Letter to the editor: FIRE Movement – What’s the Priority – Making Money or Saving Money?

Today I’d like to share a letter from reader Kevin Marshall. He responded thoughtfully to a YouTube rant that in retrospect, I’m not very proud of. As in many poor and one-sided debate, I committed all the same errors I was accusing others of. Namely, generalizing and not taking the time to properly respect and explore ideas that challenge your worldview. Sometimes, I’m just a dick.

In this particular case, I was responding to a NYTimes article that confirmed my biases: namely, that advising people to place all of their savings into the US stock market is risky.

Here’s a thoughtful and relevant response from Financial Samurai:

And although I love most of what Mr. Money Mustache has to say about frugality, I was more or less triggered by this post where he appeared to double down on said advice.

To sum up my thoughts: I think betting your entire savings in the US stock market is risky, and I’m not a big fan of advocating that others take on strategies with existential risk. That said, I sincerely hope MMM is right about his predictions.

The point of today’s article is not to make a proper argument, although if you’re interested in a more detailed explanation of at least some my thoughts you can find them here.

I don’t want to throw the baby out with the bathwater, though. Any community advocating for frugality, financial responsibility, and making smart purchases (or non-purchases) like entrepreneurmobiles are fighting the good fight.

Kevin points out as much in his letter to the TMBA today, that although STEP #4 of financial independence – building cash generating assets – is important, it can be rendered pointless if you forget about steps 1, 2, and 3, which all revolve around basic financial responsibility and creating meaningful savings.

I thought Kevin’s perspectives were more interesting than my own, so with his permission, I’ve published his email in full here.

Some topics that jumped out to me are:

  • How living in low cost / high lifestyle destinations, like Portugal or Spain, can influence your spending habits when in more expensive countries like the USA.
  • How digital nomading can enable you to ‘have your financial cake and eat it too.’
  • The downside of an over-focus on the making money side of entrepreneurship.

I’ll let Kevin take it away…

Hey Dan,

[I] just wanted to send a few thoughts about last Friday’s show regarding the FIRE community. First, I loved your points about some of the advantages of the TMBA community’s approach to wealth-building and good-living as opposed to the FIRE community. The notion of accumulating a lot of cash to live off the interest residuals without having to work might seem attractive at first, but as you both pointed out, it’s dependent on people outside of the FIRE community NOT living that way, but spending non-frugally to keep the engine of the economy hot enough to ensure your interest returns keep coming.

In 2014, [my wife] Alyssa and I started dabbling in the digital nomadic life when we moved to Thailand and joined the Dynamite Circle. We felt lucky and thrilled to be living a life of remote-work, online business, and being our own-bosses. Yet last year, we realized that we still had not built the kind of wealth we expected we would have by now when we started down this path.

We’ve done well for ourselves, and our two businesses have consistently brought in combined revenue over 6 figures, but the cash-store that we expected to have by now simply isn’t there.

Last year, as I looked back, I realized there were probably a few reasons for this:

    • While we’ve had a solid source of revenue, growth sort of stopped there, especially for our primary business due to it being such a niche market such that efforts to grow revenue have not made much of a dent.
    • When we lived in Thailand and even Portugal (both places offering a much cheaper lifestyle than the U.S.), our cash reserves increased – we were doing great and were on our way to building real wealth. Yet the moment we moved back to the U.S., long-term wealth building basically came to a halt.

My thought is this now: when living abroad as digital nomads, we were able to have the best of both: we could live it up in terms of lifestyle – dining out every day, living in beautiful high-end apartments, drinking lattes all day long – all while still saving money and building wealth. However, when we got back to the U.S. we really didn’t change our behavior too much. While we found an affordable apartment to live in, we still kept dining out, still kept drinking lattes (actually fancy $5 cold-brews for me), and went on lots of little mini-vacations around the country.

Basically, we lived a great life in terms of working remotely, having no bosses breathing down our necks, and enjoying the freedom of working when we wanted, but our wealth building was stagnant. We recently welcomed our 2nd daughter to the mix and it’s no surprise that adding the costs of children has made wealth building on that same income even harder.

Last year, out of necessity and frustration, I started getting interested in *some* of what the FIRE movement teachings in terms of frugality, which is so much more important when you’re not living in a place like Thailand or Vietnam and when your business is not currently bringing in revenue in the mid to high 6 figures. Deciding to bunker down and get serious about frugal living – reducing dining out, reducing $5 coffees, reducing min-vacations – has put us back on the path to building long-term wealth again here in the U.S. while we simultaneously work to increase our business revenue into that higher range where storing cash should be way easier.

The main difference is that before, we focused mostly on making more money as the solution to building wealth, and paid little attention to the leaky faucet which was our poor spending habits. Following leaders in the FIRE community has at least helped reframe our mindset on how we spend unconsciously on things that we don’t need, and made us aware of a somewhat unhealthy spending and debt-based culture here in the U.S. that we had bought into without really being aware of it.

I think that the lifestyle design and business coaching worlds really focus heavily on the “making money” side of things (product-market fit, marketing, SEO, conversion optimization, etc.) but perhaps don’t talk enough about the “saving money” side (personal frugality especially , not just business), which is vital for wealth building. It’s the other side of the equation.

Perhaps it’s not discussed because it’s not as sexy and interesting. Thus I’m guessing that there are lots of folks who are indeed killing it from the income point of view, but my suspicion is that many of them are also blowing a lot of the money they’re making, especially if they’re living in expensive countries. That’s one area where the FIRE guru’s are filling the gap, they’ve figured out to make the concept of “saving” sexy, and that’s important.

That said, y’all are right on for calling out the FIRE movement on some of the nonsensical aspects of its teachings.

Thanks for all you both do and for who you both are – you guys always live what you preach, unlike many “gurus” out there and it’s much appreciated!



Thanks to Kevin for reading and sharing his thoughts!