The Dangers of #FIRE - The Cult That Preys On Selling You A Dream
Just like dancing with fire really that smart?
Table of Contents (Jump Links…)
This article was originally posted over on the Disciplined Trader Substack it has been reposted here with some additional notes from the Blind Luck Project with his permission.
Introduction
The following is to critique the goals of a popular method of wealth building but not the methods themselves.
The FIRE movement [ Financial Independence Retire Early ] is not new but has become a trendy topic on social media and a draw to people seeking some financial security in a chaotic time.
The Issues with FIRE
I’m not an advocate of FIRE but I am also not a total critic of its root thesis. The basic ideas are a bit far-flung but coalesce around a small group of simple concepts that are sound but misleading without understanding the intent. That means that pursuing wealth is always good, but assuming it solves all your issues cause more problems than solutions.
BLP Note: 100% agree, too many people race to the finish line hoping early retirement will solve all their problems and they can “start living” only to realize they haven’t developed a strong sense of purpose and have the same problems they have always had. In general money solves money problems, nothing more nothing less.
FIRE isn’t a cult, but it has some of the earmarks of sect-like behaviors that draw in people desperate to belong and take advantage of those needs. It also resembles cults in that leadership is always after two goals: money and subservience, or another way to look at it increasing their power.
What FIRE Does Well
The basic premise is the same as any good wealth coach, myself included, gives you. The following are the basics in no particular order. There are orders, but that order depends on the individual or family’s issues and goals.
Paying Off Debt
Create Savings
Stop Living Paycheck to Paycheck
Investing for Retirement*
Do not live on Borrowed Money
Avoid Never-Ending Payments
Curb Excessive Spending
Create an Emergency Fund
Have a Plan
Note that investing for Retirement has an asterisk; this is because most FIRE advocates would say the whole point is to retire early, well before retirement age, so contributing to qualified retirement accounts is not worthwhile or should stop, and you start taking distributions later. Some would say it is OK to keep working but shouldn’t be the highest priority; the risk lies therein. Wealth Building isn’t a lifelong process that you do for x years and then climb in a hammock with an umbrella cocktail for the rest of your life. Wealth doesn’t work that way, wealth encompasses every part of your life even after you consider yourself retired, and it requires work to maintain.
What is Real Wealth?
Here is where the significant danger resides. The majority of people have issues with money and no fundamental understanding of what wealth is.
The general sense is wealth = riches or a large amount of money and possessions, but in truth, everyone has a wealth factor known as net worth. Regardless of how poor one might be, everyone is worth something. Increasing net worth does not mean it generates income sufficient to last a lifetime. Many who attempt to succeed at FIRE may find themselves back in a similar situation in a decade or two when going back to work is difficult.
Many FIRE proponents push popular schemes like affiliate marketing and sell subscriptions to their businesses. There is nothing wrong with this. I also sell my services, but the difference is the end product and intent.
Selling products online and the gig economy is not that new; they are just today’s variation, but the risk has always been the promise of “riches” rather than the security of wealth.
Throughout modern history, “pyramid schemes” where people at the top promoted selling people rather than products have been prevalent ways to make the people at the top money. The idea is to have a product or product like soap or trinkets, and each person in the chain “recruits” others to sell for them, making money through having as many people sell as possible. The catch is that those down the chain have to buy the products they sell and keep a monthly sales level to get paid. In the past, people hosted “parties” to promote the scheme and get sellers under them; these days, getting thousands of “virtual followers” to sign up is the new method.
Again the products may be legitimate and even reasonable, but the chances of getting paid much are lower than people think this is simply selling the dream.
FIRE is also a version of selling the dream because while the concept is relatively simple, most people can’t follow it and gain enough wealth in the short term to meet the “Financially Independent.” Authentic financial independence takes decades. That’s why Retirement is later in life. Few are Warren Buffet, even fewer Bill Gates most are capable of earning yet not managing their wealth.
Back To Reality
That’s the real issue. Wealth is not a matter of having money but managing that money and the places you put it to go to work for you. Wealth takes discipline and patience, and time three commodities the majority of people do not own. They can be acquired, and as I stated above, much of the wisdom in FIRE works, but the goals need to be rational and doable.
So if you see posts on FIRE and get enthralled in the idea of early Retirement, think twice many people are promoting it that work very hard at selling the dream if they had accomplished it they probably wouldn’t work so hard and charge so much.
BLP Notes: I agree! Be very suspicious of anyone who is working hard to sell you the dream of never having to work for someone again. ESPECIALLY when they are trying to sell you something, be it a service, coaching, market support etc. Why aren’t they living the dream they are selling you? Also if their method is so “GREAT” why don’t they just hire people do do the work for them as employees?
Conclution
To be clear, FIRE IS possible but not probable; the better choice is wealth-building which ignores the RE (Retire Early) and concentrates on the FSN or (Financial Safety Net concept).
For more on FSN concepts make sure to check out the SubStack Newsletter for Disciplined Traderand give him a follow over on Twitter @Discipln_trader for a more casual take on what’s currently going on in markets and how to keep building wealth the smart way!
-Cheers!
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