A growing number of young professionals are expediting the path to financial independence by living frugally and following the "4% rule."
Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
The 30-year-old retirees
The Hustle | | May 5, 2021
A growing number of young professionals are expediting the path to financial independence by living frugally and following the "4% rule."
Shortly after Kristy Shen and her partner, Bryce Leung, turned 31, they quit their computer programming jobs and retired.
The couple had grown disillusioned with the “Boomers’ dream”: Get a job, be a loyal employee for decades, buy a house, retire at 65.
Instead, they devoted themselves to a bare-bones lifestyle, saved 80% of their annual income, and amassed a portfolio worth $1m — enough to leave behind the 9-to-5 life and live frugally off the dividends.
Millennials are often hounded for their poor financial management. Some 66% of 21- to 32 year-olds have no savings, and one-third don’t actively think about retirement.
But a growing subculture of young folks like Chen are hellbent on achieving financial independence by their early 30s.
They call themselves the ‘FIRE’ community
Subscribers to the FIRE movement (short for “Financial Independence, Retire Early”) don’t feel like waiting around for the early bird special.
See: Latest fintechs focus on saving
Early retirement is not a new concept. It’s been kicked around since the 1950s and gained momentum during the ’90s tech boom, when books like Your Money or Your Life and The Complete Tightwad Gazette promoted self-reliance, frugality, and smart investing as a path to financial liberation.
In the past decade, FIRE has found a new home on the internet, fueled by gurus like Mr. Money Mustache and Mad Fientist, who run wildly popular blogs with posts like
“Safety Is an Expensive Illusion” and “Luxury Is Just Another Weakness.”
One of the movement’s central breeding grounds, the r/FinancialIndependence subreddit, has swelled from 100k to 900k subscribers over the past 5 years. Its members tirelessly debate everything from the cost of having children to the merits of living in a van.
Many of these fast-track retirees are tech workers under the age of 30 with healthy salaries — but the forums are also populated with nurses, teachers, fast-food employees, and janitors. They follow financial guidelines like the “4% rule” (the ideal annual withdrawal rate from a retirement account without dipping into savings) and the “FI Number” (an individual’s dollar amount needed to retire).
There are several variations of FIRE, but adherents fall into two main camps, based on how militant they are about being frugal:
- LeanFIRE: An approach that calls for extreme minimalism and living on the bare minimum in order to save and retire faster.
- FatFIRE: An approach that still aims to save and be frugal, but allows for a bit more indulgence.
FIRE is an innately privileged concept: For many Americans, thriftiness is a necessity, not a choice — especially in the wake of the pandemic.
But FIRE enthusiasts claim that anyone can follow the movement’s unofficial formula: Dramatically minimize spending. Maximize earnings. Save enough to live off of dividends.
See: Will Digital Currencies and Fintech Solve the Financial Inclusion problem?
The young, rich, and frugal
Kevin*, a 28-year-old FIRE devotee living in San Francisco, is among those who go to extreme lengths to cut down on monthly expenses. A self-described “shitty coder” at a large cloud computing company, Kevin reels in a pretax salary of $165k per year — enough to afford him a “decent lifestyle” in one of the most expensive cities in America.
Instead, Kevin lives far below his means:
- He rents a shared room in a 5-bedroom house for $800 per month
- He sleeps on an inflatable camping mat
- He eats beans and rice 5 nights per week
- He relegates himself to $20 per week for social activities
- He uses his company’s gym to work out for free
- He gets around the city on a bicycle or electric scooter
He also chronicles every purchase in an Excel spreadsheet: $3.47 for a pack of floss; $8.81 for a new bike tube; $14 for a Mother’s Day gift (“Mom gets I’m on a budget,” he says).
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