Discussion – How FIRE benefits corporations?
FIRE movement is tremendously popular these days, especially among specialist workers. The idea of retiring early with an abundance of money is attractive to everyone. The concept is excellent and is real. People have reported retiring early and have enough income for them to live their lifestyles. However, is it all good and beautiful?
Tl; dr;
- The mainstream way of FIRE is work – buy assets – reach a certain networth – retire happily.
- FIRE gives back money to corporations and allow them to continue growing.
What is FIRE?
FIRE stands for Financial Independence, Retire Early. It is the concept that first came out from the book Your Money or Your Life. This concept then blossomed and became the most popular way of achieving an independent retirement known to millenials. The FIRE movement is very simple, considering that your annual salary, you should allocate most of that earnings to buy assets like Stock and/or real estate that makes you money; living below your means until your networth is enough for you to retire and live your dream lifestyle.
Most people advise to buy ETFs as the easiest way to buy assets. At the end of the day, most fund managers cannot beat the market index. So, why try to beat the market yourself, send the money to fund managers; while you can just buy into a broad market ETF and benefits from the rise and fall of the market?
How does it benefit corporations?
Assuming you work for a big company X.
You earn $500,000 per annum post tax because you are great at doing your job and ready to work long hours for the company.
You follow FIRE movement and decide to spend 80% of your take home money to buy ETF that track the ASX200, or S&P500 depending on where you live.
Now, let us take a more general look, and assume X is the ASX200. We can see that you put back $400,000 per annum back into X and allow it to grow artificially. The growth does not come from better productivity, but from people buying blindly into the company. In a way, it is a great “scam”, where corporations take your best productive years, paying you top dollar, all that for you to give back most of the money back to them to continue the cycle. It is truly fascinating.
The best thing is that, you benefits from it too. However, I imagine that you get 1, your employer will get at least 100. But everyone is happy right?
How to FIRE the right way?
I strongly believe that beside being good at your job, you need to be fluent in at least one form of investments. It maybe learning how to pick stocks, how to invest in real estate, how to get your way around commodities, gold and silver, etc.; or even starting a company. The possibility is endless.
The question is why people do not do this? And from my experience, it seems to be because they are scared. Why learn how to invest when I am already making $200,000 per year? Why leave my job to start a business? What if I lose everything?
What most people do not experience is that the other side of fear is calmness. Before you jump out of the airplane for skydiving, fear engulfs you. But once you jump, there is a sudden calmness in your mind, and then the joy of experiencing flight.
Summary
FIRE is a great way to achieve financial independence. I am also an advocate of the movement. However, my approach to it may not be the same with other people. I will achieve Financial Independence my own way, and I will share with you the journey over time.
“Only those who go where few have gone can see what few have seen.” ― Buddha Gautama
By Tuan Nguyen
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