In "Playing with FIRE (Financial Independence Retire Early)," Scott Rieckens takes us on a personal journey of discovery and transformation as he explores the FIRE movement. FIRE, which stands for Financial Independence, Retire Early, is a lifestyle philosophy that encourages people to save aggressively and invest wisely to achieve financial freedom at a young age. This book is not just about early retirement; it's about reimagining our relationship with money, work, and life itself.
Rieckens, like many Americans, found himself trapped in a cycle of overworking to maintain a luxurious lifestyle he thought he needed. However, a chance encounter with the ideas of financial guru Mr. Money Mustache on a podcast changed everything. Within months, Rieckens had left his job, cut his family's expenses in half, and embarked on a journey to document the FIRE movement.
This book serves as both a personal memoir and a practical guide to the FIRE lifestyle. It offers insights, strategies, and real-life examples of people who have successfully achieved financial independence and early retirement. More importantly, it challenges readers to reconsider their priorities and make intentional choices about how they spend their time and money.
The Wake-Up Call
Trapped in the Rat Race
Rieckens' story begins in Coronado, California, where he and his wife Taylor were living what many would consider a dream life. With a combined annual income of $142,000 after taxes, they enjoyed the perks of a beachtown lifestyle, complete with expensive gadgets and frequent dining out. However, beneath the surface of this seemingly perfect life, Rieckens felt a growing sense of unease.
Despite their comfortable income, the couple found themselves struggling to save for important life goals like buying a house and funding their newborn daughter's college education. Their annual savings of $10,000 seemed woefully inadequate in the face of these looming expenses. Rieckens began to feel trapped, realizing that he might have to stick to his salaried position for decades just to afford these necessities, sacrificing his entrepreneurial dreams in the process.
The FIRE Revelation
Everything changed for Rieckens during a routine commute to work. While listening to The Tim Ferriss Show podcast, he heard an interview with Mr. Money Mustache, whose real name is Pete Adeney. Adeney had managed to retire at the age of 30 and had since become a prominent figure in the FIRE movement.
Intrigued by the concept, Rieckens used an online retirement calculator to crunch some numbers. He discovered that if he and his wife could cut their expenses in half and invest their savings, they could potentially retire in just 10 years. This revelation was a turning point for Rieckens, igniting a passion for the FIRE philosophy and setting him on a path to transform his family's financial future.
Understanding Financial Independence
More Than Just Early Retirement
One common misconception about the FIRE movement is that it's all about retiring early to a life of leisure. However, Rieckens quickly learned that financial independence offers much more than that. It provides the flexibility to make career choices based on passion rather than necessity.
The book shares the story of Sylvia, a lawyer who embraced FIRE principles after experiencing the devastation of Hurricane Katrina. By adopting a frugal lifestyle and supplementing her income, Sylvia achieved financial independence by age 32. Instead of retiring, she used her newfound freedom to start her own law firm, pursuing her career on her own terms.
This example illustrates a key aspect of FIRE: it's not about stopping work altogether, but about having the freedom to choose how you spend your time. Some FIRE adherents use their financial independence to travel, engage in charity work, or pursue creative passions. The goal is to have the option to work because you want to, not because you have to.
The FIRE Formula
At the heart of the FIRE movement is a simple mathematical formula: to achieve financial independence, you need to save and invest a total of twenty-five times your annual expenses. This is based on the "4 percent rule," which suggests that you can safely withdraw 4% of your investment portfolio each year without depleting your principal over the long term.
For the Rieckens family, this meant aiming for a target of $1.5 million in savings and investments, based on projected annual expenses of $60,000. By investing this sum and following the 4 percent rule, they could theoretically live off their investments indefinitely, adjusting for inflation and market fluctuations.
This formula provides a clear, tangible goal for FIRE aspirants. However, as Rieckens discovered, the real challenge lies in reducing expenses and maximizing savings to reach that goal as quickly as possible.
The Path to FIRE
Tracking and Cutting Expenses
The first step on the FIRE journey is to gain a clear understanding of your current financial situation. Rieckens emphasizes the importance of tracking every dollar spent over the course of a year. This detailed accounting provides a baseline from which to start making changes.
The FIRE movement generally advocates saving and investing between 50 to 70 percent of one's income. While this may seem daunting at first, Rieckens suggests focusing on the three largest expense categories: housing, transportation, and food.
