The Current State of the Financial Independence Movement

Motley Fool Hidden Gems Investing

In this episode of the Motley Fool Hidden Gems Investing podcast, host Robert Brokamp interviews Brad Barrett, co-founder of ChooseFI and a leading voice in the

Key takeaways

• The FI movement has shifted from sensational 'Retire Early' narratives to a more mainstream, inclusive approach focused on life design rather than escape.
• Savings rates of 30-50% are realistic targets for achieving financial independence within 15–20 years, though the community welcomes all levels of progress.

Main topics

• Evolution of the FIRE movement
• Savings rates and lifestyle design

Notable quotes

"We weren't running away from a life that we hated. We were trying to build a life that we loved."

Conclusion

Brad Barrett's journey illustrates how financial independence is less about extreme frugality and

Transcript preview

Speaker 3 (0:02) Catching up with the leading figure in the financial independence community this week on the Saturday Personal Finance Edition on the Motley Fool Hidden Gems Investing Podcast. Speaker 3 (0:19) I'm Robert Brokamp, though my nickname around here is Bro, so don't be surprised when you hear people call me that. And you know, we all want to eventually get to the point when work is optional. But some people may get a goal to get there much sooner, perhaps even by their 30s or 40s. And one fellow who knows an awful lot about how to do it is Brad Barrett. Brad is a CPA and the co-founder of the ChooseFI website and the co-host of the ChooseFI podcast. Brad, Speaker 1 (0:44) welcome back to the Speaker 3 (0:44) show. Speaker 1 (0:45) Oh, bro, it is so good to see you. It's been a number of years, so this is great. It's great Speaker 3 (0:48) to see you. It'll be great to catch up. You have been on the show a couple of times, but it's been a while. So as a refresher for newer listeners, give us the brief version of your financial independence story. Speaker 1 (1:00) Okay, so brief version. I graduated from college in 2001, which makes me pretty old at this point. I went to work for one of the biggest accounting firms in the world. I was a CPA. Arthur Anderson. Enron scandal happened. Arthur Anderson didn't exist nine months later. So craziest thing that had ever happened. And I realized how impermanent work could be, even when you go to work for what's the biggest and most acclaimed accounting firm in the world. So I just realized that at that young, tender age, even though that was a bad thing that happened, it actually turned into something really positive because it made me realize I need to take matters into my own hands. And the only way that I knew how to do that at the time was to save money. And just live below my means. Speaker 1 (1:47) without any knowledge that other people were doing this, without any knowledge that there was an end point to saving, that there was some financial independence number, I just saved my money. And I basically just, like I said, lived below my means for about 12 to 15 years. But while still living a normal middle-class life, I had two daughters, lived in a nice four-bedroom house in a great part of Richmond, Virginia. But yet I was saving probably... somewhere depending on the year. And again, you know, life intervenes, but 30 to 50 % of my income. And when you do that for an intermediate amount of time, there's no get rich quick scheme. But when you do that for an intermediate amount of time, you wake up and that money is compounded into something significant. So, you know, that was my kind of standard path to FI. But then my journey got inextricably linked with entrepreneurship. And I built some websites around travel rewards, which are using credit card rewards points to travel. And that's a fun way to save money also, not having to spend many, many thousands of dollars a year on travel. And yeah, I started this podcast about a decade ago. So it's been an interesting journey of chapters. Speaker 3 (2:58) So if I remember correctly, you gave your letter of resignation in 2015. And you were first on this show in 2018 and again in 2019. And back then, maybe a few years beforehand. My impression was there were a lot of stories about the FIRE movement, FIRE standing for Financial Independence, Retire Early. I think to a certain degree, society was kind of fascinated by it. But nowadays, you don't hear quite as much as you used to. And like your podcast and website, many people seem to have dropped the RE and are focusing on the FI. So what would you say is the current state of sort of the financial independence universe? Speaker 1 (3:37) Yeah, I think people were equal parts fascinated and equal parts appalled by the FIRE acronym. And I think, frankly, that's why a lot of us, and Jonathan and I, my co-founder of Fuse of I, we realized this pretty early on, that the RE wasn't what we were aspiring towards. We were aspiring for something. We weren't running away from a life that we hated. We were trying to