‘Fire’ movement is not for everyone, but setting financial goals early should be: Panel

SINGAPORE – The popular financial independence, retire early (Fire) movement is not for everyone, but what matters more is setting financial goals and having clear retirement and investment plans, said experts on a personal finance panel discussion.

Fire involves having a low-maintenance and frugal lifestyle while prioritising saving and investing, so people can retire early. 

While this lifestyle has garnered buzz online, it is not universally suitable.

Instead, people should aim to live and retire meaningfully, while ensuring they save enough and invest according to their risk appetites, the finance experts on the panel said.

The panel was put together by

HeadSTart, The Straits Times’ careers and personal finance newsletter

for young people, and was held at the Lifelong Learning Institute in Paya Lebar on July 19.

It was also part of a July 18 to 20 event at PLQ Plaza and the institute called Thrive@libraries, organised by the National Library Board and SkillsFuture Singapore.

It was moderated by ST assistant business editor Alyssa Woo. Around 135 people attended the panel discussion.

Panellist He Ruiming, co-founder of personal finance blog The Woke Salaryman, said: “Fire shouldn’t be pursued by everyone. Back in the day, Fire in the US was pursued by people who work in software companies, earning big bucks in California.

“That’s the richest of the richest people in the US, and I don’t think you should extend that as a standard that should be applied to everyone.”

Responding to a question on whether someone with children can pursue Fire, he noted that having children will set back retirement plans, but kids bring people joy if they decide to have them.

“What you can achieve is financial independence.

“You don’t have to retire early, but you can retire at some point, which, for those who want kids and the joy the kids bring, is a worthy sacrifice,” he said.

Ms Lorna Tan, head of financial planning literacy at DBS Bank, noted that there are three types of Fire: Lean Fire, which is about lowering your standard of living to achieve early retirement; Barista Fire, which means you still need to work to supplement passive income; and Fat Fire, which refers to having enough passive income to retire early and very comfortably.

Ms Tan is leaning more towards Fat Fire, but added that it is not about retiring early but retiring meaningfully.

“You don’t have to be so fixated on retiring early, especially if you’re enjoying the work that you do. Let’s look at this term called Firm – financial independence, retire meaningfully.

“Work towards your financial freedom and, at the same time, understand your life purpose and align your money goals so they support your life purpose,” she said.

She added that people also need to have plans for their retirement, such as studying or travelling, so it is not just about playing golf or watching Korean dramas all day at home.

Mr Aaron Chwee, head of wealth advisory at OCBC Bank, said regardless of Fire, people should have deliberate plans that consider what they need to retire and what sort of lifestyle they want, and then construct their portfolio and finances around that.

The principles of diversification and ensuring that people invest according to their personality and risk appetites still apply, he said.

His advice for those who want to achieve Fat Fire is to start young.

“You should be disciplined, and because you have that length of time, you’re able to deploy more resources each time.

“You can go more into equities, such as those that are global and as a result more diversified,” he said.

But the sandwiched generation who have to provide for parents and children might have fewer resources and can include fixed income in their portfolio instead, while ensuring they have enough finances in case of crises, he added.

Mr He said a guideline is that your age should equal the amount of portfolio allocation that you put into bonds, while subtracting your age from 100 is the amount you should put in equities.

This ensures that as one grows older, the shift between fixed income and equities will reflect how much risk one can take, as equities are more volatile.

Ms Tan said, ultimately, compounding is a vital way for people to achieve Fat Fire so they have passive income.

She added that especially when pursuing Lean Fire, people fixate on getting income flows earlier in life and there is no effect of compounding over the years.

Ms Tan said: “I think it’s good to adopt a long-term investment approach so that you can stay invested instead of timing the market.

“It also means not being so worried when the market goes up and down aggressively because you know you can ride through this time period.

“You know that whatever you’ve allocated into different investments has a strong foundation.”

She advised upgrading one’s financial knowledge and speaking to financial professionals.

Software engineer Tsa Hao Wei, 33, said the explanation of the different types of Fire was helpful, and he was looking at applying Lean Fire to his own life.

“I currently don’t have many expenses and I lead a minimalist lifestyle, so it could be the easiest way forward for me,” he said.

Mr Foo Fangwen, 41, who works in data analysis in private healthcare, said his main takeaway from the panel was that regardless of whether one tries Fire, the most important thing is to be disciplined and well versed in money matters.

“Those are principles that will work for all age groups,” he said.