For the Rieckens family, this meant making some significant lifestyle changes. They decided to leave their expensive Coronado home and embark on a year of travel, staying with family to save money while searching for a more affordable place to settle. They eventually found their new home in Bend, Oregon, where housing costs were significantly lower than in California.
Transportation Choices
Transportation is often the second-largest expense for most households. The Rieckens decided to downsize to a single car, with Scott planning to cycle to work. However, finding the right vehicle proved to be a challenge.
FIRE blogger Brandon, known as the Mad Fientist, advised them to look for a reliable used car in the $5,000 range. The idea was to find a vehicle that wouldn't depreciate significantly over the next decade. However, due to the specific needs of their new mountainous home, they ended up compromising and purchasing a used Honda CRV for $7,500.
This experience highlights an important aspect of the FIRE journey: while there are general principles to follow, individual circumstances often require flexibility and compromise.
Smart Investing
Once expenses are cut and savings increase, the next crucial step is to invest wisely. The Rieckens, new to investing, decided to split their savings among three areas: low-cost index funds, real estate, and entrepreneurial projects.
The book particularly emphasizes the benefits of low-cost index funds. These funds use algorithms to invest in a broad range of stocks across the market, typically yielding returns that mirror the overall market growth of about 10% per year. Index funds are favored in the FIRE community for their low management fees and their ability to provide steady, long-term growth.
Rieckens notes that even investment guru Warren Buffett recommends index funds as a more profitable alternative to paying for active money management. However, the book also acknowledges that the stock market's inherent volatility can be nerve-wracking for some. In such cases, Rieckens suggests adjusting savings goals or withdrawal rates to a more comfortable level, even if it means working longer before retiring.
Navigating Relationships and Community
Discussing FIRE with Your Partner
One of the most challenging aspects of adopting the FIRE lifestyle can be getting your partner on board. Rieckens candidly shares his own experience of hesitating to bring up the topic with his wife Taylor, fearing she might dismiss it as another fleeting obsession.
To approach this delicate subject, Rieckens developed the "Ten Things Exercise." He asked Taylor to write down the ten things that made her happiest on a weekly basis. To his relief, her list closely matched his own, focusing on experiences like spending time with their daughter and enjoying outdoor activities. Notably absent were the expensive trappings of their beach lifestyle.
This exercise provided a non-confrontational way to discuss values and priorities, making it easier to introduce the concept of FIRE. It highlighted that their current spending patterns didn't align with what truly made them happy, opening the door for a productive conversation about lifestyle changes.
Building a FIRE Community
While partners and close family members are crucial in the FIRE journey, Rieckens also emphasizes the importance of finding a wider community of like-minded individuals. He cautions against being too preachy about FIRE to friends who might not be receptive, suggesting instead to seek out others who are already interested in the concept.
The book recounts how Rieckens' idea for a FIRE documentary led him to connect with many leading voices in the FIRE movement, including Mr. Money Mustache himself. These connections not only provided valuable insights and support but also led to unexpected opportunities, such as partnering with a BBC Worldwide executive to produce the documentary.
Rieckens describes attending a Camp Mustache retreat, where he and Taylor found a diverse and welcoming community of FIRE practitioners. This experience underscores the value of connecting with others on the same journey, whether through in-person events or online forums.
FIRE for Everyone
FIRE on Any Income
One common criticism of the FIRE movement is that it's only accessible to high-income earners. Rieckens challenges this notion by sharing stories of individuals achieving FIRE on modest incomes.
The book introduces Kalen, a 26-year-old management analyst from Colorado. Despite a combined household income of under $50,000, Kalen and her boyfriend Kyle have embraced the FIRE lifestyle. By reducing their annual expenses to $32,000, they're on track to reach financial independence in just six years.
This example illustrates that FIRE is more about the percentage of income saved rather than the absolute amount. While a higher income can accelerate the journey to financial independence, the principles of FIRE can be applied at any income level. The key is aligning spending with values and prioritizing long-term financial freedom over short-term material gains.
Flexibility in FIRE
Another misconception about FIRE is that it requires extreme frugality and sacrifice. While some practitioners do take frugality to the extreme, Rieckens emphasizes that FIRE can and should be flexible.
He shares a personal anecdote about struggling with Christmas expenses during their first year of pursuing FIRE. Initially, they felt trapped between their new frugal mindset and their desire to participate in family gift-giving traditions. This experience taught them an important lesson: FIRE is about making intentional choices, not about deprivation.