build a life that we loved. And I think the financial independence aspect of that is what's so important. So, yeah, it's interesting because over the last decade, certainly probably since Mr. Money Mustache came around in the early, I think, 2013 thereabouts. So we're coming up on 13, 14 years. The community worldwide has grown dramatically. So you don't hear as many stories about it. But honestly, I think it's because it's not as sensational anymore. It's much more. mainstream to a degree about, okay, look, for most middle-class people, these are not people with silver spoons. These are not people making millions of dollars. For most middle-class people, there's precisely one way to get ahead financially, and it's to live below your means. And obviously, as Marley Fool knows, it's to invest wisely. And I think for a lot of us, that's low-cost, broad-based index funds. But of course, it can be individual stocks. It can be real estate. It can be whatever. But there's a pretty prescribed path. So it's not as sensational anymore. I think a lot of people have heard of financial independence. People have heard of our podcast. They've heard of Mr. Money Mustache. And even people like Ramit Sethi, who on the face of it seems to hate the fire community, but it's more clickbait than anything. He's of the same ilk. He really is. And even though I don't know that he would say that if you asked him. Speaker 1 (5:24) I think it's that it's ubiquitous. It's everywhere. I mean, we have our own choose of high. We have 300 local groups in 300 cities across the world with people getting together in real life, hundreds of people in many of these chapters. And it's just an unofficial thing. But they're getting together and living lives that we used to be these kind of frugal weirdos. And we're not so weird anymore. That's the great thing. I think on a lot of levels, this is a fundamental truth of life is. you're going to live paycheck to paycheck and be stressed all the time if you don't live below your means. It's actually pretty simple. And Speaker 3 (5:58) obviously to do this, you probably have to have an above average savings rate, especially when you consider that according to the Federal Reserve, the personal savings rate in the U.S. now is 3%. Most experts recommend that you should be saving 10 to 15%. I think Speaker 1 (6:12) a lot of people struggle to do that. You Speaker 3 (6:14) mentioned your savings rate. Is that about the range of the rates you see in the FI community? acknowledging that there's probably a lot of variability there. Speaker 1 (6:22) A lot of variability, for sure. And yeah, we're a very big tent community here. If you come in and your net worth is in the red and your savings rate is zero effectively or negative, you're not excommunicated. It's not like you're not welcome, right? It's like we're all just trying to live better lives. I think that's the biggest thing. And you make changes one at a time. And it's amazing just like how how your investments compound. It's amazing how these little changes compound. So, um, but yeah, I mean, I think realistically to reach financial independence in that intermediate amount of time, which to me is 15, 20 years, like that, that's a pretty abbreviated, uh, career for most people. Most people would be thrilled obviously to have a 20 year career. Yeah. I mean, you're going to need to save 30 to 40 % of your income. So I think, yeah, that 30 to 50, I think is a, is, is a sweet spot. Now, again, that might be unrealistic for a lot of people who have fancy expensive mortgages, have the big cars, but, you know, you can make changes over a period of time. So, yeah, I mean, I think. I think you're going to see people in the sensational headlines, bro, of course, is that person saving 87 % of their income and they're living on rice and beans. You know, that's, that's the nonsense. But, but realistically, these are mostly just normal middle-class people who have just made a series of changes over, over many years to, yeah, get to that point where they can save probably 30 to 50 % roughly. Speaker 3 (7:49) They say to save more, you have to spend less. And I think a lot of people conceive of folks in the five movement is, you know, living in cardboard boxes and eating rice. But it's not true from what I have seen, but it does require making choices. And you've talked about this in terms of a term using as being a valuist with your spending. Explain what you mean by that. Speaker 1 (8:15) Yeah, it's a funny term, but I've had it for about a decade now. A friend of mine who I met through our community, actually, that's the beautiful part, coined this. And yeah, it's spending on what you value, what you value critically, not on what society values. So it's not to say, and I hope people understand by now that pursuing financial independence is not about being a miser. It's not about living a bad life. I mean, who would sign up for that, right? Like, especially when you're talking, like I said, there's no get rich