Funnily enough, if you actually read the article, no one interviewed says that they’re leaving the FIRE lifestyle, or that they think that the movement will die out. Here’s my argument for why the FIRE movement will only gain steam during a recession.
We’ll Realize the Illusion of Security a W2 Income Provides
If you’ve already been laid off, congratulations! You’ve realized that a ‘stable job’ provides an illusion of security: it seems more stable or secure than freelancing or other forms of income, but it’s actually even more vulnerable to macroeconomic forces far outside of your control.
With millions of Americans waking up to how insecure their financial positions are, they’ll naturally seek out a way of increasing their financial security. To them I say, welcome to FIRE!
We’ll Understand the Importance of an Emergency Fund
The first milestone on the path to FIRE is to be debt free (at least free from the kind of debt with usurious interest rates, like credit card debt). The second milestone is to build up a six month emergency fund to be able to cover your expenses in the event of a freak economic event. With millions now out of work and struggling to collect government benefits, the importance of an emergency fund only becomes more obvious. If only there was a movement which advocated the importance of an emergency fund? Welcome to FIRE!
We’ll Realize the Importance of Diversified Income Streams
Since W2 income isn’t as secure as we’ve come to realize, what are we supposed to do? Diversify income streams. This is also a central idea of FIRE: after all, if you’re not working anymore, you better have some other kind of income coming in. For many in the FIRE movement, diversified income streams typically consists of the stock market, and real estate. While both have also taken a beating over the past few months, owning these income generating assets provides you a further layer of security against economic downturns.
I can understand why in bad times people want to be cynical and pessimistic. When things are going well we like to think that they’ll never end, and when things are bad we think that they’ll be bad for a long time. The New York Times falsely assumes that the reason the FIRE movement has been successful is the decade long bull market, and now that there’s a recession, the FIRE movement will lose its appeal. I think the opposite is true: the FIRE movement will only gain momentum as people realize the false security of their day jobs and the importance of emergency funds and diversified income.