The Rieckens found a middle ground, giving their daughter secondhand books (which she loved) and buying new gifts for their nieces to maintain family traditions. They also decided to forgo gifts for friends. This compromise allowed them to stay true to their FIRE goals while still enjoying the holiday season.
This flexibility extends to other areas of life as well. Some FIRE adherents choose to work part-time or pursue passion projects even after achieving financial independence. Others use their freedom to travel or engage in volunteer work. The key is to use FIRE principles as a tool for creating the life you want, rather than following a rigid set of rules.
The Psychology of FIRE
Shifting Mindsets
One of the most profound aspects of the FIRE journey is the shift in mindset it requires. Rieckens describes how embracing FIRE forced him and his wife to reevaluate their relationship with money, work, and happiness.
The process of tracking expenses and cutting costs led them to question the true value of their purchases. They began to distinguish between spending that aligned with their values and spending that was driven by societal expectations or mindless consumption.
This shift in perspective extends beyond just finances. FIRE encourages a more intentional approach to life in general. Practitioners often report feeling more in control of their lives and more satisfied with their choices, even if they haven't yet achieved full financial independence.
Overcoming Societal Pressure
The book acknowledges that pursuing FIRE can sometimes feel like swimming against the societal current. Friends and family may not understand or support the lifestyle changes required. Media and advertising constantly promote consumerism and instant gratification.
Rieckens shares strategies for dealing with these pressures. He emphasizes the importance of staying connected with the FIRE community for support and motivation. He also suggests focusing on the long-term benefits of financial independence when faced with short-term temptations.
Moreover, he encourages readers to be confident in their choices and to view FIRE as a positive, empowering decision rather than a series of sacrifices. This positive framing can help maintain motivation and explain the lifestyle to others in a more appealing way.
The Impact of FIRE
Personal Growth
Throughout the book, Rieckens reflects on the personal growth he experienced through his FIRE journey. Beyond the financial aspects, he found himself becoming more resourceful, patient, and appreciative of simple pleasures.
The process of scrutinizing expenses led to a deeper understanding of what truly brings happiness and fulfillment. For many FIRE practitioners, this introspection results in stronger relationships, clearer life goals, and a greater sense of purpose.
Broader Implications
While FIRE is often viewed as a personal finance strategy, Rieckens touches on its potential broader impacts. By encouraging mindful consumption and long-term thinking, FIRE principles could contribute to more sustainable economic practices.
Furthermore, as more people achieve financial independence, it could lead to shifts in how society views work and retirement. The traditional model of working continuously until a set retirement age may give way to more flexible career paths and earlier transitions to passion projects or part-time work.
Practical FIRE Strategies
Optimizing Housing Costs
Housing often represents the largest expense for most households. Rieckens provides several strategies for reducing this cost:
- Relocating to a lower cost-of-living area
- Downsizing to a smaller home
- House hacking (renting out part of your living space)
- Refinancing to a lower interest rate
- Paying off your mortgage early to eliminate interest
He emphasizes that the right strategy depends on individual circumstances and goals. For some, moving to a new city might be the best option, while others might find creative ways to reduce costs in their current location.
Optimizing Transportation Costs
After housing, transportation is typically the second-largest expense category. Rieckens suggests several ways to reduce these costs:
- Living close to work to reduce commuting costs
- Using public transportation or cycling when possible
- Buying used cars instead of new ones
- Maintaining vehicles well to extend their lifespan
- Carpooling or using car-sharing services
The book stresses that the goal is to meet transportation needs efficiently, not to eliminate all car usage. The right balance will depend on factors like location, family size, and work requirements.
Food and Entertainment
While often overlooked, food and entertainment expenses can add up quickly. Rieckens offers tips for reducing these costs without sacrificing quality of life:
- Cooking at home more often
- Meal planning to reduce food waste
- Shopping sales and using coupons strategically
- Finding free or low-cost entertainment options
- Hosting gatherings at home instead of going out
He notes that many FIRE practitioners find that cooking at home and exploring free local activities not only save money but also lead to healthier lifestyles and stronger social connections.
Increasing Income
While much of FIRE focuses on reducing expenses, increasing income can also accelerate the journey to financial independence. Rieckens suggests several strategies:
- Negotiating for higher pay at your current job
- Developing new skills to qualify for higher-paying positions
- Starting a side hustle or freelance business
- Investing in rental properties or other passive income streams
- Monetizing hobbies or skills
He emphasizes that any additional income should be directed towards savings and investments rather than lifestyle inflation.
