Living a miserable existence to fund an early retirement is a terrible idea

I’ve got a confession to make. I think the Financial Independence Retire Early or “Fire” movement, is a load of rubbish.

The internet is now awash with Fire evangelists, priding themselves on eking out a miserable existence so they can stuff a few more pennies into a stock market tracker to fund their dreams of early retirement.

And you probably either agree or now hate me, but at least hear me out.

Why would you sacrifice years of your life living in misery in order to save up for a future that you might not be around for? Missing out on experiences such as friends’ weddings, not going travelling, or all the fun things that, yes, cost money just so you can retire a few years’ earlier is a stupid strategy.

The best time to travel is before you have responsibilities, whether that be job related, a mortgage, or a young family. You can certainly travel while having all of these things, but it’s definitely harder to plan.

Not everyone is a huge fan of travelling. That’s fine. I know a man who has never been north of Watford and he’s happy. But within Fire communities, it feels like there are badges of honour for those who deprive themselves of as much as possible; a cult-like feel with a fetish for reducing expenses to a bare minimum. You will have heard the apocryphal tales of students who only eat instant noodles and end up with scurvy – I’m sure some Fire acolytes would put them on a pedestal.

It makes sense not to banana your wages on fancy dinners out you can’t afford. And yes, sometimes a Big Tasty with Bacon does the job over a high-end Mayfair dinner. But food is one of life’s great pleasures – and if cost is the sole focus then your life will be rather dull.

For me, the costs firmly don’t outweigh the benefits.

Let’s assume that you’re able to invest an extra £10,000 per year by living miserably now in hopes of a brighter future (bear in mind the average full-time salary in the UK is around £35,000 and that’s before tax).

The S&P 500 has historically averaged around 10pc per year, so if we assume a compound annual growth rate of 8pc across 20 years, you’d have £46,609.57. Not bad, and it’s easy to see why people focus solely on the numbers.

And if you ramp up your savings then there’s a clear path to being a hefty six-figures better off in retirement. However, the goal of Fire is to retire early, so you’re missing out on what are expected to be your golden years of earning power as your career and skills progress. This is all so you can retire early (and continue to live on little).

We also need to remember that young professionals (especially those in London) find rent and living costs a struggle, and so it’s unlikely they’ll have a spare £10,000 lying around to invest for retirement given the average 22-year-old graduate can expect to earn £25,000 a year.

Perhaps the biggest criticism of Fire is that it assumes that working is so bad that retiring early trumps everything. If I was bagging burgers and getting treated like dirt by customers I’d agree, but jobs and career paths are hugely rewarding and can offer huge variety.

But this isn’t just a criticism of Fire. The opposite extreme Yolo (You Only Live Once) is equally as silly. Living pay cheque to pay cheque and totally “in the moment” at the cost of your financial future only makes financial sense if you do actually die tomorrow… and happily the chances of that are very small.

Like most things – extreme diets of calorie restriction and fasting, 4am morning routines with yoga, green juice, meditation, and writing a book by 7am – often the best course of action is a happy medium. Planning sensibly for the future whilst still enjoying life is the best of both worlds and is far more likely to succeed.

Fire isn’t the solution to your problem of hating your job. Find a job that you don’t hate, that allows you to enjoy a comfortable life now, and retire happy with a sensible amount of money you have been saving for years. It really is that simple.

Michael Taylor is an investor and runs the Shifting Shares website

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