October 4, 2025 • 31 mins
The source provides an extensive overview of the Financial Independence, Retire Early (FIRE) movement and its growing adoption among Generation Z. The episode explains that Gen Z is attracted to FIRE due to economic instability, a desire for freedom and flexibility, and a rejection of traditional hustle culture. It details the core philosophy of FIRE, which involves aggressively saving and investing 50-70% of income to build a nest egg sufficient for early retirement. Finally, the source outlines the specific strategies Gen Z employs, such as extreme frugality, early aggressive investing, and utilizing side hustles, while also acknowledging significant challenges like student debt and rising housing costs.
“If you don't find a way to make money while you sleep, you will work until you die.”
Warren Buffett
“If you don't find a way to make money while you sleep, you will work until you die.”
Warren Buffett
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome back to the deep dive. Today, we are plunging
into something pretty radical, actually, the idea of retiring by forty.
Speaker 2 (00:06):
Yeah, it sounds like a fantasy, doesn't it, But it's
becoming a very real goal for a whole generation Exactly.
Speaker 1 (00:12):
We're not talking about windfalls or inheritances here, we're dissecting
this huge acceleration of the fire movement that's financial independence,
retire early, and how Generation Z is really driving it
and well changing it.
Speaker 2 (00:24):
It really is a massive shift. Our sources today they
show that for Gen Z born roughly ninety seven to
twenty twelve, early retirement isn't just wishful thinking. It's becoming
a meticulously planned financial strategy.
Speaker 1 (00:38):
So our mission today is to unpack that. We want
to give you the blueprint, really look at the well
the extreme strategies they're using.
Speaker 2 (00:45):
And the why behind it all. You know, what societal
forces are pushing them this way, and of course the obstacles,
because let's be honest, retiring at forty isn't easy. There
are unique modern challenges they have to face.
Speaker 1 (00:56):
Okay, let's start with the basics then, because, like you said,
retiring at forty that sounds almost impossible on the surface.
How does the math even work for fire?
Speaker 2 (01:04):
Right? It starts with that term financial independence. What does
it actually mean? Yeah, Well, at its core, FIERY is
about building up a pot of money your investments right,
big enough so the returns of those investments can cover
your living expenses forever ideally.
Speaker 1 (01:19):
Okay, so your money makes money enough to.
Speaker 2 (01:21):
Live on, precisely. But the mechanism to get there quickly,
it's simple but pretty demanding. You have to save and
invest a huge chunk of your income. We're typically talking
fifty percent to seventy percent.
Speaker 1 (01:33):
Fifty to seventy percent.
Speaker 2 (01:35):
Wow, that's aggressive it has.
Speaker 1 (01:37):
To be to hit that goal so early. And that
pot of money the target size, that's determined by a well,
a famous rule in the fire community.
Speaker 2 (01:45):
Ah, the four percent rule. I've heard of this, that's
the one.
Speaker 1 (01:48):
It came out of research, the Trinity study back in
the late nineties, and it basically suggests that if you
withdraw only four percent of your total investment portfolio in
your first year of retirement, and then adjust that amount
for inflation each year after that, you have a very
very high chance of your money lasting even for say
thirty years or in Genz's case, maybe fifty or sixty
years if they retire at forty. So let's make that concrete.
(02:10):
If I figure out I need, say forty thousand dollars
a year to live comfortably, then I just multiply that
by twenty five, because twenty five times four percent is
one hundred percent exactly.
Speaker 2 (02:20):
You got it. Forty thousand dollars a year means your
target number, your fire number, is one million dollars.
Speaker 1 (02:26):
A million dollars, Okay, still sounds like a lot.
Speaker 2 (02:28):
It is, But that super high savings rate is what
compresses the timeline. You see, if you save a typical
ten percent, maybe fifteen percent of your income, it could
take you forty fifty years to reach financial.
Speaker 1 (02:39):
Independence traditional retirement path.
Speaker 2 (02:41):
Right, But if you managed to sock away sixty percent,
you could hit that million dollar target or whatever your
number is, and maybe fifteen.
Speaker 1 (02:49):
Years, give or take fifteen years. That's how forty becomes feasible,
not sixty five.
Speaker 2 (02:53):
That's the core math. Now, fiery isn't new, right, We
saw pioneers like mister money Mustache really popularizing it in
the early twenty ten.
Speaker 1 (03:00):
Yeah, I remember that, but it felt very niche back then.
Like an extreme lifestyle choice for a few dedicated bloggers.
Speaker 2 (03:06):
It definitely was. But what's fascinating now, and what our
sources really highlight is how gen Z has taken this
concept and well almost mainstreamed it, but they've also changed
its flavor. How So for them, it seems to be
about more than just the money, more than just escaping work.
It's almost a cultural statement, a kind of rebellion against
(03:27):
the expectation that you have to trade the best decades
of your life for paycheck.
Speaker 1 (03:30):
So it's about reclaiming control exactly.
Speaker 2 (03:33):
Reclaiming control over their time, their lives is a very
deliberate choice.
Speaker 1 (03:37):
Okay, that strong motivation that why is the perfect place
to start our first deep dive section. What exactly is
driving this generation? What mix of economic realities and cultural
shifts made them look at the traditional forty year career
and just say no thanks.
Speaker 2 (03:54):
I think you absolutely have to start with the economic
backdrop they grew up in. It's all about insecurity, really,
a generation whose formative years were just soaked in financial volatility.
Speaker 1 (04:03):
They saw the two thousand and eight crisis unfold.
Speaker 2 (04:05):
Right, they're kids, teenagers, maybe watching older siblings, parents, neighbors,
lose jobs, lose homes. They saw the system wobble badly.
Speaker 1 (04:14):
That must leave a mark. Witnessing that kind of instability
when you're.
Speaker 2 (04:17):
Young, it absolutely erodes trust. The old promise, you know,
go to college, get a good job, saved diligently, and
you'll have a comfortable retirement. That promise just feels broken
to many of them. It seems unreliable.
Speaker 1 (04:31):
And then they entered adulthood facing their own challenges.
Speaker 2 (04:34):
Huge challenges, crushing student loan debt for one, wages that
haven't really kept pace with productivity or living costs. And then,
just as many were entering the workforce, banned the COVID
nineteen pandemic kids, throwing everything into chaos again.
Speaker 1 (04:47):
So it's a learned distrust of the system. Instead of
relying on pensions or social security decades down the line,
they're thinking, I need to build my own safety net
right now.
Speaker 2 (04:55):
That's a huge part of the psychology. It's about self reliance,
building a personal fortress against future shocks. YEA. The data
backs this up pretty starkly. A twenty twenty three Deloitte
survey found almost half forty six percent of gen Z
workers feel financially.
Speaker 1 (05:09):
Insecure nearly half wow and.
Speaker 2 (05:11):
Even more seventy five percent three quarters are worried, deeply
worried about the rising cost of living. So for many,
fire isn't about getting rich quick, It's about achieving basic
stability and security on their own terms.
Speaker 1 (05:26):
Which connects to another big cultural shift. We're seeing this
rejection of hustle culture. They seem to be drawing a
line where maybe millennials didn't.
Speaker 2 (05:34):
That's a really key distinction. They saw the millennial experience right,
the glorification of overwork, the rise and grind mentality, working
eighty hour weeks, chasing promotions, often leading to burnout, anxiety,
mental health struggles. Learned from that, It seems so gen
Z appears to be placing a much higher premium on
work life balance, on mental health, on sustainable work patterns.
(05:56):
They observed the burnout and thought there has to be
a better way.
Speaker 1 (06:00):
But wait, how does that square with saving sixty percent
of your income? That sounds like its own kind of hustle,
doesn't it.
Speaker 2 (06:05):
Ah, that's the interesting nuance. It's not necessarily about not
working hard. It's about working smart, efficiently, and perhaps most importantly,
working temporarily at that intense pace.
Speaker 1 (06:15):
Okay, explain that they aren't.
Speaker 2 (06:16):
Rejecting effort, They're rejecting inefficient effort and mandatory indefinite effort.
The idea is often to maximize income and savings over
a relatively short focused period. That fifteen year sprint we
talked about. The goal isn't lifelong leisure. It's to buy
back their time sooner so they can then choose how
to spend it. Maybe that involves working on passion projects,
(06:37):
maybe volunteering, maybe part time work they actually enjoy. It's
about gaining optionality, not necessarily stopping work.
Speaker 1 (06:45):
Entirely optionality that makes sense. And facilitating all this, enabling
both the learning and the execution is their inherent advantage
as digital needed. Oh.
Speaker 2 (06:54):
Absolutely. The democratization of knowledge, especially financial knowledge, is massive. Here.
Twenty years ago, understanding investing often meant paying expensive advisors,
navigating jargon filled prospectuses gatekeepers, essentially exactly that information asymmetry
is basically gone. Now gen Z is learning about compound interest,
asset allocation, tax optimization, all these complex topics for free
(07:16):
online through channels like YouTube. You see creators like Graham
Steffan andre Jeek getting millions of views or huge reddit
communities like Financial Independence.
