Personal Finance

Family FIRE: What It Takes And Is It Worth Pursuing?

Calvin Lo

Recently, there seems to be more attention on the FIRE movement. I’m not talking about cars or houses on fire (and burnt birds in cages). I’m talking about the Financial Independence Retire Early movement.

No longer are people contented with working 9-5 jobs until the statutory retirement age of 63 (in Singapore). With increasing affluence and financial education, more and more are aspiring to retire early. Some have even achieved FIRE in their 30s or even 20s!

However, I noticed that most who managed to achieve FIRE seem to be singles or couples without kids which got me thinking whether FIRE is achievable or even worth pursuing for families with kids. I’m not saying there aren’t any families who have achieved FIRE, but they seem to be pretty rare.

I’ll link to several resources of people who have achieved FIRE at the end of this post.

What does it take to FIRE?

The generally accepted rule-of-thumb to consider yourself FIREd is having assets worth 25 times your annual expenses. This is based on the 4% rule which is just a general guide. The idea is that if your invested assets can provide you a 4% return after inflation, you can theoretically live off the returns without touching your initial capital forever.

For example, if your household spends $5k per month or $60k per year, you will need $60k X 25 = $1.5 million in invested assets. So $1.5 million will be your FIRE number. It can’t be in cash because cash will be eroded by inflation, giving you a negative real return.

Update on the 4% rule: A friend pointed out that the 4% rule was actually from a study by William Bengen in 1994 (link here), which assumes a minimum requirement of 30 years of portfolio longevity and first-year safe withdrawal rate of 4%, followed by inflation-adjusted withdrawals in subsequent years. I’m not sure how this translates to FIRE number, so I’m less confident of the formula now. A safer withdrawal rate might be 3%. Might be worth a closer look and a separate post to delve deeper into it.

Coincidentally, Endowus just published an article covering the 4% rule amid higher inflation, which is worth a read here.

According to Singstat, the average Singaporean household expenditure in 2017/18 was $4,906 per month. Keep in mind that was 4-5 years back and costs have increased quite a bit due to rampant inflation. We won’t know until the next Household Expenditure Survey.

The same formula applies for families with kids. We just need to make sure that the household expenses we use to calculate the FIRE number includes the increased expenses including those for our kids.

Is FIRE worth pursuing?

For singles and couples without kids, I think the question is much easier to answer. It’s much easier to control expenses when it was just ourselves or with our spouse (especially if the spouse is also working and earning their own keep).

If we have kids (or even elderly parents) dependent on us, there is higher financial burden and uncertainty with more bodies to consider. The amount of sacrifice we would need to make to attain FIRE would be more than before.

That said, it is not impossible. Much of it depends on our philosophy and aspirations for our family and kids. Do we want our kids to attend expensive schools, eat expensive organic food only, go for a dozen enrichment classes? Do we cave to societal pressure to push our kids to get a head start in life or let them just be children?

Unless you’re a super high earner, I think you might need to seriously keep your aspirations for your kids in check if you want to achieve FIRE. In terms of basic needs for our kids, those costs are pretty minimal but will still impact your FIRE number.

Even ignoring the chunk of cash used to pay for maternity (doctor and hospital costs) and confinement nanny, just the ongoing costs of diapers, milk powder, childcare services, hiring helper will already add up to substantial additional costs. For our family, we even bought a car in preparation for kids for the added convenience of ferrying them around.

Let’s say you aim to FIRE and reduce most of those costs to lower your FIRE number, are you really willing to forgo childcare/helper services and take care of your kids full-time while also cleaning your home (because you’d be “retired”)? If Singapore is too expensive, are you willing to uproot your family and move to another country with lower cost of living?

The FIRE movement is often criticised for encouraging people to put their life on hold in pursuit of early retirement. I can’t say whether that’s accurate or whether that’s even a problem. That’s a personal choice. But what’s clear is that pursuing any form of FIRE or even just FI involves intentionality and definitely some sacrifices.