Investing for FIRE
The Power of Index Funds
Rieckens devotes significant attention to the role of investing in achieving FIRE. He particularly advocates for low-cost index funds as a cornerstone of FIRE investing strategy. These funds offer several advantages:
- Low fees, which preserve more of your returns
- Broad market exposure, reducing risk through diversification
- Passive management, which often outperforms active management over the long term
- Simplicity, requiring less time and expertise to manage
He explains that by consistently investing in index funds over time, FIRE practitioners can harness the power of compound interest and market growth to build substantial wealth.
Real Estate Investing
While index funds form the core of many FIRE portfolios, Rieckens also discusses real estate as a potential investment avenue. He covers several approaches:
- Rental properties for ongoing income
- House hacking to offset living expenses
- Real Estate Investment Trusts (REITs) for those who prefer a more hands-off approach
He notes that real estate can provide diversification and potentially higher returns, but also comes with more complexity and potential risks compared to index fund investing.
Managing Risk
Rieckens addresses concerns about the risks of investing, particularly for those new to the concept. He emphasizes several risk management strategies:
- Maintaining an emergency fund to cover unexpected expenses
- Diversifying investments across different asset classes
- Adjusting asset allocation based on risk tolerance and time horizon
- Regularly rebalancing portfolios to maintain desired asset allocation
- Staying invested for the long term to ride out market fluctuations
He stresses that while investing always carries some level of risk, historical data suggests that a diversified, long-term approach tends to yield positive results over time.
Maintaining Motivation on the FIRE Journey
Celebrating Milestones
Rieckens recognizes that the path to FIRE can be long and challenging. He suggests setting intermediate goals and celebrating milestones along the way. These could include:
- Reaching certain net worth targets
- Paying off specific debts
- Achieving savings rate milestones
- Learning new financial skills
Celebrating these achievements can help maintain motivation and make the journey more enjoyable.
Visualizing the End Goal
Another strategy Rieckens recommends is regularly visualizing your post-FIRE life. This might involve:
- Creating a vision board of how you want to spend your time
- Writing a detailed description of your ideal day
- Regularly discussing future plans with your partner or FIRE community
By keeping the end goal in mind, it becomes easier to make short-term sacrifices for long-term gain.
Staying Connected to the FIRE Community
Throughout the book, Rieckens emphasizes the importance of community in the FIRE journey. He suggests several ways to stay connected:
- Participating in online FIRE forums and discussion groups
- Attending local FIRE meetups or national conferences
- Starting a FIRE book club or discussion group with friends
- Sharing your journey through a blog or social media
These connections provide support, motivation, and ongoing learning opportunities.
Life After FIRE
Redefining Retirement
As Rieckens approaches his own FIRE goal, he reflects on what life might look like after achieving financial independence. He stresses that FIRE doesn't necessarily mean stopping work entirely, but rather having the freedom to choose how to spend your time.
He shares stories of FIRE achievers who have:
- Started businesses aligned with their passions
- Transitioned to part-time work in their field
- Devoted more time to volunteer work or community involvement
- Pursued creative projects or hobbies full-time
- Traveled extensively or lived as digital nomads
The common thread is the ability to design a life around personal values and interests rather than financial necessity.
Ongoing Financial Management
Rieckens also discusses the importance of ongoing financial management even after achieving FIRE. This includes:
- Regularly reviewing and adjusting your investment strategy
- Staying informed about changes in tax laws and financial regulations
- Considering the impact of inflation on your long-term plans
- Potentially working with a financial advisor for complex situations
He emphasizes that financial independence requires ongoing attention and adjustment, not just a one-time achievement.
Conclusion
In concluding "Playing with FIRE," Rieckens reflects on the transformative impact the FIRE journey has had on his life and the lives of others he's encountered. He reiterates that FIRE is not just about retiring early, but about intentionally designing a life that aligns with one's values and priorities.
The book ends with a call to action, encouraging readers to take control of their financial lives, regardless of whether they pursue full FIRE or simply incorporate some of its principles. Rieckens emphasizes that even small steps towards financial independence can lead to greater freedom, reduced stress, and increased life satisfaction.
Ultimately, "Playing with FIRE" presents a compelling case for rethinking our relationship with money, work, and life itself. It offers both inspiration and practical guidance for those seeking to break free from the traditional work-until-65 paradigm and create a more intentional, fulfilling life path.