Speaker 1 (07:26):
Precisely, these platforms break down sophisticated financial strategies into easily digestible,
often entertaining formats. They share real numbers, real tactics. This
digital fluency gives gen z a massive headstart.
Speaker 2 (07:39):
So they're learning about roth iras and index funds in
college or even high.
Speaker 1 (07:43):
School sometimes, Yes, instead of figuring it out in their
late thirties, potentially missing out on a crucial decade of
compound and growth, they are front loading their financial education
and their action.
Speaker 2 (07:53):
Which ties right back into their core values. Doesn't it
This desire for freedom, for purpose beyond just accumulating.
Speaker 1 (07:59):
Well, absolutely, what does fire ultimately buy them? It's not
just escaping the nine to five, it's buying the freedom
to live a life aligned with their values much sooner.
Speaker 2 (08:08):
You mentioned experiences over things.
Speaker 1 (08:10):
Yeah, there was a twenty twenty two Adobe study that
found fifty nine percent, almost six out of ten gen
Zers prioritize experiences over material possessions. That's a significant shift.
So early retirement isn't about buying a bigger house or
a fancier car necessarily.
Speaker 2 (08:26):
For many know it's the vehicle that allows them to
travel to volunteer for causes they believe in, like climate
action or social justice, maybe pursue creative work that doesn't
pay well but feels meaningful. Fire becomes purpose driven financial planning.
The money is the tool. The freedom to live authentically
is the real goal.
Speaker 1 (08:44):
Okay, so we've got the why pretty clear now. The
economic anxiety, the rejection of hustle, the digital tools, the
drive for purpose. It's a powerful combination, definitely.
Speaker 2 (08:55):
So now let's shift gears to the how. Because motivation
is one thing, but achieving fire by forty requires a serious,
aggressive financial engine. This is where we see gen Z
deploying some really specific, sometimes intense strategies.
Speaker 1 (09:08):
And the absolute foundation, the bedrock of the whole thing,
has to be strategy one extreme saving and frugality. You
just can't get to a fifty sixty seventy percent savings
rate without drastically cutting expenses.
Speaker 2 (09:18):
It's non negotiable. This requires living well below your means.
But it's interesting many in the movement don't frame it
as deprivation. They see it as optimization, trading unnecessary consumption
now for massive time freedom later.
Speaker 1 (09:34):
So what are the big targets for cuts? Where do
they focus.
Speaker 2 (09:38):
Housing first and foremost. It's almost always the biggest expense
category for anyone, right, often thirty percent of forty percent
of take home pay. So gen Z gets really creative here,
like what we see a lot of minimalist approaches choosing
smaller apartments, continue to live with roommates well into their
late twenties or even thirties, which used to be less common.
Speaker 1 (09:58):
Or even more extreme options.
Speaker 2 (09:59):
Yeah, things like van life converting a van or buss
to live in, eliminating renderor mortgage payments almost entirely, or
house hacking, which we can talk more about. It's about
slashing that biggest bill dramatically. They're consciously trading conventional comforts
for speed toward their goal.
Speaker 1 (10:13):
And beyond the big stuff like housing, it's about tracking
everything else meticulously.
Speaker 2 (10:18):
Down to the dollar. They often rely heavily on budgeting apps.
YNA You Need a Budget is a popular one, Mint
as well for really granular tracking every coffee, every subscription
is scrutinized.
Speaker 1 (10:30):
Like running their life like a business, watching the P
and L kinda.
Speaker 2 (10:34):
Yeah. They're hyper aware of lifestyle inflation, the tendency to
spend more as you earn more, and they actively fight
against it so. Yes, it means home brewed coffee, packing lunches,
canceling streaming services they don't use much. It requires real discipline.
Speaker 1 (10:48):
That sounds tough to sustain. Doesn't that lead to burnout
feeling deprived all the time? Is saving sixty percent really enjoyable?
Speaker 2 (10:55):
That's probably the biggest personal challenge, and the sources suggest
community is key here online forums, local meetups to stay
motivated and not feel totally isolated. Let's take Sarah's example.
She's a twenty four year old software engineer. Okay, she
earns eighty thousand dollars. That's a good salary for sure.
Speaker 1 (11:11):
Decent start, Yeah, but still a long way from that
million dollar target we mentioned.
Speaker 2 (11:15):
True, but her savings rate is the accelerator. By choosing
to live with two roommates in a pretty basic apartment
and dedicating time to bull cooking her meals, she's managing
to save sixty percent of her income.
Speaker 1 (11:27):
Sixty percent of eighty k that's nearly fifty thousand dollars
a year going into savings and investments exactly.
Speaker 2 (11:35):
Her strategy isn't necessarily relying on hitting home runs in
the stock market. It's based on sheer saving discipline. Her
specific goal is to have three hundred thousand dollars invested
by the time she's thirty, and she keeps that up.
If she maintains that trajectory, even with average market returns,
she's absolutely on track for fire by forty. It's disciplined
driving the timeline.
Speaker 1 (11:54):
But discipline saving cash under the mattress won't cut it.
That money needs to work, which brings us to two.
Investing early and aggressively harnessing compound interest.
Speaker 2 (12:04):
This is where their digital native advantage really kicks in again.
They understand the power of compounding and they know they
need to start now. So first stop is maximizing any
tax advantage accounts.
Speaker 1 (12:13):
Available, like four oh one k iras.
Speaker 2 (12:15):
Exactly, especially grabbing any employer match on a four to
one k I mean that's literally free money, an instant
one hundred percent return on your contribution. Usually they prioritize.
Speaker 1 (12:24):
That, and inside those accounts, what are they typically investing in.
Speaker 2 (12:28):
The overwhelmingly common approach is using low cost broadly diversified
index funds or ETFs. Think Vanguard's Total Stock Market Index
VTSAX or similar funds. The goal isn't to beat the market,
it's to be the market captures average long term returns
while keeping investment fees absolutely minimal.
Speaker 1 (12:48):
Minimize fees, maximize time in the market. Got it. Let's
look at Jake, the graphic designer example. He illustrates starting young.
Speaker 2 (12:55):
Right, Jake is twenty two. He's putting five hundred dollars
a month into a roth ira it's post tax money
that grows tax free, and another two hundred dollars into
a regular taxable brokerage count.
Speaker 1 (13:05):
So seven hundred dollars a month total doesn't sound like
a huge amount.
Speaker 2 (13:09):
Initially, it might not seem like it, but the key
isn't the amount today, it's the time that money has
to grow. Assuming a pretty standard long term average return,
say seven percent per year after inflation, that consistent seven
hundred dollars a month starting at twenty two, thanks to
the magic and compounding, is projected to grow to over
one million dollars by the time he turns forty.
Speaker 1 (13:28):
One million from seven hundred dollars a month. Just by
starting early.
Speaker 2 (13:32):
It's incredibly powerful. What happens if he waited just ten years,
started at thirty two instead, you'd.
Speaker 1 (13:37):
Have to save way more each month to catch.
Speaker 2 (13:39):
Up Radically more, probably close to three times as much
per month to hit that same million dollar target by
forty That delay is incredibly costly. Front Loading the investment
is critical for the accelerated fire timeline. Time is the
secret sauce.
Speaker 1 (13:53):
Okay, So index funds are the core. What about other assets?
Real estate comes up a lot in fire discussions.
Speaker 2 (13:59):
It does, but often for gen Z pursuing early fire,
it's not about buying a portfolio of rental properties right away.
It's often more about that strategy we touched on heal tacking.
Speaker 1 (14:09):
Well to explain house hacking again, how does that work?
Speaker 2 (14:11):
So the typical way is you buy a small multi
family property like a duplex, triplex, or maybe a house
with a rentable basement suite. You live in one unit.
Speaker 1 (14:20):
And rent out the others exactly, and you.
Speaker 2 (14:22):
Often try to use loan programs that allow for a
low down payment, like an FAHA loan, which might only
require three point five percent down. The goal is for
the rent you collect from your tenants to cover most
or even all of your mortgage payment plus taxes and insurance.
Speaker 1 (14:37):
So you're essentially living for free or very close to it.
Speaker 2 (14:40):
That's the dream scenario. It drastically cuts your biggest expense
housing while you're also building equity in an asset and
getting significant tax advantages. It's a massive accelerator if you
can pull it off.
Speaker 1 (14:51):
Turning your biggest liability into an income source.
Speaker 2 (14:53):
Clever, very clever, And often that core saving and investing
is supplemented by strategy, threat side hustles, and multiple income streams.
They're leveraging the gig economy.
Speaker 1 (15:04):
This seems almost tailor made for the fire mindset. Don't
just save more, earn more too precisely.
