If you spend any time in the personal finance space online, you will likely be familiar by now with the FIRE (Financial Independence, Retire Early) movement. It’s a concept whereby those of us lucky enough to have decent-paying, middle-class jobs aim to live cheap, save aggressively, invest wisely, and retire well below the ‘normal’ retirement age.
Whether you want to retire early or not, you’ve probably never really considered the idea that you could potentially retire before your parents do. One man (at least) thinks you can, and he’s written a book in which he aims to explain how.
In the book, Retire Before Mom and Dad, Rob Berger sets forth a set of principles that people can use to retire not just way before ‘normal’ retirement age, but so early that their own parents will probably still be in full-time work.
The book is somewhat controversial for a number of reasons. It addresses the latte factor, which is one of the more divisive concepts when it comes to modern-day personal finance advice. It assumes a return on investment of 9.3% for ‘normal’ stock market investors, which is ambitious, and it generally assumes a lot of things that may or may not apply to you as a typical middle-class American in the twenty-first century.
It also addresses five lies the world tells us that do indeed, in some ways, stand in the way of our financial freedom. If you’re struggling to build wealth right now, in spite of a decent level of income, maybe a belief in one or more of these is limiting you.
Financial Freedom Requires a BIG Salary
Berger points out that financial freedom doesn’t require a six or seven-figure salary. It is possible on a decent five-figure salary, depending on how it’s managed. And of course, financial freedom is complex. There are people on six-figure salaries living paycheck to paycheck, and others doing very well on a lot less. However you look at it, financial freedom, for those on a consistent salary, is linked to choices around debt, saving and spending, and all of those are addressed in this book.
Financial Freedom Takes Over 40 Years To Achieve
Traditionally, this has tended to be the case. Work for 40 years, pay into a good pension, and reap the fruits of your labor. Then everything changed. Life-long jobs with reliable pensions are rarer than they used to be. And those who achieve financial freedom young have followed one of many possible routes to get there, from crypto investing to blogging. One thing that Berger states that makes perfect sense is this: “In reality, Financial Freedom is a journey. And we can begin to enjoy the fruits of Financial Freedom very early in that journey.”
Happiness is expensive
Berger states this is the most pernicious lie. I’d add that it has also become one of the most important ones for our ultra-capitalist society to maintain. Companies want us to spend a lot of money and they know that the best way to persuade us to do so is by convincing us that happiness is expensive.
As long as we believe that we can only be happy in a big house, with an expensive car, surrounded by luxury goods, the economy thrives. It is, however, hard to reach financial independence while trying to maintain the lifestyles we think we need to be happy.
Investing is complicated
Investing can be complicated, but as Berger points out, you can create an investment portfolio at any age and on any income, starting with just a couple of investments. There are strategies that make investing relatively straightforward, and managing a simple investment portfolio is nowhere near as time-consuming as you might imagine.
Debt is a fact of life
In the USA in the 21st century, we are constantly sent the message that debt is normal, inevitable, and unavoidable. Whether it comes in the form of mortgage debt, student loans, or consumer debt, it is just something everybody has.
We’re even persuaded that we need debt, to do simple things like improve our credit score (we don’t). It’s possible to live free of consumer debt. It’s even possible to live mortgage-free, though it may mean tweaking the ‘American dream’ a little.
Berger’s five lies are still going strong. And they’re probably shaping your life decisions and your level of financial freedom. Perhaps it’s time to examine them a little more closely.
Frequently Asked Questions
What is the FIRE movement?
FIRE stands for Financial Independence, Retire Early. Followers aim to save and invest a large share of their income so they can reach a point where investment returns cover their living expenses, often well before traditional retirement age. Some people use that independence to stop working entirely, while others choose part-time or more meaningful work.
How much money do I need to retire early?
A common starting point is the 4% rule, a guideline drawn from historical research that suggests a portfolio of about 25 times your annual expenses may support withdrawals over a long retirement. Early retirees often plan more conservatively because their money may need to last 40 years or more. It is a rule of thumb rather than a guarantee, and a financial advisor can help you test a plan against your own numbers.
What is the latte factor?
The latte factor is a phrase popularized by author David Bach to describe how small, regular purchases like daily coffees can add up to large sums over time if the money is invested instead. Critics argue it focuses too much on small expenses and not enough on big ones like housing, cars and income. Most people get the biggest results from reviewing their largest costs first.
Can you retire early on an average salary?
It is possible, but it depends far more on your savings rate than on your income alone. Keeping housing and transportation costs low, avoiding consumer debt and investing consistently all shorten the timeline. Higher earners can reach independence faster, but only if they avoid letting spending rise with income.
About the author
Contributing Writer, Wealthtender
Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine.
Karen provides copy editing and proofreading services, as well as content creation services, at her website KarenBanes.com.