Is FIRE still achieveable in 2022?

Brenton Tong – Financial adviser and Managing Director of Financial Spectrum

FIRE is still viable in 2022. If anything, I expect to see the movement grow. Globally, there has been a shift in some societies to question if the current trajectory of life – 40 years of hard labour and an expensive lifestyle, is really the right way to do life. Many have resigned, and others are looking at life a little differently. With the growth in remote working, now is an incredibly unique time to be alive and wondering how you're doing to live yours.

Cost of living pressure is front-page news at the moment, and with an election on, it's a phrase that we're using or hearing hourly. And it's true, prices are up. On the face of it, you would think that the FIRE movement is under a bit of pressure and is it really possible? However, FIRE – as a concept – is alive and well and being used by many to achieve their financial aspirations. Of particular note, if you can move out of the expensive city areas and maintain your city job and salary, it's in fact easier today to build your nest egg than it ever has been.

For those that have to live in expensive areas, I'm afraid that it has become harder to save and build wealth – with a higher cost of living and rents increasing, it's going to get harder to squirrel away that money into your investment portfolio. This has a double negative – since you can't save as much, it takes longer to build and compound your wealth up to the level that you need, and you'll need more than ever before to keep up with the cost of living. What was a 10-year plan is now 12-, or even 15- for those facing cost-of-living pressure.

Specifically for Australians, we're seeing strong rent pressure in most capital cities – so if you're job keeps you close to the action and you can't work remotely, wage growth isn't quite high enough to keep up with rising living costs. FIRE isn't about doing without everything, but it is about keeping things very finely tuned and not living a lavish lifestyle. But even basic living now costs more. For places like Sydney, the alternatives aren't that great either. Move further out for cheaper rent? You have to then contend with long commutes, tolls, expensive transport or if you have a car, through-the-roof petrol prices.

Brenton's top tips for growing wealth

• Fine-tune your budget and have an acute awareness of where all your money is going. It's not about saving as much as possible, but extracting maximum value for what you do save. Question expenditure on the basis of: "does this add value?" There's nothing wrong with spending money, but FIRE is about not wasting it. Be smart about your lifestyle choices.
• Don't ignore superannuation. This is probably my #1 tip for people looking to retire early. You can't access your super until 60, so it's not going to be any use if you want to retire at 40, right? Totally wrong. You can't rely on super to fund your life for the first 20 years, but it's incredibly gratifying to receive a massive cheque when you turn 60 because you were smart with your super fund. Money goes into super pre-tax and is only taxed at 15% – this gives you more capital to invest for the long term and the returns are taxed at a maximum of 15% - so the compounding effect is massive. Make sure the fees are low and the money is invested well.
• Manage your risk. While there are many great investment ideas out there, don't get too carried away with all the great rapid ways of developing wealth. As a rule, wealth comes to those that are patient and consistent. If you want to use Crypto, as an example, do so but in moderation. The old saying "don't keep all your eggs in one basket" can't ring truer. If you have multiple assets in different investments, then when it's time to call on the money it's likely that some will be performing well, some not so. The idea is to always have money that you can draw upon willingly, rather than reluctantly taking a loss.

Hakan Ozyon – Founder and CEO at Hejaz Financial Services

The FIRE method is more viable today than it has been before, due mainly to new societal trends. The traditional 'work in a job or profession for all of your working life until you retire' expectation is over for current generations. Paths for creating wealth too have expanded on many legitimate fronts: business advice, capital markets, wealth products, digital assets, and various small business opportunities are more accessible and, in most cases, cheaper than any time in history.

Advice from my high school teacher in the mid-1980s is no longer applicable. She said we would all follow in our parents' footsteps in terms of our careers (i.e. if our father was a labourer, then we would become a labourer as well). There are so many alternative career and income opportunities for those with the courage to explore them.

At least 70% of young people I have encountered have ambitions to become financially independent and retire early. However, astonishingly, very few have a plan for execution. There are those who think that they can hit the jackpot by making quick fortunes via digital assets or becoming an online influencer. There are others who think that they can work very hard for ten years, and then they will have enough money to retire; which is not the case.

My experience over the years has shown that individuals who are predominantly on target for FIRE are those who have understood the need for mentoring, surrounding themselves with talented people who impart wisdom and personal learnings, to achieve a path to early retirement. Nothing is a substitute for hard work, listening to advice and internal drive.