Speaker 2 (15:10):
It gives them another lever at to pull to boost
that savings rate without necessarily needing a huge raise at
their main job. And they're using the.
Speaker 1 (15:17):
Skills they have, like what kinds of side hustles.
Speaker 2 (15:19):
Lots of freelancing, coding, graphic design, writing, social media management
using platforms like upwork or fiverr. Also, content creation is huge,
monetizing YouTube channels, TikTok blogs through ads or sponsorships, and
e commerce.
Speaker 1 (15:35):
Ventures selling things online.
Speaker 2 (15:36):
Yeah, maybe setting up an Etsy shop, selling digital products
like planners or templates, or even trying drop shipping using
platforms like Shopify. It's about finding ways to generate extra
cash flow, often leveraging digital skills.
Speaker 1 (15:48):
Mia the teacher example, really highlights the impact of this right.
Speaker 2 (15:52):
MIA's twenty six works as a teacher, likely on a
modest salary, but she built a successful Etsy store on
the side selling digital planners, and that store brings in
an extra three thousand dollars a month.
Speaker 1 (16:03):
Three thousand extra month. That's significant.
Speaker 2 (16:05):
It's huge. Think about it. If she's already saving, say
forty fifty percent of her teaching salary, and then she
takes that entire three thousand dollars side income and throws
it straight into investments.
Speaker 1 (16:15):
It massively speeds things up.
Speaker 2 (16:17):
It doesn't just accelerate the timeline, It potentially collapses it.
That's the power of increasing the income side of the equation.
Speaker 1 (16:23):
Okay, and speaking of collapsing timelines, Strategy four feels particularly
relevant to this generation because of remote work geo arbitrage.
Speaker 2 (16:33):
Geo arbitrage, Yeah, this is a really powerful tool. It's
basically the strategy of earning income based on one location's
salary norms, but living in a location with a much
lower cost.
Speaker 1 (16:43):
Of living, soar like you live in New York or
San Francisco.
Speaker 2 (16:47):
That actually lives somewhere much cheaper. Yeah, the rise of
remote work has blown the doors open for this. You
could be a software developer earning one hundred and fifty
thousand dollars salary tied to a company in a high
cost city.
Speaker 1 (16:57):
But you choose to live in say a Boise, Idaho,
where you're housing in daily costs or.
Speaker 2 (17:02):
Maybe half or even more dramatically, you can move abroad.
Places like shang Mai in Thailand or Lisbon in Portugal
are popular fire destinations where the cost of living can
be incredibly low compared to major US or European cities.
Speaker 1 (17:15):
And that difference in costs, that entire difference.
Speaker 2 (17:17):
That cost saving, goes directly into the investment pot. Your
savings rates skyrockets almost effortlessly because your expenses plummet while
your income stays high. It makes hitting those fifty seventy
percent savings rates much much easier.
Speaker 1 (17:30):
Wow, Okay, that's a game changer if you can swing
remote work. And finally, strategy five is about understanding that
fire isn't monolithic. There are different flavors, different goals within
the movement.
Speaker 2 (17:41):
Right, it's more of a spectrum. You often hear about
lean fire.
Speaker 1 (17:44):
Versus fat fire, Okay, break those down.
Speaker 2 (17:46):
Lean fire is about achieving financial independence as quickly as
humanly possible. This usually means aiming for a smaller nest egg,
one that can support a more frugal lifestyle and retirement,
maybe living on only twenty thousand to thirty thousand dollars
dollars per year.
Speaker 1 (18:01):
So you get to fi faster, but you live more.
Speaker 2 (18:03):
Simply, exactly, it prioritizes speed and freedom over luxury. Then
you have fat fire. This is the goal. For those
who want it more comfortable, perhaps even luxurious retirement. They're
aiming for a much larger portfolio, say two million dollars
or more, that can safely support annual spending of eighty
thousand dollars one hundred thousand dollars or even higher.
Speaker 1 (18:23):
Takes longer to get there, obviously.
Speaker 2 (18:24):
Much longer, or requires a significantly higher income and savings rate.
What's interesting is that many gen zers might aim for
lean fire initially get to that baseline independence, quickly, secure
their freedom and optionality, and then.
Speaker 1 (18:36):
Maybe let their investments continue to grow or keep aside
hustle going part time to eventually drift towards a more
fat lifestyle later.
Speaker 2 (18:44):
Precisely achieve independence first, then optimize for comfort. It's about
securing the core freedom as the primary goal.
Speaker 1 (18:51):
Okay, this all sounds incredibly strategic, very disciplined, but we
have to acknowledge retiring by forty is a massive undertaking.
It's not a walk in the park. Let's talk about
the hurdles, the specific challenges gen Z faces on this
path that maybe previous generations didn't or not to the
same degree.
Speaker 2 (19:08):
Absolutely, and the first undeniable obstacle is the sheer way
to student loan debt. It's an anchor for so many.
The total amount in the US is just staggering, over
one point seven trillion dollars.
Speaker 1 (19:19):
Recently, and that debt hits them right at the starting line,
right when they need to be saving aggressively.
Speaker 2 (19:24):
It completely sabotages the start. Instead of saving fifty percent,
many are starting with negative savings just trying to dig out.
It requires incredible discipline just to pay off the debt,
let alone save on top of it. For many, the
first say three to five years of their intended fire
journey are just spent getting back to zero.
Speaker 1 (19:40):
That's years of lost compounding critical years.
Speaker 2 (19:44):
They're already behind schedule from day one in many.
Speaker 1 (19:46):
Cases, and then you pile on top of that the
general rising cost of living, especially housing. It feels like
the goalposts are constantly moving further away.
Speaker 2 (19:54):
Housing is just brutal. We mentioned the strategies like house
hacking or van life, but those aren't feasible or desirable
for everyone. The media and US home price hitting four
hundred and twelve thousand dollars in twenty twenty four. That
makes traditional home ownership incredibly difficult if you're also trying
to save half your.
Speaker 1 (20:12):
Income, and even if you rent, those costs keep climbing
too relentlessly.
Speaker 2 (20:17):
Rising rents eat directly into the money you could be
saving and investing. Inflation in general means your target fire
number might need to be adjusted upwards over time as well.
It's a constant battle against rising costs.
Speaker 1 (20:29):
Then there's the flip side of the gig economy flexibility.
We talked about career instability and the lack of benefits.
Speaker 2 (20:35):
This is a huge one, maybe the hidden vulnerability in
some fire plans. Relying heavily on freelance work, contract gigs
or being self employed often means you don't get the traditional.
Speaker 1 (20:44):
Safety nets like employer sponsored health insurance.
Speaker 2 (20:48):
Exactly, or paid sick leave, disability insurance, retirement plan matches,
all those things that come with a traditional W two job.
Speaker 1 (20:57):
So fire eat adherents have to cover all that themselves.
Speaker 2 (21:00):
They have to self insure. Essentially, buying health insurance on
the private market can be incredibly expensive, especially for families,
and those costs tend to rise unpredictably. They also have
to fund their entire retirement savings making up for the
lack of any employer match.
Speaker 1 (21:14):
That adds significant cost and complexity to their planning. They
probably need a bigger emergency fund too.
Speaker 2 (21:20):
Absolutely, it requires a larger buffer and potentially a higher
fire number overall, just to account for those self funded
benefits and potential income gaps between contracts.
Speaker 1 (21:30):
There's also a psychological cost, isn't there the social pressure
and potential isolation from living so differently.
Speaker 2 (21:36):
Oh, definitely, it can be really challenging, especially in your
twenties and thirties. Our culture heavily promotes consumption. Success is
often signaled by spending nice cars, big houses, expensive vacations,
frequent nights out.
Speaker 1 (21:49):
And if you're saving sixty percent, you're opting out of
a lot of that.
Speaker 2 (21:52):
You are you might be constantly explaining to friends or
family why you're packing a lunch instead of going out,
why you're driving an old car, why you're skipping the
destination wedding or the group trip. That can lead to judgment, misunderstandings,
feeling left out.
Speaker 1 (22:08):
It takes real mental strength to stick to your plan
when everyone around you is spending it really does.
Speaker 2 (22:14):
Finding a community, even online, who understands and supports your
goals becomes crucial for staying the course without feeling completely isolated.
Speaker 1 (22:23):
And lastly, the big one lurking behind all investment plans
market volatility, especially when your timeline is compressed.
Speaker 2 (22:31):
This is the inherent risk you can't fully control. They're
relying heavily on stock market returns over a relatively short
fifteen twenty year accumulation phase. The danger is what's called
sequence of returns risking, meaning when the market fluctuations happen.
Matters hugely. If you experience a major, prolonged downturn like
two thousand and eight or the dot com bust right
(22:52):
as you're nearing your fire number, or worse, just after
you've retired and started making.
Speaker 1 (22:57):
Withdrawals, it could wreck the plan.
