MARK TOBIN: Light the fuse on your best life

The FIRE (financial independence, retire early) movement has existed for about 15 years and picked up steam during the Covid lockdowns. It has since faded somewhat from the general market consciousness in South Africa; however, it remains a big trend in countries such as the US and Australia.

The basic premise is that you ditch the traditional model of working 40 years and retiring at 65, and try to “retire” much sooner. You build a nest egg as fast as possible, and draw down on it or live off the interest. Most blogs and podcasts talk about building a nest egg 25 times your annual expenses and then draw down no more than 4% of the capital annually, which should equal your yearly costs. The 4% maximum should mean you will never run out of capital. While the FIRE movement was initially focused on extreme frugality and achieving the highest savings possible, it has now morphed into many different forms and is focused on the financially independent part rather than the retire-early part.

Today, many people concentrate on being financially independent to ensure a life not tied to the standard nine-to-five rat race. People want an income that covers their needs but they also want to have time to volunteer or do part-time work that may not be lucrative but is rewarding in other ways Or they may want to get a few small side hustles going to keep busy, without having the stress of relying on the income to survive.

For Americans, a big trend post-Covid has been the rise of digital nomads moving around within the US and travelling to lower-cost locations globally — including Cape Town — and such countries as Thailand, Portugal, Dubai and Vietnam. Another trend is geo-arbitraging, which is associated with more long-term moves to areas where the cost of living is relatively low.

In the US, FIRE followers relocate from expensive cities such as New York and San Francisco to states with lower taxes and warm climates, including Florida and Texas. In South Africa, the Garden Route and Karoo are popular semigration destinations. However, given the rising prices of property in Cape Town and the Western Cape generally, some people are moving back to such places as Joburg, Pretoria and the KwaZulu-Natal North Coast.

The other notable change in the FIRE movement is the fading emphasis on extreme frugality — in the early days you lived like a hermit for about a decade while saving as much as possible and spending as little as possible. While a high savings rate is still a requirement, there is a much more nuanced FIRE approach now that looks at adding income streams from side hustles, dividends, optimising loyalty programmes or affiliate marketing, to name a few.

We have also seen the emergence of a version called “Fat FIRE”, whose adherents are aiming at far more than a bare minimum nest egg — they want one that will provide for a comfortable lifestyle of travel, fine dining and a home in a desirable neighbourhood. This requires a more substantial nest egg, but the motives are the same.

FIRE might seem like a pipe dream for South Africans, but it is achievable with such platforms as EasyEquities. Building a nest egg outside traditional retirement annuities and high-interest bank accounts is eminently possible. Just this week, a 22-year-old I follow on Twitter/X revealed that his stockbroking account had reached R100,000 in just a few years, through a combination of diligent saving and decent returns from the market. All this while still a student and doing some part-time work. Maintaining this trajectory could allow him to achieve FIRE by the time he turns 30, if that is want he wants.

There is also the wild and wonderful world of cryptocurrency trading and investing. Traditional equity investors might scoff at using crypto as part of a FIRE strategy. Still, I know one very early bitcoin adopter who cashed out his entire bitcoin holding in 2019 and since then has lived in Bali off a dividend stream from a high-quality global equity portfolio.

It is never too late to start, but for young investors — who are what I call “time billionaires” —  the concept of FIRE should be part of their financial education and the conversations we have with them.