downside?. Number one, I’ve never heard of the F.I.R.E movement”.
Interviewer: “Neither did I”
Interviewer: “Did you?”
Interviewer: “I had”. I spend what I got.
Interviewer: “I’ve never heard of it, but they seem to do it right. What’s the downside where criticism?”
Jill: “There have been some financial journalists and some people in the business who say, Oh, they’re giving false hope to many Americans. You’re really not going to retire early because you’ve got such a long life ahead of you. Let’s these kids are probably gonna live till they’re 90, 95, even a hundred.
But I would say this, anything that gets us in the habit of saving and questioning why we are spending the way we are spending a lot of these folks who adhere to this movement, they’ve got a side hustle, a little part-time job. Not because they want to be great entrepreneurs. They want to get a little bit more money in the door so they can hit these goals. I think this is laudable”.
Interviewer: “It is laudable, but you know, two-thirds of young people, millennials who are employed, don’t have any savings at all. Many people don’t have enough savings. So is this really only something for people who are taking in a huge paycheck?”
Jill: “I think another criticism has been that this started with a lot of the younger folks who had high-tech jobs. So they have ample pay so they could choose to do this. But I interviewed a bunch of the F.I.R.E adherence for my podcast. And what they said to me is that’s actually not the case, that every single person makes choices every week about how they spend money.
So imagine if you could find 10, 15, $20 that maybe you’re just throwing away and capture that money, put your savings on autopilot, put a game plan together. I mean, part of this movement is we are asking people to say, what do you want your life to look like? How much do you spend today? Are you tracking your expenses? These are fantastic habits to form. So I am very much a cheerleader for that”.
Interviewer: “So Jill, where do you look to, to cut, to save money?”
Jill: “I think the first piece is you’ve got to track your expenses. I think most of us have this mindless spending habit. And no matter how much you make, you know what I’m talking about. There’s 10% of the money that comes in the door. And you say, I don’t know where that went. So tracking your money becomes imperative”.
Interviewer: “Sounds so very scary”.
Jill: “It is. Funny, you should say that. I like to diet and exercise. Yeah. It’s scary to step on the scale. If you need to lose weight, it’s scary to go to the gym for the first time. If you haven’t gotten a long time, these are steps in the process, but only by doing that, tracking your money, which is really important.
Can you identify some amount of money to save that you want to automate that saving and maybe you want to automate saving for retirement? And then you want to use the lowest cost options available when you are investing like index funds. These are superb practices. Even if you don’t get to retire when you’re 40 or 50, what you do gain is a sense of control. And I think that is imperative to make us feel much better about how we handle our financial lives”.
Interviewer: “I honestly say I never regret saving money”.
Jill: Nobody does.
Interviewer: “I don’t know. I feel like spending it while you got it”
Interviewer: “Thank you for being at the table”
Interviewer: “Tony, I’m worried about you”.
Interviewer: Find something you love. You never work a day in your life. Spend what you have. I’m going to die broke and broken. You know, there’s nothing wrong with that. That’s a good philosophy. We got to go, Jill. Thank you for that.