Speaker 2 (23:00):
Seriously derail it if your portfolio drops thirty forty percent
right when you need to start living off it, and
you're forced to sell assets at those low prices, it
drastically increases the chances of running out of money later.
Someone retiring at sixty five has more time, potentially decades,
for the market to recover from dips early in their retirement.
Someone retiring at forty doesn't have that same buffer. They
(23:21):
need the market to cooperate, especially around their retirement date.
Speaker 1 (23:25):
Okay, so the hurdles are significant, debt costs, benefit gaps,
social pressure, market risk. It's definitely not guaranteed.
Speaker 2 (23:32):
Not at all. It requires careful planning, discipline, and maybe
a bit of luck regarding market time.
Speaker 1 (23:38):
Again, despite all that, we are seeing gen Z make
real strides. They seem to be navigating these challenges successfully,
partly by, as you said earlier, redefining what success even
looks like.
Speaker 2 (23:48):
I think that's key. They're changing the goalposts. For many.
Success isn't measured solely by income or job title anymore.
The sources strongly suggests their definition centers much more on time, autonomy,
meaningful experiences, and making a positive impact rather than just
climbing a corporate ladder.
Speaker 1 (24:04):
And fire is the tool to achieve that alternative definition
of success.
Speaker 2 (24:08):
Exactly. It's the practical roadmap to escape the rat race
framework that maybe doesn't align with their values and to
start living that purpose driven life much much sooner.
Speaker 1 (24:18):
And this values driven approach is even showing up in
how they invest their money, right, not just that they invest.
Speaker 2 (24:24):
Yeah, we're seeing a much greater emphasis on aligning investments
with personal values, things like ESG investing. Focusing on companies
with strong environmental, social and governance records seems much more
prevalent among gen Z investors compared to previous generations.
Speaker 1 (24:39):
So they want their money to do good or at
least not do harm while it grows.
Speaker 2 (24:44):
That seems to be a growing priority. But interestingly, alongside
that ethical focus, we also see an openness to much
newer and frankly riskier asset classes.
Speaker 1 (24:53):
Like cryptocurrencies or NFTs, things that weren't really on the
fire map ten years ago.
Speaker 2 (24:57):
Exactly. It's a bit of a paradox. I might have
a core portfolio of stable, low cost index funds, but
some are willing to allocate a smaller portion to these
much more volatile assets, hoping for those outsized exponential returns
that could potentially shave years off their fire timeline.
Speaker 1 (25:15):
A calculated gamble for speed.
Speaker 2 (25:17):
Potentially yes, acknowledging the high risk, but seeing the potential
reward as worth a small bet, and.
Speaker 1 (25:22):
Underpinning so many of these strategies. The side hustles, the
geo arbitrage. The flexible work is the remote work catalyst.
It feels like this structural shift in how we work
has been a massive enabler.
Speaker 2 (25:34):
It's arguably the single biggest tailwind for gen Z's fire ambitions.
The widespread acceptance of remote work, accelerated by the pandemic,
just unlocks so much potential that two main ways. One,
it allows them to compete for higher salaries often tied
to jobs based in expensive cities, regardless of where they live. Two,
it directly enables geo arbitrage, earning that high salary while
(25:56):
living somewhere significantly cheaper. That combination drastically boost savings potential
in a way that just wasn't possible for most people
fifteen years ago when fire was gaining its initial traction.
Speaker 1 (26:08):
So the fire movement and the remote work revolution are
kind of feeding each other.
Speaker 2 (26:13):
Absolutely, they are perfectly synergistic remote work makes the extreme
saving required for fire much more feasible for a wider
group of people.
Speaker 1 (26:21):
Okay, to really inspire listeners and show this isn't just theory,
let's highlight some of those real world examples. People who've
actually done it, achieved fire early using these diverse paths.
Speaker 2 (26:30):
Great idea. Let's start with Emma. She hit lean fire
at twenty seven.
Speaker 1 (26:34):
Twenty seven, that's incredibly fast.
Speaker 2 (26:36):
She was a marketing specialist. Her strategy was pure focused
execution on the core principles extreme frugality, saving around seventy
percent of her income, combined with smart tactics like house
hacking to minimize her housing costs and consistently invest in
the difference and index funds.
Speaker 1 (26:53):
So discipline and execution. What's her life like now?
Speaker 2 (26:56):
She reached her number around six hundred thousand dollars, but
she didn't just stop contributing. She pivoted. She left the
corporate marketing world and now works part time as a
travel blogger. It generates some income, keeps her engaged, and
funds her passion for experiences. She traded the high salary
for total control over her time.
Speaker 1 (27:13):
Amazing. Okay, who else?
Speaker 2 (27:15):
Then there's Liam who represents more of the income acceleration path.
He's twenty five, a self taught coder. Okay, instead of
just focusing on saving a salary, he put his skills
to work building an asset and educational app that generates
passive income for him.
Speaker 1 (27:28):
Ah, creating something that works for him exactly.
Speaker 2 (27:31):
So he combined a frugal lifestyle with this accelerating income stream.
He's now on track for fat fire, aiming for a
larger nest egg potentially by age thirty five. It shows
the power of boosting the income side, not just cutting expenses.
Speaker 1 (27:45):
Right creating assets, and Ava's story highlights the geo arbitrage angle.
Speaker 2 (27:51):
Yes, Ava was a nurse. She retired at twenty nine
with about eight hundred thousand.
Speaker 1 (27:55):
Dollars twenty nine. As a nurse.
Speaker 2 (27:57):
House strategic geo arbitrage. She took high paying travel nursing assignments,
often in expensive areas like California, where demand and salaries
were high, but crucially, during her time off or even
between contracts, she chose to live in much lower cost
locations like Mexico so.
Speaker 1 (28:13):
Earn high spend low geographically.
Speaker 2 (28:16):
Precisely, that difference allowed her to save aggressively and hit
her fire number incredibly quickly, And like Emma, she didn't
just stop. She now uses her freedom to volunteer with
health care nonprofits. It's about redirecting her skills and energy
on her own terms.
Speaker 1 (28:30):
Those are powerful examples. They really show it's possible, but
also that it requires very intentional choices and trade offs.
Speaker 2 (28:36):
Definitely, there's no single right way, but they all involved discipline, planning,
and a clear focus on the end goal of freedom.
Speaker 1 (28:43):
Okay, So for listeners who are hearing this feeling inspired,
maybe thinking how could I even start pump, let's boil
down the actionable takeaways. What are the essential steps based
on everything we've discussed for someone wanting to begin their
own fire journey?
Speaker 2 (28:58):
All right, the listener's toolkit. Step one absolutely foundational. Calculate
your fire number. You need that target. Multiply the annual
income you think you'll need in retiring by twenty five.
If it's forty thousand dollars a year, your target is
one million dollars. Knowing your number is step one.
Speaker 1 (29:14):
Step two you need data track your spending. Use those
budgeting apps like Yna or Mint. You can't cut cost
effectively if you don't know exactly where your money's going
right now, find the leaks.
Speaker 2 (29:24):
Step three, play offense as well as defense. Maximize your income. Yes,
cut costs, but also focus on earning more. Negotiate raises,
look for higher paying jobs, or seriously consider starting that
side hustle. Boosting income is often easier than cutting expenses
past a certain point.
Speaker 1 (29:40):
Step four and maybe the most crucial for long term success.
Invest early, don't wait, start now, even if it's small.
Use low cost index funds or ETFs, and critically automate it.
Set up automatic transfers from your checking account or paycheck
directly into your investment accounts. Pay yourself first.
Speaker 2 (30:00):
Step five. Don't underestimate the psychological side. Build a support system.
This path can feel lonely. Find your tribe. Join online
fire communities on Reddit or Facebook, look for local meetups.
Having people who understand your goals provides motivation, accountability, and
helps combat that social pressure.
Speaker 1 (30:18):
And finally, Step six, be adaptable, Stay flexible. Life happens you.
Income might change, you might have kids, face unexpected expenses.
Your goals might even evolve. Your fire plan isn't set
in stone. Be prepared to adjust the timeline the target
number or the strategy as needed, but keep that core
goal of financial independence front and center.
Speaker 2 (30:35):
That flexibility is key. It's a long journey, but gin
Z's resourcefulness, their comfort with digital tools, and crucially, their
willingness to question traditional norms about work and life, it
really positions them well. They fundamentally understand that time is
the ultimate non renewable resource, which.
Speaker 1 (30:55):
Makes this whole movement feel like more than just clever
financial planning, feels like, well, like you said earlier, almost
a revolution.
Speaker 2 (31:03):
He kind of is a quiet revolution maybe, but it's
a fundamental shift towards prioritizing a life built around meaning,
purpose and possibility, rather than one dictated solely by the
perceived necessity of decades of mandatory labor.
Speaker 1 (31:17):
The freedom to choose your contribution, not just endure your job.
