Fire and Desire for FIRE? Why the Financial Freedom Concept Doesn't Work for Everyone in Switzerland

Welcome, Money Essence Readers! ✨

Are you dreaming of FIRE 🔥? But what exactly is it and why is everyone talking about it?

FIRE stands for "Financial Independence, Retire Early" - sounds fantastic, right? Of course! It's based on several key principles that enable financial independence and potentially early retirement. Here are the main principles:

1. Extreme Saving

• The core idea: Saving 50-75% of your income (in extreme cases, even more).
• This means dramatic expense cutting and embracing a minimalist lifestyle.

2. Investing Your Savings

• Money shouldn't just sit in an account – it should work for you.
• Most commonly invested in index funds (e.g., ETFs), real estate, bonds, or businesses.
• The assumption is that an investment portfolio grows by an average of 7% annually (after inflation).

3. The 4% Rule (Safe Withdrawal Rate)

• The classic FIRE rule states you can safely spend 4% of your portfolio value annually, meaning:
  • If you want to spend 40,000 CHF yearly, you need 1 million CHF in investment assets.
  • If you want to spend 100,000 CHF yearly, you need 2.5 million CHF.

4. Early Retirement or Financial Freedom

• Achieving FIRE doesn't necessarily mean stopping work completely, but gives you choice.
• You can:
  • Quit your job and live off investments.
  • Work on your own terms, e.g., as a freelancer, consultant, or creator.
  • Pursue your passions without financial pressure.

It's no wonder this system tempts many people - how could anyone think it's a bad approach? Well, I can and do! 😃 (UPDATE - How wrong I was here…) The FIRE system also has variations:

• Lean FIRE – minimalism, living on small amounts.
• Fat FIRE – larger capital, luxury lifestyle.
• Coast FIRE – saving a lot initially and letting capital grow on its own.
• Barista FIRE – partial financial independence while still working lightly.

However, none of these really appeal to me - though Barista FIRE comes close. I have two wolves inside me that have clashed and decided it's time to look for something else.

One very important thing - I love radicalization - my perfectionism almost craves it, but since perfectionism by definition can't reach its too-high bar, I know such an approach might bring me more harm than good. Hence my decision to minimize any radicalism in my life.

Below is a list of why this strategy doesn't work for me:

1. Extreme saving can lower quality of life

• To achieve FIRE quickly, many people cut expenses to the bare minimum, which can lead to constant frustration.
• You must give up pleasures, travel, hobbies, or even small expenses that improve life comfort - and that's exactly what I want to introduce in my life - save and enjoy wisely what I'm given.

2. High pressure for high earnings

• FIRE is easier for high-income individuals – for the average worker, achieving a 50-70% savings rate can be extremely difficult.
• It can lead to burnout as people stick with stressful jobs to reach their goal faster.

3. Market risk and financial instability

• FIRE relies on investing, mainly in stocks and index funds. Financial crises (e.g., 2008, 2020) can significantly reduce portfolio value.
• Savings value may drop, requiring flexibility in spending or returning to work.
• I definitely prefer moving forward at my own pace - I might not break investment records, but I make steady progress. I don't want to force myself into anything.

4. Difficulty returning to the job market

• If someone retires early at 40-50 years old, returning to work after years away can be challenging.
• Changing technologies and requirements may mean additional training is needed to secure a new job.
• Additionally, I'm not Swiss. From experience, I know that finding a new job isn't simple or pleasant.

5. FIRE can be harder in expensive countries

• FIRE works well in countries with low living costs, but in places like Switzerland or Norway, minimum expenses are high.
• This means needing to accumulate much more capital or relocating to a cheaper country.

6. Challenges in interpersonal relationships

• Not every life partner wants to live extremely frugally.
• Friends may not understand your lifestyle – declining restaurant outings, trips, or parties can create social tensions.
• It can be harder to form relationships if you live in a completely different mode than most people.

🔥 In summary: FIRE is a great strategy for those who value freedom, but it's not ideal for everyone. You can approach it flexibly – for example, instead of full retirement, aim for greater financial independence and working on your own terms.

For me, it's too radical an approach. I think it's ultra-interesting and offers new perspectives. However, in my case, it's totally unattainable.

What do you think? Still tempted, or leaning toward other strategies? 😊

And for a while...

Ciao, Bella! 💕