In Time for Your New Years Resolutions: A Review of Playing with FIRE, Scott Rieckens' New Book on Financial Independence

                My last post dealt with Suze Orman’s ludicrous criticism of the FIRE (Financial Independence Retire Early) movement. While I was doing research for that post, I discovered a book was soon to be published on FIRE.

                I requested and received a review copy of that book, Scott Rieckens’ Playing with FIRE: How Far Would You Go for Financial Freedom?, which will be hitting book stores in a couple of weeks. The book retails for $16.95, but Amazon is taking preorders for $11.56. I’m going to buy a few to give to some of my family. That’s how much I (to put it in terms Suze Orman would understand) liked, liked, liked, liked this book.

              Yes, FIRE stands for Financial Independence Retire Early. Now, before you get all nasty about retiring early, as in retiring to sit on the beach, or as Suze Orman said about FIRE, sit around watching TV and doing nothing, the FIRE version of retire is—you get to do what you want. If you want to, as Suze suggests, work in a corporate job until you’re 70, when you can collect your maximum Social Security benefits, that’s great (although, remember Suze also says that Social Security won’t be around in 2030). Just because you CAN retire does not mean you MUST retire. You’re simply giving yourself an option you would not otherwise have without following the FIRE program. In my own case, as I’ve mentioned before, with the help of Paul Terhorst’s Cashing in on the American Dream and Joe Dominguez’s and Vicki Robin’s Your Money of Your Life, I realized early retirement could be enjoyable and that it was possible. I never thought I’d pull the plug, but new management took over at Company L, and we had a disagreement over work-life balance. I thought there should be one. I made the decision to leave 25 years ago, and I finally got everything together and said goodbye to my old life in February, 1995.

                So I’ve been retired from corporate life and office politics for nearly a quarter century. Time has flown. I’m thinking of doing a 25-year anniversary revised edition of Beating the System if I can find the time. It might be interesting to share the mistakes I made and lessons learned as well as how my views have changed over the past quarter century.

                At any rate, having lived the FIRE lifestyle for so long, I was grateful that Scott Rieckens has taken the time to pull this book together. He has also put a documentary with the same title together, and it will be opening in select venues very shortly. I would imagine if it is not opening where you live, it will be on Kanopy, the library free streaming service, soon.

                OK. To the book. Mr. Rieckens and his wife, Taylor, were living what they thought was the California dream life in Coronado, California, a suburb of San Diego. Together they earned, after taxes, $142,000 a year, of which they spent $132,000. The Rieckens married in 2010 and in 2015 had a child. Taylor decided to work from home in order to spend time with their daughter. They had bought a bunch of stuff for their daughter’s birth, and, it seems, every new interest the Rieckens found involved purchases. They leased two cars, had a boat club membership (I’ll say this, though, that boat club membership at $350 a month was a lot cheaper than owning a boat), and everything they wanted. Every material thing, that is. Scott was feeling drained by his job when he heard Pete Adeney (Mr. Money Moustache) on a podcast. Adeney said he and his family lived comfortably on $24,000 to $27,000 per year. That was in February 2017. Scott started investigating the FIRE movement and grew more intrigued. He began forwarding blog posts and articles to Taylor, who eventually came around largely as the result of an exercise that asks what are the ten things that mean the most to you. Not one of either Scott’s or Taylor’s list included a lot of material stuff. They decided to take action and began by getting rid of their surplus stuff. Scott recommends starting small—not eating out, making your own coffee instead of going to Starbucks, and bringing your lunch to work. In Scott’s case, bringing his lunch resulted in his coworkers suggesting other ways to save money. Once Scott started sharing his FIRE discoveries, he found a great many people were already living the FIRE lifestyle.

                Scott makes the observation about living in California that played a big part in my decision to leave: he says he and Taylor planned to spend lots of time on the water—surfing, paddleboarding, kayaking, and swimming—but that didn’t happen. They were working so much they never had time to do any of those things (though they had bought paddleboards, kayaks, etc.). When Scott gives up his much loved $350 per month boat club membership, he lost a one-time $6,000 initial membership fee. He takes that opportunity to discuss the “sunk cost” fallacy, or the tendency of people to hold on to things that become useless because of the money we’ve already spent on them. (Ask anyone who’s bought exercise equipment or held on to GE stock through good, bad, and empty backup plane trips.) He advises we forget about the money spent, take our losses, and move on.

                Then he gets into the nitty gritty of FIRE. It involves saving as much as you can—he and Taylor went from virtually no savings to saving 54% of their income. He convinced Taylor to get rid of her BMW lease by showing her that by doing so, their savings rate would increase to 58%, and they’d reach FI in 11 years instead of 12.5 years with the BMW. Taylor decided the beloved BMW was not worth an additional 1½ years of her life.

                There are several examples of formulas that will tell you how soon you can retire if you get with the program. The basics are: Spend well below your income and invest the difference. FIRE enthusiasts recommend Vanguard’s VTSMX funds for those with at least $3,000 to invest and the VTSAX fund for those with at least $10,000 to invest. VTSMX investments will automatically become VTSAX funds when they reach $10,000. A word of caution here—I don’t have a clue about these funds. Most of my investments have been in bonds. When I rolled my 401(k) over to an IRA, I bought zero coupon bonds. This has worked out well for me, but I’m certainly open to exploring the funds the FIRE enthusiasts recommend. For further reading on the subject, Scott recommends JL Collins’ The Simple Path to Wealth. I haven’t read it, but I will.

