FIRE Movement and Frugal Lifestyle: A Temporary Fashion for a Minority?

Abstract

Who doesn’t have a moment of dreaming of financial independence or early retirement in their life? For many generations, in wealthy societies, it used to be normal to have a steady job with regular income until the standard age of retirement. This way of life was not questioned, it was the routine, and the way people lived. Becoming a millionaire, early retirement, and financial freedom was not a realistic plan or option for the majority, often not even a thought, yet people still didn’t question this way of life. The status quo is changing and one of the real drivers of this change is the Millennials, also known as Generation Y, born from 1981 to 1995. Millennials strive for freedom and independence and create new approaches to life in unparalleled ways. One consequence born from this new mindset is the FIRE movement in the US. FIRE stands for “Financial Independence, Retire Early”. It encourages people to practice a frugal lifestyle, enabling people to retire at a much younger age, as early as 40 years old. So far, research hasn’t paid much attention to this new subject. This paper is about to change that. The focus of this paper is to understand this FIRE movement in terms of reasoning and financial practices and to analyze the sustainability of this frugal lifestyle concept. Alderfer's ERG motivation theory will be applied to research if and how this new phenomenon is covered by this theory.