Hakan's top tips for growing wealth

• Your net connections are your net wealth. Surround yourself with hardworking, successful people who will encourage you to go after challenges and set ambitious goals
• Spend money on expanding your knowledge and expertise. If you are unable to do this, seek out fully licenced professionals to offer advice and help drive your wealth creation in a sustainable way
• Do not be afraid of risk — ensure that the risks you are taking though, do not stop you from sleeping at night and align with your personal, ethical or religious values.

Serina Bird – Author and Host of The Joyful Frugalista podcast

Yes, it (FIRE) is still viable in 2022. Yes, the cost of living is high – but we are still living in an abundant country. There are always ways to save and invest, and one of the good things about 2022 is that there are more ways to invest online than ever before. There are also more ways to get a side-hustle than ever before or be part of an online FIRE community to connect with others who share your goals. The sharing community now is huge, and it's hip to be frugal: not just to save money, but also for sustainability reasons.

The biggest thing is the lifestyle decision of wanting to have things now. You can have what you want – but often it pays to wait and save for it. Australians are, in general, not comfortable with the concept of delayed gratification. We also (still) don't talk enough about financial literacy. We equate savings and investing with not having fun. I equate it with choosing to focus on what you value.

I value my family and spending time with them, for instance, more than 'stuff'. I also value the financial security of knowing I have a roof over their head over having expensive holidays or toys. When my kids were young and I was single parenting after domestic violence, I would repackage toys for them for Christmas and their birthdays – or package gifted or op-shopped toys. Honestly, they didn't know when they were that little. Most of the fun was in opening the packages! They also valued playing with me and my family members more than the toys.

Now my eldest is in high school and not so easily fooled. For bigger purchases, such as IT equipment, we usually offer to pay 50% and for them to save towards their goal. This works really well and we find they respect and value what they buy. They also love the autonomy of having bought the items.

Serina's top tips for growing wealth

• The biggest tip is to have the habit of saving. Often, we think that to be successful at growing our wealth we need to do something complex or blingy. The book The Millionaire Next Door (a 1996 book by Thomas J. Stanley and William D. Danko) shows that, in most cases, the genuinely wealthy live frugally and within their means. You probably would not pick them out in the street as being wealthy! I've met billionaires and honestly, you would just think they were ordinary people unless you knew. And generally, they like it that way. But their secret is that they consistently save a portion of their wealth, and they invest it wisely – usually in a diversity of ways.
• The related tip is to educate yourself about personal finance. Read as much as you can and be as informed as you can. Always be curious, and always ask questions.
• Another way to grow your wealth is by starting a business – including a side hustle. Having your own business can enable you to grow different revenue streams than if you were just in a job. This is a topic I explore more fully in my recent book, The Joyful Startup Guide.

David Scollon – Author of MISSION: POSSIBLE – Four Steps to Financial Independence on Any Income

FIRE is still viable, just at a different pace. It is guaranteed that people's savings rates will fluctuate year to year, and that's ok – stuff happens. It is analogous to committing to sailing around the world; the weather will constantly change, and that's part of the course. If your strategy requires stable conditions, you will be in for a shock. A FIRE plan doesn't avoid change; it accounts for it.

How each person is impacted by inflation depends on their circumstances, income and capacity to reign in expenses. Some will face higher costs but are at a life stage where their income increases.

What's holding people in Australia back the most from reaching the endgame of FIRE?

Resources, particularly time. All good things take time, including FIRE. If you can add the other key ingredients, including long-term positive savings and investing well, it is just a matter of time. This doesn't mean it is easy! It's like planting an oak tree – if you are fortunate enough to have the resources of seeds, good soil, water, fertiliser and patience, it's not a question of 'if' it will become an oak tree but 'when'.

David's top tips for growing wealth

The path to financial independence and growing wealth can be summarised in 16 carefully chosen words and four steps:

• Earn more than you spend
• Invest the rest well, over time
• Plan for property
• Cover your risks.

John Cachia – Financial Adviser at AFA Group Wealth & National Practitioner Chair of the Association of Financial Advisers

Achieving FIRE is definitely viable in 2022 and is always a viable option, no matter the market conditions. While inflation and the rising cost of living can make achieving FIRE more challenging, it's about coming back to the fundamentals of having a strategic financial plan that is appropriate to the needs of the client and sticking to it.

My approach is to ensure that I'm not helping clients achieve FIRE for the sake of achieving FIRE. There are strategic methods that I apply to look at our clients' overall financial wellbeing to ensure that they are able to achieve financial freedom – to stop trading time for money – in the most effective way, without necessarily sacrificing their lifestyle.

The FIRE movement's focus on paying down debt can have its downsides; there are strategies you can implement to pay down debt but also leverage that debt to assist you on your wealth journey. Ultimately, I want all of my clients to achieve financial freedom in the quickest and most strategic way and the principles of FIRE don't always align with that.