                The book discusses buying a car. Among the recommendations are buy what you need (which probably won’t be a turbocharged car), try to find a good used car for less than $5,000, and pay cash. I’m going to advise you to be flexible here. The car I owned before I bought my Kia was (I thought) a $4,200 bargain. It had low miles, had been owned by a little old lady who had only driven it to the beauty parlor, and it turned out to be not only the most expensive car I’ve ever owned, but the car that convinced me never to buy another General Motors product for as long as I live. (And I come from a family that rarely bought anything that wasn’t GM.) I drive between 2,000 and 3,000 miles per year, and that car easily cost $2,000 a year to keep running. When the brakes failed the SECOND time, I decided enough was enough. I had the brakes fixed and drove the car to a Kia dealership fully expecting to write a check for a new car. When I didn’t bother filling out the credit application because I was going to pay cash, the salesman told me I really didn’t want to do that, since if I financed the car with Kia, they’d knock $1,000 off the price of the car. I asked how long I had to keep the car financed, and he said three months, and I could pay one-third of the principal for each of those three months. The interest rate was 5%. The sales tax in Missouri is 8%, so I saved $80 on the sales tax and wound up paying three months’ interest at 5% (probably about $35). The car cost $16,000—the only option I bought was an automatic transmission, and that was nearly five years ago. I’ve had the car serviced every nine months, and so far that’s been my only expense. Given that I was paying at least $2,000 a year to keep my previous car running, I figure this car has saved me $10,000 so far, and if that continues another three years, the car will have been free. So, I’d diverge from the FIRE folk here and advise you to keep your options open and think long-term when it comes to cars.

                Scott and Taylor decided to leave California for a more affordable area. They narrowed their list to Bend, Oregon, Fort Collins, Colorado, Boise, Idaho, and Spokane, Washington. They fell in love with Bend and decided to settle there. They fell in love with a midcentury home and offered the $480,000 asking price. Alas, and possibly for the best, the home had multiple offers and they wound up with a $420,000 house in a slightly less desirable area.

                A personal note here. Scott grew up largely in Iowa and his parents still live there. He mentions homes there are $150,000. I’m not clear on why a $420,000 home in Bend was a more attractive alternative. But I’ve never been to Bend, and this is Scott's and Taylor’s story. But there are many places where housing is more affordable, including Kansas City (although given the city’s profligate spending on subsidized housing for the wealthy and a fixed rail fair weather only streetcar, I’d strongly favor the Kansas side if I were in the housing market today).

     

                Scott sprinkles the book with other people’s FIRE stories, which I found encouraging. After all, it may seem easy on the surface to cut a lot of unnecessary spending from a $142,000 annual budget, but how about those who make less? Jillian of Kalispell, Montana is 35 and reached FI at 32 on a $60,000 income. She spends $30,000 a year for a family of seven. She and her husband were extremely frugal and overcame many obstacles, but at 35, they’re financially independent. Kalen and Kyle of Evans, Colorado currently spend $32,000 a year. They’re 26 and plan to reach FI at 32 by continuing to save 65% of their income (which I estimate is $92,000 per year). And these are just a couple of the inspiring FI stories in this book.

                One young man gives this advice: For traditional employment, don’t pursue your passion. Find a company that appreciates its employees and will provide challenging work for equitable compensation. Make the rest of your life about pursuing your passion. Good advice, indeed.

                Scott concludes: “[O]nce you taste a truly free life, untethered to a schedule or a paycheck or a career ladder, you can’t untaste it. Once you ask yourself the most important questions—What do I want to do with my time, and what makes me happiest—you can’t ignore the answers.” (Italics his)

                While you’re waiting for the book, here are some websites Scott provides for you to check out the FIRE movement:

                Mr. Money Moustache: mrmoneymoustache.com

                Mad Fientist: madfientist.com

                Frugalwoods: frugalwoods.com

                Physician on FIRE: physicianonfire.com

                Early Retirement Extreme: earlyretirementextreme.com

                The Simple Path to Wealth: jlcollinsh.com

                Millennial Revolution: millennial-revolution.com

                ChoseFI: choosefi.com

                Afford Anything: affordanything.com

                When I contrast this book with Malcolm Harris (B. 1988)’s whinefest, Kids these Days, which I reviewed last February, there simply is no comparison. Mr. Harris (B. 1988) wallows in his misery, and that’s basically all he has to offer. Scott and Taylor are roughly the same age as Mr. Harris (B. 1988), and they offer a way for people to take control of their future and live the lives they want to live. And I’m happy to see the media are giving the FIRE movement serious coverage. With the future so uncertain (as it always is), FIRE provides a path to prepare for some of that uncertainty.

                I won’t go so far as to take Suze’s approach and say if you don’t follow Scott’s advice, you’ll wind up putting a gun to your head, but I don’t think you’ll regret reading what Scott has to offer.

                I hate to end this post with a downer, but in his latest post Pete Adeney, Mr. Money Moustache, reveals he and his wife have divorced. If there is good news here, it’s that their divorce is extremely amicable, and it was all accomplished for $265. Here’s wishing both of them the best.

                Next up: I’m going to fulfill a promise I made nineteen years ago.

©2019 Larry Roth