Speaker 2 (31:21):
That's the ultimate prize they're chasing, not necessarily idleness, but autonomy,
the freedom to define what work and life itself looks
like for them.
Speaker 1 (31:28):
A really fascinating deep dive into how a generation is
rewriting the retirement playbook. Thanks so much for unpacking that.
Speaker 2 (31:35):
With us, my pleasure. It's a compelling shift to watch
Speaker 1 (31:37):
And thank you for joining us on the deep dive
Welcome back to the deep dive. Today, we are plunging
into something pretty radical, actually, the idea of retiring by forty.
Speaker 2 (00:06):
Yeah, it sounds like a fantasy, doesn't it, But it's
becoming a very real goal for a whole generation Exactly.
Speaker 1 (00:12):
We're not talking about windfalls or inheritances here, we're dissecting
this huge acceleration of the fire movement that's financial independence,
retire early, and how Generation Z is really driving it
and well changing it.
Speaker 2 (00:24):
It really is a massive shift. Our sources today they
show that for Gen Z born roughly ninety seven to
twenty twelve, early retirement isn't just wishful thinking. It's becoming
a meticulously planned financial strategy.
Speaker 1 (00:38):
So our mission today is to unpack that. We want
to give you the blueprint, really look at the well
the extreme strategies they're using.
Speaker 2 (00:45):
And the why behind it all. You know, what societal
forces are pushing them this way, and of course the obstacles,
because let's be honest, retiring at forty isn't easy. There
are unique modern challenges they have to face.
Speaker 1 (00:56):
Okay, let's start with the basics then, because, like you said,
retiring at forty that sounds almost impossible on the surface.
How does the math even work for fire?
Speaker 2 (01:04):
Right? It starts with that term financial independence. What does
it actually mean? Yeah, Well, at its core, FIERY is
about building up a pot of money your investments right,
big enough so the returns of those investments can cover
your living expenses forever ideally.
Speaker 1 (01:19):
Okay, so your money makes money enough to.
Speaker 2 (01:21):
Live on, precisely. But the mechanism to get there quickly,
it's simple but pretty demanding. You have to save and
invest a huge chunk of your income. We're typically talking
fifty percent to seventy percent.
Speaker 1 (01:33):
Fifty to seventy percent.
Speaker 2 (01:35):
Wow, that's aggressive it has.
Speaker 1 (01:37):
To be to hit that goal so early. And that
pot of money the target size, that's determined by a well,
a famous rule in the fire community.
Speaker 2 (01:45):
Ah, the four percent rule. I've heard of this, that's
the one.
Speaker 1 (01:48):
It came out of research, the Trinity study back in
the late nineties, and it basically suggests that if you
withdraw only four percent of your total investment portfolio in
your first year of retirement, and then adjust that amount
for inflation each year after that, you have a very
very high chance of your money lasting even for say
thirty years or in Genz's case, maybe fifty or sixty
years if they retire at forty. So let's make that concrete.
(02:10):
If I figure out I need, say forty thousand dollars
a year to live comfortably, then I just multiply that
by twenty five, because twenty five times four percent is
one hundred percent exactly.
Speaker 2 (02:20):
You got it. Forty thousand dollars a year means your
target number, your fire number, is one million dollars.
Speaker 1 (02:26):
A million dollars, Okay, still sounds like a lot.
Speaker 2 (02:28):
It is, But that super high savings rate is what
compresses the timeline. You see, if you save a typical
ten percent, maybe fifteen percent of your income, it could
take you forty fifty years to reach financial.
Speaker 1 (02:39):
Independence traditional retirement path.
Speaker 2 (02:41):
Right, But if you managed to sock away sixty percent,
you could hit that million dollar target or whatever your
number is, and maybe fifteen.
Speaker 1 (02:49):
Years, give or take fifteen years. That's how forty becomes feasible,
not sixty five.
Speaker 2 (02:53):
That's the core math. Now, fiery isn't new, right, We
saw pioneers like mister money Mustache really popularizing it in
the early twenty ten.
Speaker 1 (03:00):
Yeah, I remember that, but it felt very niche back then.
Like an extreme lifestyle choice for a few dedicated bloggers.
Speaker 2 (03:06):
It definitely was. But what's fascinating now, and what our
sources really highlight is how gen Z has taken this
concept and well almost mainstreamed it, but they've also changed
its flavor. How So for them, it seems to be
about more than just the money, more than just escaping work.
It's almost a cultural statement, a kind of rebellion against
(03:27):
the expectation that you have to trade the best decades
of your life for paycheck.
Speaker 1 (03:30):
So it's about reclaiming control exactly.
Speaker 2 (03:33):
Reclaiming control over their time, their lives is a very
deliberate choice.
Speaker 1 (03:37):
Okay, that strong motivation that why is the perfect place
to start our first deep dive section. What exactly is
driving this generation? What mix of economic realities and cultural
shifts made them look at the traditional forty year career
and just say no thanks.
Speaker 2 (03:54):
I think you absolutely have to start with the economic
backdrop they grew up in. It's all about insecurity, really,
a generation whose formative years were just soaked in financial volatility.
Speaker 1 (04:03):
They saw the two thousand and eight crisis unfold.
Speaker 2 (04:05):
Right, they're kids, teenagers, maybe watching older siblings, parents, neighbors,
lose jobs, lose homes. They saw the system wobble badly.
Speaker 1 (04:14):
That must leave a mark. Witnessing that kind of instability
when you're.
Speaker 2 (04:17):
Young, it absolutely erodes trust. The old promise, you know,
go to college, get a good job, saved diligently, and
you'll have a comfortable retirement. That promise just feels broken
to many of them. It seems unreliable.
Speaker 1 (04:31):
And then they entered adulthood facing their own challenges.
Speaker 2 (04:34):
Huge challenges, crushing student loan debt for one, wages that
haven't really kept pace with productivity or living costs. And then,
just as many were entering the workforce, banned the COVID
nineteen pandemic kids, throwing everything into chaos again.
Speaker 1 (04:47):
So it's a learned distrust of the system. Instead of
relying on pensions or social security decades down the line,
they're thinking, I need to build my own safety net
right now.
Speaker 2 (04:55):
That's a huge part of the psychology. It's about self reliance,
building a personal fortress against future shocks. YEA. The data
backs this up pretty starkly. A twenty twenty three Deloitte
survey found almost half forty six percent of gen Z
workers feel financially.
Speaker 1 (05:09):
Insecure nearly half wow and.
Speaker 2 (05:11):
Even more seventy five percent three quarters are worried, deeply
worried about the rising cost of living. So for many,
fire isn't about getting rich quick, It's about achieving basic
stability and security on their own terms.
Speaker 1 (05:26):
Which connects to another big cultural shift. We're seeing this
rejection of hustle culture. They seem to be drawing a
line where maybe millennials didn't.
Speaker 2 (05:34):
That's a really key distinction. They saw the millennial experience right,
the glorification of overwork, the rise and grind mentality, working
eighty hour weeks, chasing promotions, often leading to burnout, anxiety,
mental health struggles. Learned from that, It seems so gen
Z appears to be placing a much higher premium on
work life balance, on mental health, on sustainable work patterns.
(05:56):
They observed the burnout and thought there has to be
a better way.
Speaker 1 (06:00):
But wait, how does that square with saving sixty percent
of your income? That sounds like its own kind of hustle,
doesn't it.
Speaker 2 (06:05):
Ah, that's the interesting nuance. It's not necessarily about not
working hard. It's about working smart, efficiently, and perhaps most importantly,
working temporarily at that intense pace.
Speaker 1 (06:15):
Okay, explain that they aren't.
Speaker 2 (06:16):
Rejecting effort, They're rejecting inefficient effort and mandatory indefinite effort.
The idea is often to maximize income and savings over
a relatively short focused period. That fifteen year sprint we
talked about. The goal isn't lifelong leisure. It's to buy
back their time sooner so they can then choose how
to spend it. Maybe that involves working on passion projects,
(06:37):
maybe volunteering, maybe part time work they actually enjoy. It's
about gaining optionality, not necessarily stopping work.
Speaker 1 (06:45):
Entirely optionality that makes sense. And facilitating all this, enabling
both the learning and the execution is their inherent advantage
as digital needed. Oh.
Speaker 2 (06:54):
Absolutely. The democratization of knowledge, especially financial knowledge, is massive. Here.
Twenty years ago, understanding investing often meant paying expensive advisors,
navigating jargon filled prospectuses gatekeepers, essentially exactly that information asymmetry
is basically gone. Now gen Z is learning about compound interest,
asset allocation, tax optimization, all these complex topics for free
(07:16):
online through channels like YouTube. You see creators like Graham
Steffan andre Jeek getting millions of views or huge reddit
communities like Financial Independence.
Speaker 1 (07:26):
Precisely, these platforms break down sophisticated financial strategies into easily digestible,
often entertaining formats. They share real numbers, real tactics. This
digital fluency gives gen z a massive headstart.
