Many people look forward to the day that they can retire from work. On average Americans typically retire around age 62. But while most people retire around this age, it really has nothing to do with age. It’s about income.

Yes, some employers stipulate an age to be eligible to receive a pension, but this is not the only way to retire.

Back in 1992, authors Vicki Robin and Joe Dominguez introduced the concept of aligning your values with your money to become financially independent. In their book, Your Money or Your Life, the authors challenged readers to determine how much was enough to sustain their desired lifestyle.

Since this book, the financial independence movement has caught FIRE. (pun intended)

But there are some advantages and disadvantages to this approach. This article will highlight what FIRE is and present some of the pros and cons of the FIRE movement.

What is FIRE?

FIRE stands for financial independence retire early. It challenges the traditional status quo of lifestyle and retirement. The premise is that once you have enough money, you can retire early regardless of your age.

To achieve the FIRE, you first must understand your financial independence number. How much money is enough to sustain your lifestyle. At the beginning of the FIRE movement, many focused on saving a specific amount of money so that they could withdraw and live on 4 percent of the earnings each year.

Learn how to calculate your financial independence number here.

The strategy required extreme frugality where you would save and invest at least 50 percent of your income. This strategy is not for the faint at heart. However, over the years, this strategy has evolved to also find ways to increase your income over time to meet your retirement number.

Advantages

Time Freedom

One of the benefits of being financially independent is time freedom. You get to be more intentional about how you spend your time and who you spend it with. This will allow you to pursue new hobbies, expand your network, and experience new adventures without the need to request time off.

Lifestyle By Design

Even though the second half of the F.I.R.E movement is to retire early, you do not actually have to retire. You can design your lifestyle.  You can pursue work that is aligned with your calling and that you enjoy. Rather than adjusting your lifestyle to fit around your work, you can adjust your work around your lifestyle.

Encourages Conscious Spending 

Another benefit of the F.I.R.E. movement is the emphasis on saving and conscious spending. Regardless of how much income you make, living below your means will always be required. Being aware of your spending behavior helps you stay on track with your financial goals. When you are conscious about your spending you are more intentional about giving every dollar a job and aligning your money to your highest values.

Disadvantages

Subject To Market Fluctuations

If you plan to achieve financial independence through aggressive investing, one of the disadvantages can be your money subject to market fluctuations. Obviously, when the market is increasing, this can be a benefit, but when the market is down, this can significantly adjust how long your money will last throughout retirement.

Retirement Can Be Boring

When some people reach F.I.R.E, they may choose to become a beach bum or sip pina coladas under a palm tree all day long. While this may be appealing in the beginning, at some point it will become old. We were all created on purpose for a purpose so it’s important to use this time freedom to fulfill that purpose.

Saving 50% of Income with Dependents Can Be Harder

One of the disadvantages many have highlighted for the F.I.R.E. movement is the amount of money needed for people with dependents. It is not impossible, but it is a greater sacrifice when multiple people must adjust their lifestyles.

Conclusion

The F.I.R.E movement has changed the way many have viewed the traditional retirement approach. It has offered a solution that empowers people to step outside the box of hyper-consumerism, lifestyle creep and keeping up with the Jones’ to focus on intentional spending, work flexibility, and lifestyle design.

While the F.I.R.E movement has its advantages and disadvantages, striving to be a better financial steward is a worthwhile goal for everyone. Instead of constantly working for money, it’s time to use your money to work for you. That’s getting your Finances On Point.