These types of stories are not exactly unheard of: An increasing number of people have expressed their desire to escape the so-called “rat race” and pursue a more abundant and vigorous way of living. It was what these three individuals found themselves in when they hit that certain fork in the road at some point in their lives.
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The Financial Independence, Retire Early (FIRE) Movement, Explained
Kenneth Reyes-Lao was in search of a missing puzzle piece that he felt he never found after working as a corporate employee, an overseas Filipino worker (OFW), and an entrepreneur for most of his life. “It felt like I’ve been going through the same ‘race’ in the different stages of my life, but couldn’t figure out how to finish strong.”
Meanwhile, Irene Tayamora chose to make a change after realizing that she could never be assured about her own employment, especially as an architect who lost two previous jobs due to things that were out of her control. “I work crazy hours, and I think I can’t do this until I’m 55 or older. Being financially independent and [to be] able to retire [if and when I want to] is a choice I want to have.”
As for Michael Ponce Sanches (along with his wife Rose May), what started out as a journey to learn more about money and how it works turned into an eye-opening reality that he eventually needed to face.
“You begin to see the real costs of your current habits and learn that you have the power to change them little by little. With this, I started to gain control over my life once again. No more living paycheck to paycheck, or working just to pay off credit cards.” He clarifies, however, that this is not about financial freedom, but rather, a “little more” peace.
This particular yearning was what led the three of them and countless others to the FIRE Movement, which has soared in popularity among millennials in recent years because they want to know more about how they can achieve the kind of balanced and healthy life every person wishes to have—and, more importantly, how one can retire early before they reach their golden years.
But what is the FIRE Movement all about?
FIRE stands for “Financial Independence, Retire Early.” The goal of the FIRE Movement is to invest in one’s retirement at a pace where it is no longer necessary to work until the standard retirement age. When done right, a person can retire years or even decades earlier in order to enjoy their hobbies, spend time with family and friends, go on vacations, and anything else their heart desires.
FIRE can be achieved in several ways. A person may do any of the following:
- LeanFIRE: opt to save money while living an extremely frugal lifestyle
- FatFIRE: build a substantial “nest egg” so one can enjoy a more luxurious retirement life in the future
- CoastFIRE: enjoy the fruits of one’s numerous investments without having to add more contributions
- BaristaFIRE: enjoy a life of semi-retirement where a person continues to invest and save while juggling a more flexible and less-demanding job
The FIRE method works if one follows either one of the two known formulas of the FIRE Movement: The Rule of 25 or the 4 Percent Rule.
The Rule of 25
Under the Rule of 25, a person needs to compute their expenses in a single year and multiply it by 25. The sum of the formula will equal the amount that you need to support you throughout one’s retirement life for the next 30 years.
The 4 Percent Rule
Conversely, a person only needs to withdraw 4 percent of their savings every year to ensure that it will last for 30 years of one’s retirement. The difference between the formulas is that the latter formula accounts for inflation.
Committing to the FIRE Movement also means having faith in delayed gratification. To do so, one has to exert more effort into their work and live a modest lifestyle as much as possible. To put it simply, a person has to make a choice: either to continue living and working from paycheck to paycheck while putting little to none in savings until they retire sometime in their 60s, or give more attention to their hard work and sacrifice at the earliest so they can live off of interests for the rest of their days.
But how did the FIRE Movement actually come about?
The beginnings of the FIRE Movement can be traced back to 1992, the same year Vicki Robin and Joe Dominguez wrote and published the book called Your Money or Your Life, which many people have treated as their own personal bible as they continue to dedicate themselves to the FIRE Movement. In it, both authors laid out the fundamental outline of financial independence by fusing simple living with profits earned from various investments. Their version of a retirement plan can be summed up in six words: “Save almost everything, spend virtually nothing.”
Of course, the intent of the FIRE Movement is not to convince people to quit their day jobs all at once. In an interview with The New York Times back in 2018, Vicki explained: “Our aim was to lower consumption to save the planet. We attracted longtime simple-living people, religious people, (and) environmentalists.”
She acknowledges that the FIRE Movement might not be for everyone, given that it can be challenging in particular for people who 1) have minimum wage paying jobs, 2) grew up impoverished, or 3) have a mounting debt that they are struggling to pay off, which makes it all the more difficult for them to retire by the age of 40. Regardless, many of these people are still determined to quit the workforce out of a desire to obtain their own agency.
Vicki elaborates: “The worker in this economy has very little sense of control over their existence. People are expendable. You’re a young person and you look ahead and you say, ‘What’s there for me?’”
This is in line with how Kenneth, Irene, and Michael all felt when they made the big leap and chose to commit themselves to the FIRE Movement. Fortunately for them, the fruits of their labor after making that choice have shown through.
But not without any setbacks.
Michael admits that the FIRE Movement journey can be a race that never ends. Rather than focusing on achieving early retirement, a FIRE pursuer ends up setting a goal to reach “a specific number in your bank account,” a goal which he says can make someone “obsessed” with their finances and “oversensitive” to events that happen unexpectedly and affect one’s net worth negatively.
On the other hand, Irene reveals that the main struggles for anybody who wishes to join the FIRE Movement are 1) earning lots of money, 2) budgeting, and 4) the “right investing vehicle.” However, the most difficult task of all, according to her, is controlling oneself.
As for Kenneth, he confesses that he and his wife initially were not on the same page about the FIRE Movement, specifically the part about applying select concepts to their financial goals, however they eventually reached a common ground.
Despite the setbacks, the three of them continue to sing praise for the FIRE Movement and how it changed their lives for the better—including how their lives continue to evolve because of it to this day. This journey also inspired Kenneth and his wife to start the Fire Movement PH Group on Facebook in 2020, a group that Irene, Michael, and Rose Kay are also part of, with the intent of sharing what they have learned with fellow Filipinos who feel they're still stuck in the rat race and are craving for something new.
And if people ask when exactly the right time is to pursue the FIRE Movement, Kenneth shares something that he has heard all the time. “The best time to start your FIRE journey was 10 years ago. The next best time to start is today.”