Speaker 2 (07:39):
So they're learning about roth iras and index funds in
college or even high.
Speaker 1 (07:43):
School sometimes, Yes, instead of figuring it out in their
late thirties, potentially missing out on a crucial decade of
compound and growth, they are front loading their financial education
and their action.
Speaker 2 (07:53):
Which ties right back into their core values. Doesn't it
This desire for freedom, for purpose beyond just accumulating.
Speaker 1 (07:59):
Well, absolutely, what does fire ultimately buy them? It's not
just escaping the nine to five, it's buying the freedom
to live a life aligned with their values much sooner.
Speaker 2 (08:08):
You mentioned experiences over things.
Speaker 1 (08:10):
Yeah, there was a twenty twenty two Adobe study that
found fifty nine percent, almost six out of ten gen
Zers prioritize experiences over material possessions. That's a significant shift.
So early retirement isn't about buying a bigger house or
a fancier car necessarily.
Speaker 2 (08:26):
For many know it's the vehicle that allows them to
travel to volunteer for causes they believe in, like climate
action or social justice, maybe pursue creative work that doesn't
pay well but feels meaningful. Fire becomes purpose driven financial planning.
The money is the tool. The freedom to live authentically
is the real goal.
Speaker 1 (08:44):
Okay, so we've got the why pretty clear now. The
economic anxiety, the rejection of hustle, the digital tools, the
drive for purpose. It's a powerful combination, definitely.
Speaker 2 (08:55):
So now let's shift gears to the how. Because motivation
is one thing, but achieving fire by forty requires a serious,
aggressive financial engine. This is where we see gen Z
deploying some really specific, sometimes intense strategies.
Speaker 1 (09:08):
And the absolute foundation, the bedrock of the whole thing,
has to be strategy one extreme saving and frugality. You
just can't get to a fifty sixty seventy percent savings
rate without drastically cutting expenses.
Speaker 2 (09:18):
It's non negotiable. This requires living well below your means.
But it's interesting many in the movement don't frame it
as deprivation. They see it as optimization, trading unnecessary consumption
now for massive time freedom later.
Speaker 1 (09:34):
So what are the big targets for cuts? Where do
they focus.
Speaker 2 (09:38):
Housing first and foremost. It's almost always the biggest expense
category for anyone, right, often thirty percent of forty percent
of take home pay. So gen Z gets really creative here,
like what we see a lot of minimalist approaches choosing
smaller apartments, continue to live with roommates well into their
late twenties or even thirties, which used to be less common.
Speaker 1 (09:58):
Or even more extreme options.
Speaker 2 (09:59):
Yeah, things like van life converting a van or buss
to live in, eliminating renderor mortgage payments almost entirely, or
house hacking, which we can talk more about. It's about
slashing that biggest bill dramatically. They're consciously trading conventional comforts
for speed toward their goal.
Speaker 1 (10:13):
And beyond the big stuff like housing, it's about tracking
everything else meticulously.
Speaker 2 (10:18):
Down to the dollar. They often rely heavily on budgeting apps.
YNA You Need a Budget is a popular one, Mint
as well for really granular tracking every coffee, every subscription
is scrutinized.
Speaker 1 (10:30):
Like running their life like a business, watching the P
and L kinda.
Speaker 2 (10:34):
Yeah. They're hyper aware of lifestyle inflation, the tendency to
spend more as you earn more, and they actively fight
against it so. Yes, it means home brewed coffee, packing lunches,
canceling streaming services they don't use much. It requires real discipline.
Speaker 1 (10:48):
That sounds tough to sustain. Doesn't that lead to burnout
feeling deprived all the time? Is saving sixty percent really enjoyable?
Speaker 2 (10:55):
That's probably the biggest personal challenge, and the sources suggest
community is key here online forums, local meetups to stay
motivated and not feel totally isolated. Let's take Sarah's example.
She's a twenty four year old software engineer. Okay, she
earns eighty thousand dollars. That's a good salary for sure.
Speaker 1 (11:11):
Decent start, Yeah, but still a long way from that
million dollar target we mentioned.
Speaker 2 (11:15):
True, but her savings rate is the accelerator. By choosing
to live with two roommates in a pretty basic apartment
and dedicating time to bull cooking her meals, she's managing
to save sixty percent of her income.
Speaker 1 (11:27):
Sixty percent of eighty k that's nearly fifty thousand dollars
a year going into savings and investments exactly.
Speaker 2 (11:35):
Her strategy isn't necessarily relying on hitting home runs in
the stock market. It's based on sheer saving discipline. Her
specific goal is to have three hundred thousand dollars invested
by the time she's thirty, and she keeps that up.
If she maintains that trajectory, even with average market returns,
she's absolutely on track for fire by forty. It's disciplined
driving the timeline.
Speaker 1 (11:54):
But discipline saving cash under the mattress won't cut it.
That money needs to work, which brings us to two.
Investing early and aggressively harnessing compound interest.
Speaker 2 (12:04):
This is where their digital native advantage really kicks in again.
They understand the power of compounding and they know they
need to start now. So first stop is maximizing any
tax advantage accounts.
Speaker 1 (12:13):
Available, like four oh one k iras.
Speaker 2 (12:15):
Exactly, especially grabbing any employer match on a four to
one k I mean that's literally free money, an instant
one hundred percent return on your contribution. Usually they prioritize.
Speaker 1 (12:24):
That, and inside those accounts, what are they typically investing in.
Speaker 2 (12:28):
The overwhelmingly common approach is using low cost broadly diversified
index funds or ETFs. Think Vanguard's Total Stock Market Index
VTSAX or similar funds. The goal isn't to beat the market,
it's to be the market captures average long term returns
while keeping investment fees absolutely minimal.
Speaker 1 (12:48):
Minimize fees, maximize time in the market. Got it. Let's
look at Jake, the graphic designer example. He illustrates starting young.
Speaker 2 (12:55):
Right, Jake is twenty two. He's putting five hundred dollars
a month into a roth ira it's post tax money
that grows tax free, and another two hundred dollars into
a regular taxable brokerage count.
Speaker 1 (13:05):
So seven hundred dollars a month total doesn't sound like
a huge amount.
Speaker 2 (13:09):
Initially, it might not seem like it, but the key
isn't the amount today, it's the time that money has
to grow. Assuming a pretty standard long term average return,
say seven percent per year after inflation, that consistent seven
hundred dollars a month starting at twenty two, thanks to
the magic and compounding, is projected to grow to over
one million dollars by the time he turns forty.
Speaker 1 (13:28):
One million from seven hundred dollars a month. Just by
starting early.
Speaker 2 (13:32):
It's incredibly powerful. What happens if he waited just ten years,
started at thirty two instead, you'd.
Speaker 1 (13:37):
Have to save way more each month to catch.
Speaker 2 (13:39):
Up Radically more, probably close to three times as much
per month to hit that same million dollar target by
forty That delay is incredibly costly. Front Loading the investment
is critical for the accelerated fire timeline. Time is the
secret sauce.
Speaker 1 (13:53):
Okay, So index funds are the core. What about other assets?
Real estate comes up a lot in fire discussions.
Speaker 2 (13:59):
It does, but often for gen Z pursuing early fire,
it's not about buying a portfolio of rental properties right away.
It's often more about that strategy we touched on heal tacking.
Speaker 1 (14:09):
Well to explain house hacking again, how does that work?
Speaker 2 (14:11):
So the typical way is you buy a small multi
family property like a duplex, triplex, or maybe a house
with a rentable basement suite. You live in one unit.
Speaker 1 (14:20):
And rent out the others exactly, and you.
Speaker 2 (14:22):
Often try to use loan programs that allow for a
low down payment, like an FAHA loan, which might only
require three point five percent down. The goal is for
the rent you collect from your tenants to cover most
or even all of your mortgage payment plus taxes and insurance.
Speaker 1 (14:37):
So you're essentially living for free or very close to it.
Speaker 2 (14:40):
That's the dream scenario. It drastically cuts your biggest expense
housing while you're also building equity in an asset and
getting significant tax advantages. It's a massive accelerator if you
can pull it off.
Speaker 1 (14:51):
Turning your biggest liability into an income source.
Speaker 2 (14:53):
Clever, very clever, And often that core saving and investing
is supplemented by strategy, threat side hustles, and multiple income streams.
They're leveraging the gig economy.
Speaker 1 (15:04):
This seems almost tailor made for the fire mindset. Don't
just save more, earn more too precisely.
Speaker 2 (15:10):
It gives them another lever at to pull to boost
that savings rate without necessarily needing a huge raise at
their main job. And they're using the.
Speaker 1 (15:17):
Skills they have, like what kinds of side hustles.
Speaker 2 (15:19):
Lots of freelancing, coding, graphic design, writing, social media management
using platforms like upwork or fiverr. Also, content creation is huge,
monetizing YouTube channels, TikTok blogs through ads or sponsorships, and
e commerce.