Lessons from FIRE

Even if you decide not to pursue FIRE for your family, there are many lessons we can take away from the FIRE movement:

  • Frugality and minimalism. FIRE encourages us to consume less, be contented with less, to live a more balanced and intentional life, and not be pressured by society to conform. I think these are important principles to consider living by otherwise we might be trapped in a vicious cycle of consumption. We can intentionally decide to live healthier, eat less, only consume what we need.
  • Managing finances. I’m an advocate for this either way, regardless of whether you aim to FIRE or not. Making the conscious effort to learn how to manage our own finances helps gives us more confidence in our financial situation too. We should optimise and prioritise our spending.
  • Idea of financial independence and self-sufficiency. FIRE encourages us to depend on ourselves rather than a salary. That could be investing in assets, starting a side hustle, or even our own business. Having various sources of income also reduces our risk and empowers us to do what we’re passionate about.

Closing thoughts

Pursuit of FIRE is not an easy path but even if you decide not to pursue FIRE, that doesn’t mean you can’t incorporate some of the good financial habits espoused by FIRE into your life.

There have also been other forms of FIRE like Coast FIRE and Barista FIRE, which are closer to semi-retirement. So, there’s a spectrum of FIRE you can aim to achieve. Also, even if you don’t aim to retire early, you can also just aim for financial independence which is also a worthy goal.

In my opinion, money should just be a means to support our goals and should not be a goal in and of itself. Personally, my goal would be to spend more time with family (kids/parents/siblings) and FIRE could be one way of achieving that.

We also need to consider what kind of life would we want to live in retirement. For all you know, it involves working anyway. So, you might as well consider gradually transitioning to living out your retirement life partially in advance. That could involve taking a step back in your career, working less hours, or working a part-time job instead.

Focus on the journey, not the destination. Ultimately, you need to know what you want to aim for in retirement and what you’re willing to give up in return to achieve that goal earlier.

Are you pursuing FIRE or have attained FIRE? Would love to hear your story if you’re willing to share.

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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2 thoughts on “Family FIRE: What It Takes And Is It Worth Pursuing?”

  1. To achieve FIRE for the whole family means more expenses per month. For my own accidental FIRE case, I reckon I can cover 1 adult (myself) +1 kid expenses relatively comfortably as we have 0 debt (no outstanding car/house/reno loan, this is very important) Covering for 2 kids is doable but will be less comfortable. Definitely not possible to cover for 2A + 2K. Having said that, there are families of 5 living their life happily with a monthly household income of 5000 with house/car loan to service. So you are right, it definitely depends on the type of lifestyle the family is chasing after, especially expenses on kids. Frugal lifestyle = easier to FIRE. Atas lifestyle = much more difficult.

    FIRE movement doesnt put the life of the FIRE(man) or FIRE(woman) on hold(pun intended), if it is planned carefully/correctly, it is supposed to prioritize the life of the person on FIRE (again, pun intended, ok not funny anymore) so that they can go live a life instead of spending at least 40-60 hrs a week working, unless the person really loves her/his work and no other commitment in life except for the career, then, so be it. To each his/her own, as long as the person is happy.

    The concept of FIRE is not embraced as much over here in asia, compared to the western worlds. In asia, we are meant to work to our grave. Once you stop becoming a productive member of the society, everyone views you as useless. Ok, maybe I am a little exaggerated here, but i guessed you get what I am trying to say. Throughout my months of notice period, I debated with myself about this. In the end, I am convinced that life is not about work, work is just a mean for me to live my life, but if something else can replace work as a mean for me to live my life, then why do I still need to work? So let me try living my life without working, if I really like it and my FIRE plan works out fine, then perhaps my career break will become indefinite.

    In my opinion , we dont have to conform to social norms just for the sake of it. It’s totally fine to deviate from it if there is a better way to live your life that doesnt negatively impact you/the people around you.

    1. You’re right I think here in asia most of our identity is tied to our job/career/rank/title. Difficult to break our of the mould. I don’t really think I can live the frugal life to the level to achieve FIRE at least not now but I certainly learnt a lot from the motivation and philosophy behind viewing work as a means to an end. If and big IF I do manage to FIRE, I would definitely still want to contribute to society but at least it’ll be in a way that I choose to. Congrats again on your FIRE and hope you find that something you really enjoy doing.

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