The number one thing I see holding people back from FIRE is seeing it as such an overwhelming thing to do alone that they give up before they have even started. I remind clients that it's not a sprint, it's a marathon so when I am working with clients, it's about them clearly understanding that we're not working together to just get them fit for summer, we're getting them fit for life.

It's about making incremental changes that are compounding over a period of time for them to live the life they want, and have the choice to no longer trade time for money as soon as possible while ensuring their retirement looks how they want their retirement to look. You don't want to retire early for the sake of it and then be living on noodles.

You want clarity around your goal to retire wealthy and what that looks like for you as an individual and build a pathway to get there. I work strategically with my clients to coach them on their plan to make this happen.

I integrate money mindset and behavioural coaching into my model of financial advice to ensure my clients are making good financial decisions every day and it's these changes that compound over time to yield transformational results.

John's top tips for growing wealth

• First and foremost, you need to understand what you want to achieve, and build a plan to get there: you need a clear, strategic plan which is your roadmap to your goals.
• Second, you need to build a system or a machine to get you there. This machine integrates every element of your financial world - all the moving parts - this is your vehicle to get to your destination. Your system essentially runs on autopilot, with you making minimal changes, once it's humming.
• Thirdly, is to ensure you have a coach to help you stick to the plan. Rafa Nadal just won his 21st Grand Slam and yet he's got a coach. You know the coach is probably not there to teach him how to hit the ball but mainly about helping him to continuously level up his mindset to keep him winning. The coach's role is to keep him in the frame of mind that focuses on winning his 22nd Grand Slam and that's what I do with my clients: I help them keep winning their financial Grand Slams: their ultimate goals and aspirations.

Lacey Filipich – Co-founder of Money School, author and TEDx speaker

I like to talk about FI (Financial Independence) and RE (Retire Early) separately. Very few people will retire early in the sense we typically mean retirement – as in, never working again. Really, people who achieve FI become time rich – they get to choose how they'll spend their time because they don't need a wage to survive. That might include periods of not working, but most people will find something meaningful to replace paid work, or will continue working. It's just that they're not in it for the money anymore.

Yes, reaching FI is still viable. Because everyone's FI target will be different – that is, the total equity (wealth) you need to generate the passive income that covers your living costs – all that changes as inflation, interest rates and Return On Investments vary is how long it will take you personally to hit FI.

Because you don't know exactly how your investments will perform over the next few years, you don't know if you might get there quicker or slower than you anticipated, or would have done 5-10 years ago. What we do know is: if you don't try, you definitely won't get there. So, if FI is important to you, start trying.

That doesn't mean everyone who wants to achieve FI is guaranteed to get there, but following the principles of FI will put you in a better financial position either way, so you may as well give it a shot.

At the moment, it seems harder to achieve FI because wage growth is so far behind inflation and therefore it's harder, on average, to save for investing. We're also experiencing a weird time with supply chain shortages pushing up prices in general, which is particularly noticeable in housing costs. But over the long term (10+ years) these blips even out. If inflation remains high, wages will be forced upward, and saving will get easier.

Of course, there's no crystal ball telling us what will happen or when, so we might be in for an interesting time economically, and that might make FI a lot harder to achieve in the short-term. For example, if there's an environment of higher unemployment and lower returns on investments like shares and property.

Then again, who had a housing boom on their 2020/2021 bingo card? Not many folks would have seen that coming when the pandemic started.

Lacey's top tips for growing wealth

• A lot of people firstly don't know it [FIRE] is an option. We're expected to work into our 60s, and that's reinforced repeatedly. For example, Money Smart's retirement calculator won't even let you put in a target retirement age of less than 60. That's not much use if you're aiming for FIRE.
• Secondly, I think people assume you need a huge income or to start really young. Both are certainly helpful, but they're not essential. I point people to my mother's experience when they raise that concern. She started investing at 49 and got to financial independence at 63. She only earned more than $100k per year in the last few years of her career – she was on what would be considered average wages for most of that investing time. She also didn't take huge risks – she was a fairly conservative investor, sticking to shares and property most of the time. Turned out those extra two years of retirement versus the usual age of 65 were important for Mum because she passed away at 70. You never know how much time you have, so you've got to make the most of it.
• Finally, putting it in the 'too hard' basket is a common issue. A lot of people might put off starting to invest because they're convinced it's too complicated for them to learn, or that you need lots of professional advice to get it right. Fortunately, as you learn a little, you begin to see it's not as hard or complex as it's often made out to be.