Speaker 1 (15:35):
Ventures selling things online.
Speaker 2 (15:36):
Yeah, maybe setting up an Etsy shop, selling digital products
like planners or templates, or even trying drop shipping using
platforms like Shopify. It's about finding ways to generate extra
cash flow, often leveraging digital skills.
Speaker 1 (15:48):
Mia the teacher example, really highlights the impact of this right.
Speaker 2 (15:52):
MIA's twenty six works as a teacher, likely on a
modest salary, but she built a successful Etsy store on
the side selling digital planners, and that store brings in
an extra three thousand dollars a month.
Speaker 1 (16:03):
Three thousand extra month. That's significant.
Speaker 2 (16:05):
It's huge. Think about it. If she's already saving, say
forty fifty percent of her teaching salary, and then she
takes that entire three thousand dollars side income and throws
it straight into investments.
Speaker 1 (16:15):
It massively speeds things up.
Speaker 2 (16:17):
It doesn't just accelerate the timeline, It potentially collapses it.
That's the power of increasing the income side of the equation.
Speaker 1 (16:23):
Okay, and speaking of collapsing timelines, Strategy four feels particularly
relevant to this generation because of remote work geo arbitrage.
Speaker 2 (16:33):
Geo arbitrage, Yeah, this is a really powerful tool. It's
basically the strategy of earning income based on one location's
salary norms, but living in a location with a much
lower cost.
Speaker 1 (16:43):
Of living, soar like you live in New York or
San Francisco.
Speaker 2 (16:47):
That actually lives somewhere much cheaper. Yeah, the rise of
remote work has blown the doors open for this. You
could be a software developer earning one hundred and fifty
thousand dollars salary tied to a company in a high
cost city.
Speaker 1 (16:57):
But you choose to live in say a Boise, Idaho,
where you're housing in daily costs or.
Speaker 2 (17:02):
Maybe half or even more dramatically, you can move abroad.
Places like shang Mai in Thailand or Lisbon in Portugal
are popular fire destinations where the cost of living can
be incredibly low compared to major US or European cities.
Speaker 1 (17:15):
And that difference in costs, that entire difference.
Speaker 2 (17:17):
That cost saving, goes directly into the investment pot. Your
savings rates skyrockets almost effortlessly because your expenses plummet while
your income stays high. It makes hitting those fifty seventy
percent savings rates much much easier.
Speaker 1 (17:30):
Wow, Okay, that's a game changer if you can swing
remote work. And finally, strategy five is about understanding that
fire isn't monolithic. There are different flavors, different goals within
the movement.
Speaker 2 (17:41):
Right, it's more of a spectrum. You often hear about
lean fire.
Speaker 1 (17:44):
Versus fat fire, Okay, break those down.
Speaker 2 (17:46):
Lean fire is about achieving financial independence as quickly as
humanly possible. This usually means aiming for a smaller nest egg,
one that can support a more frugal lifestyle and retirement,
maybe living on only twenty thousand to thirty thousand dollars
dollars per year.
Speaker 1 (18:01):
So you get to fi faster, but you live more.
Speaker 2 (18:03):
Simply, exactly, it prioritizes speed and freedom over luxury. Then
you have fat fire. This is the goal. For those
who want it more comfortable, perhaps even luxurious retirement. They're
aiming for a much larger portfolio, say two million dollars
or more, that can safely support annual spending of eighty
thousand dollars one hundred thousand dollars or even higher.
Speaker 1 (18:23):
Takes longer to get there, obviously.
Speaker 2 (18:24):
Much longer, or requires a significantly higher income and savings rate.
What's interesting is that many gen zers might aim for
lean fire initially get to that baseline independence, quickly, secure
their freedom and optionality, and then.
Speaker 1 (18:36):
Maybe let their investments continue to grow or keep aside
hustle going part time to eventually drift towards a more
fat lifestyle later.
Speaker 2 (18:44):
Precisely achieve independence first, then optimize for comfort. It's about
securing the core freedom as the primary goal.
Speaker 1 (18:51):
Okay, this all sounds incredibly strategic, very disciplined, but we
have to acknowledge retiring by forty is a massive undertaking.
It's not a walk in the park. Let's talk about
the hurdles, the specific challenges gen Z faces on this
path that maybe previous generations didn't or not to the
same degree.
Speaker 2 (19:08):
Absolutely, and the first undeniable obstacle is the sheer way
to student loan debt. It's an anchor for so many.
The total amount in the US is just staggering, over
one point seven trillion dollars.
Speaker 1 (19:19):
Recently, and that debt hits them right at the starting line,
right when they need to be saving aggressively.
Speaker 2 (19:24):
It completely sabotages the start. Instead of saving fifty percent,
many are starting with negative savings just trying to dig out.
It requires incredible discipline just to pay off the debt,
let alone save on top of it. For many, the
first say three to five years of their intended fire
journey are just spent getting back to zero.
Speaker 1 (19:40):
That's years of lost compounding critical years.
Speaker 2 (19:44):
They're already behind schedule from day one in many.
Speaker 1 (19:46):
Cases, and then you pile on top of that the
general rising cost of living, especially housing. It feels like
the goalposts are constantly moving further away.
Speaker 2 (19:54):
Housing is just brutal. We mentioned the strategies like house
hacking or van life, but those aren't feasible or desirable
for everyone. The media and US home price hitting four
hundred and twelve thousand dollars in twenty twenty four. That
makes traditional home ownership incredibly difficult if you're also trying
to save half your.
Speaker 1 (20:12):
Income, and even if you rent, those costs keep climbing
too relentlessly.
Speaker 2 (20:17):
Rising rents eat directly into the money you could be
saving and investing. Inflation in general means your target fire
number might need to be adjusted upwards over time as well.
It's a constant battle against rising costs.
Speaker 1 (20:29):
Then there's the flip side of the gig economy flexibility.
We talked about career instability and the lack of benefits.
Speaker 2 (20:35):
This is a huge one, maybe the hidden vulnerability in
some fire plans. Relying heavily on freelance work, contract gigs
or being self employed often means you don't get the traditional.
Speaker 1 (20:44):
Safety nets like employer sponsored health insurance.
Speaker 2 (20:48):
Exactly, or paid sick leave, disability insurance, retirement plan matches,
all those things that come with a traditional W two job.
Speaker 1 (20:57):
So fire eat adherents have to cover all that themselves.
Speaker 2 (21:00):
They have to self insure. Essentially, buying health insurance on
the private market can be incredibly expensive, especially for families,
and those costs tend to rise unpredictably. They also have
to fund their entire retirement savings making up for the
lack of any employer match.
Speaker 1 (21:14):
That adds significant cost and complexity to their planning. They
probably need a bigger emergency fund too.
Speaker 2 (21:20):
Absolutely, it requires a larger buffer and potentially a higher
fire number overall, just to account for those self funded
benefits and potential income gaps between contracts.
Speaker 1 (21:30):
There's also a psychological cost, isn't there the social pressure
and potential isolation from living so differently.
Speaker 2 (21:36):
Oh, definitely, it can be really challenging, especially in your
twenties and thirties. Our culture heavily promotes consumption. Success is
often signaled by spending nice cars, big houses, expensive vacations,
frequent nights out.
Speaker 1 (21:49):
And if you're saving sixty percent, you're opting out of
a lot of that.
Speaker 2 (21:52):
You are you might be constantly explaining to friends or
family why you're packing a lunch instead of going out,
why you're driving an old car, why you're skipping the
destination wedding or the group trip. That can lead to judgment, misunderstandings,
feeling left out.
Speaker 1 (22:08):
It takes real mental strength to stick to your plan
when everyone around you is spending it really does.
Speaker 2 (22:14):
Finding a community, even online, who understands and supports your
goals becomes crucial for staying the course without feeling completely isolated.
Speaker 1 (22:23):
And lastly, the big one lurking behind all investment plans
market volatility, especially when your timeline is compressed.
Speaker 2 (22:31):
This is the inherent risk you can't fully control. They're
relying heavily on stock market returns over a relatively short
fifteen twenty year accumulation phase. The danger is what's called
sequence of returns risking, meaning when the market fluctuations happen.
Matters hugely. If you experience a major, prolonged downturn like
two thousand and eight or the dot com bust right
(22:52):
as you're nearing your fire number, or worse, just after
you've retired and started making.
Speaker 1 (22:57):
Withdrawals, it could wreck the plan.
Speaker 2 (23:00):
Seriously derail it if your portfolio drops thirty forty percent
right when you need to start living off it, and
you're forced to sell assets at those low prices, it
drastically increases the chances of running out of money later.
Someone retiring at sixty five has more time, potentially decades,
for the market to recover from dips early in their retirement.
Someone retiring at forty doesn't have that same buffer. They
(23:21):
need the market to cooperate, especially around their retirement date.
