FIRE vs Die with Zero: What does financial freedom really mean?
What do rising interest rates, costly household bills and turbulence in the share market all have in common?
Answer: They all impact millions of Australians right now. And while these are worrying times for so many, followers of the FIRE movement have particular cause for concern in the economic downturn.
After all, FIRE (which stands for Financial Independence, Retire Early) is all about cutting down on expenses and big investment wins. Good luck with that in 2022...
As for Die with Zero? It's centred on a different kind of investment: one that places importance on gaining rich life experiences. These pay out "memory dividends" to enjoy for years to come. Sounds appealing, right?
But what happens if you put spicy questions to followers of each strategy and – later – source the views of a 3-time member of AFR's Young Rich List?
Let's find out.
Age: 27
Lives: Kirribilli, Sydney
Arguing for: FIRE
Age: 27
Lives: Marrickville, Sydney
Arguing for: Die with Zero
Shares are diving… the cost of living is sky-high… has your FIRE plan been smashed?
"No. My plan is well intact. FIRE isn't a short-term endeavour. It's expected that the prices of assets you accumulated will go up and down over time.What's more important is to continuously keep accumulating, and then get to the point where the passive income from those assets can sustain your lifestyle without you needing to work all the time.
Honestly, I see now as a great time to dollar cost average into buying assets, which is exactly what I'm doing."
Surely one of the biggest pluses of FIRE is you work hard now and eventually become time rich. You'll have total freedom on how to spend your time, free from the rat race. What's so wrong with this view?
"I like the rat race. I like working. Why do FIRE people dislike working so much that they want to quit at age 40? Just get a job that you like.It's great that FIRE has got people thinking about saving and long-term investing – especially because young Australians are being locked out of the property market – but it's a pretty unrealistic philosophy for the majority of people.
Telling people to save 50 or 60% of their pay just isn't possible for many Australians, which I think is why it's often met with so much derision. It's insulting to a lot of people.
This is the point though, right? The FIRE movement appeals to our society's get-rich-quick sensibility but it also generates a lot of eye-rolling and anger, so it makes for good content."
How many years of working to the bone do you have until you can stop working?
"According to my calculations, I have about 8 or 9 years until I can reach FIRE on my terms. And, to be honest, my interpretation of FIRE is very different from the literal definition. I don't actually want to stop working.But I want the option to be able to, and the independence to be able to decide where to work.
Maybe I want to dedicate my life to a not-for-profit for the rest of my life – I don't want an organisation's ability to not pay me/pay me little to dictate whether I choose to contribute to their mission. That's what FIRE means to me."
In Australia, we're lucky enough to enjoy one of the world's highest life expectancies – 89. Isn't that a great justification for hustling and saving hard now to secure your long-term financial health and wellbeing?
"I'm Scottish so I probably won't get very old… More seriously though, I think it's about finding a balance. I don't think you should compromise on your quality of life in the vain hope that it will all be better in the future.That doesn't mean go nuts now. If you can afford to save, you probably should. 'Die with zero' sounds like the antithesis to FIRE, a kind of reckless hedonism – spend all your money now and don't worry about the future. But I don't think it's really about that. It's about finding a balance between saving and enjoying yourself now.
I actually quite like the idea of not leaving your family with an inheritance though, since inheritances increase wealth inequality. I'd much rather see wealthier people pump their money into the wider community than pass it on to their children. I'm not totally sure if that's what Die with Zero is about, but it's a nice thought."
Is there something you have against fun stuff like round-the-world trips, destination weddings and long pub sessions?
Absolutely not. My FIRE plan accounts for all these things. 2 things here: 1. It's about balance. 2. Often, it's the effect of big-ticket items and compounding that gets you, not the small pleasures.For example, I don't own a car and I always try to get flight tickets using points where possible. Instead, I invest the money I'd have spent in those places into income-producing assets.
For other goals, like big weddings and such, I just adjust my goals and FIRE age to make sure that those expenses are accounted for. Usually, the delay to FIRE isn't as long as you'd think if you stay disciplined and plan well.
What would it take you to change your lifestyle and start following the principles of FIRE?
"Maybe world peace? I'm not sure. I just don't think it's any way to live your life.Having said that, if it makes you happy, go for it. That's what FIRE and Die with Zero both have in common. They're both trying to sell you a form of happiness through their financial philosophies. Personally, I'm not buying either of them."
Do you ever fear life might deal you a cruel hand and knock you off a couple of years into your much-toiled-for retirement?
"Nah. I don't fear that at all. In fact, in a way that's what I'm preparing for. FIRE, or even the journey towards FIRE allows you to be prepared to absorb shocks that life might deal you unexpectedly.If it delays things by a few years, so what? I plan to stay disciplined, and adjust my approach to try and make up those years along the way. In fact, in a way, FIRE is helping me prepare for life's uncertainty."
"You need to think long-term and sacrifice"
Read more expert tips on achieving FIRE in 2022.