Speaker 1 (23:25):
Okay, so the hurdles are significant, debt costs, benefit gaps,
social pressure, market risk. It's definitely not guaranteed.
Speaker 2 (23:32):
Not at all. It requires careful planning, discipline, and maybe
a bit of luck regarding market time.
Speaker 1 (23:38):
Again, despite all that, we are seeing gen Z make
real strides. They seem to be navigating these challenges successfully,
partly by, as you said earlier, redefining what success even
looks like.
Speaker 2 (23:48):
I think that's key. They're changing the goalposts. For many.
Success isn't measured solely by income or job title anymore.
The sources strongly suggests their definition centers much more on time, autonomy,
meaningful experiences, and making a positive impact rather than just
climbing a corporate ladder.
Speaker 1 (24:04):
And fire is the tool to achieve that alternative definition
of success.
Speaker 2 (24:08):
Exactly. It's the practical roadmap to escape the rat race
framework that maybe doesn't align with their values and to
start living that purpose driven life much much sooner.
Speaker 1 (24:18):
And this values driven approach is even showing up in
how they invest their money, right, not just that they invest.
Speaker 2 (24:24):
Yeah, we're seeing a much greater emphasis on aligning investments
with personal values, things like ESG investing. Focusing on companies
with strong environmental, social and governance records seems much more
prevalent among gen Z investors compared to previous generations.
Speaker 1 (24:39):
So they want their money to do good or at
least not do harm while it grows.
Speaker 2 (24:44):
That seems to be a growing priority. But interestingly, alongside
that ethical focus, we also see an openness to much
newer and frankly riskier asset classes.
Speaker 1 (24:53):
Like cryptocurrencies or NFTs, things that weren't really on the
fire map ten years ago.
Speaker 2 (24:57):
Exactly. It's a bit of a paradox. I might have
a core portfolio of stable, low cost index funds, but
some are willing to allocate a smaller portion to these
much more volatile assets, hoping for those outsized exponential returns
that could potentially shave years off their fire timeline.
Speaker 1 (25:15):
A calculated gamble for speed.
Speaker 2 (25:17):
Potentially yes, acknowledging the high risk, but seeing the potential
reward as worth a small bet, and.
Speaker 1 (25:22):
Underpinning so many of these strategies. The side hustles, the
geo arbitrage. The flexible work is the remote work catalyst.
It feels like this structural shift in how we work
has been a massive enabler.
Speaker 2 (25:34):
It's arguably the single biggest tailwind for gen Z's fire ambitions.
The widespread acceptance of remote work, accelerated by the pandemic,
just unlocks so much potential that two main ways. One,
it allows them to compete for higher salaries often tied
to jobs based in expensive cities, regardless of where they live. Two,
it directly enables geo arbitrage, earning that high salary while
(25:56):
living somewhere significantly cheaper. That combination drastically boost savings potential
in a way that just wasn't possible for most people
fifteen years ago when fire was gaining its initial traction.
Speaker 1 (26:08):
So the fire movement and the remote work revolution are
kind of feeding each other.
Speaker 2 (26:13):
Absolutely, they are perfectly synergistic remote work makes the extreme
saving required for fire much more feasible for a wider
group of people.
Speaker 1 (26:21):
Okay, to really inspire listeners and show this isn't just theory,
let's highlight some of those real world examples. People who've
actually done it, achieved fire early using these diverse paths.
Speaker 2 (26:30):
Great idea. Let's start with Emma. She hit lean fire
at twenty seven.
Speaker 1 (26:34):
Twenty seven, that's incredibly fast.
Speaker 2 (26:36):
She was a marketing specialist. Her strategy was pure focused
execution on the core principles extreme frugality, saving around seventy
percent of her income, combined with smart tactics like house
hacking to minimize her housing costs and consistently invest in
the difference and index funds.
Speaker 1 (26:53):
So discipline and execution. What's her life like now?
Speaker 2 (26:56):
She reached her number around six hundred thousand dollars, but
she didn't just stop contributing. She pivoted. She left the
corporate marketing world and now works part time as a
travel blogger. It generates some income, keeps her engaged, and
funds her passion for experiences. She traded the high salary
for total control over her time.
Speaker 1 (27:13):
Amazing. Okay, who else?
Speaker 2 (27:15):
Then there's Liam who represents more of the income acceleration path.
He's twenty five, a self taught coder. Okay, instead of
just focusing on saving a salary, he put his skills
to work building an asset and educational app that generates
passive income for him.
Speaker 1 (27:28):
Ah, creating something that works for him exactly.
Speaker 2 (27:31):
So he combined a frugal lifestyle with this accelerating income stream.
He's now on track for fat fire, aiming for a
larger nest egg potentially by age thirty five. It shows
the power of boosting the income side, not just cutting expenses.
Speaker 1 (27:45):
Right creating assets, and Ava's story highlights the geo arbitrage angle.
Speaker 2 (27:51):
Yes, Ava was a nurse. She retired at twenty nine
with about eight hundred thousand.
Speaker 1 (27:55):
Dollars twenty nine. As a nurse.
Speaker 2 (27:57):
House strategic geo arbitrage. She took high paying travel nursing assignments,
often in expensive areas like California, where demand and salaries
were high, but crucially, during her time off or even
between contracts, she chose to live in much lower cost
locations like Mexico so.
Speaker 1 (28:13):
Earn high spend low geographically.
Speaker 2 (28:16):
Precisely, that difference allowed her to save aggressively and hit
her fire number incredibly quickly, And like Emma, she didn't
just stop. She now uses her freedom to volunteer with
health care nonprofits. It's about redirecting her skills and energy
on her own terms.
Speaker 1 (28:30):
Those are powerful examples. They really show it's possible, but
also that it requires very intentional choices and trade offs.
Speaker 2 (28:36):
Definitely, there's no single right way, but they all involved discipline, planning,
and a clear focus on the end goal of freedom.
Speaker 1 (28:43):
Okay, So for listeners who are hearing this feeling inspired,
maybe thinking how could I even start pump, let's boil
down the actionable takeaways. What are the essential steps based
on everything we've discussed for someone wanting to begin their
own fire journey?
Speaker 2 (28:58):
All right, the listener's toolkit. Step one absolutely foundational. Calculate
your fire number. You need that target. Multiply the annual
income you think you'll need in retiring by twenty five.
If it's forty thousand dollars a year, your target is
one million dollars. Knowing your number is step one.
Speaker 1 (29:14):
Step two you need data track your spending. Use those
budgeting apps like Yna or Mint. You can't cut cost
effectively if you don't know exactly where your money's going
right now, find the leaks.
Speaker 2 (29:24):
Step three, play offense as well as defense. Maximize your income. Yes,
cut costs, but also focus on earning more. Negotiate raises,
look for higher paying jobs, or seriously consider starting that
side hustle. Boosting income is often easier than cutting expenses
past a certain point.
Speaker 1 (29:40):
Step four and maybe the most crucial for long term success.
Invest early, don't wait, start now, even if it's small.
Use low cost index funds or ETFs, and critically automate it.
Set up automatic transfers from your checking account or paycheck
directly into your investment accounts. Pay yourself first.
Speaker 2 (30:00):
Step five. Don't underestimate the psychological side. Build a support system.
This path can feel lonely. Find your tribe. Join online
fire communities on Reddit or Facebook, look for local meetups.
Having people who understand your goals provides motivation, accountability, and
helps combat that social pressure.
Speaker 1 (30:18):
And finally, Step six, be adaptable, Stay flexible. Life happens you.
Income might change, you might have kids, face unexpected expenses.
Your goals might even evolve. Your fire plan isn't set
in stone. Be prepared to adjust the timeline the target
number or the strategy as needed, but keep that core
goal of financial independence front and center.
Speaker 2 (30:35):
That flexibility is key. It's a long journey, but gin
Z's resourcefulness, their comfort with digital tools, and crucially, their
willingness to question traditional norms about work and life, it
really positions them well. They fundamentally understand that time is
the ultimate non renewable resource, which.
Speaker 1 (30:55):
Makes this whole movement feel like more than just clever
financial planning, feels like, well, like you said earlier, almost
a revolution.
Speaker 2 (31:03):
He kind of is a quiet revolution maybe, but it's
a fundamental shift towards prioritizing a life built around meaning,
purpose and possibility, rather than one dictated solely by the
perceived necessity of decades of mandatory labor.
Speaker 1 (31:17):
The freedom to choose your contribution, not just endure your job.
Speaker 2 (31:21):
That's the ultimate prize they're chasing, not necessarily idleness, but autonomy,
the freedom to define what work and life itself looks
like for them.
Speaker 1 (31:28):
A really fascinating deep dive into how a generation is
rewriting the retirement playbook. Thanks so much for unpacking that.
Speaker 2 (31:35):
With us, my pleasure. It's a compelling shift to watch
Speaker 1 (31:37):
And thank you for joining us on the deep dive
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