Allianz Guru Series by Henry Yang: My personal take at FIRE (Financial Independence, Retire Early)

My first few jobs were filled with situations that would make you want to retire early. Long hours? Check – I think the longest I did was a 36 hours shift (this pales in comparison though to those in the healthcare industry). Working on weekends? Check – I remember inviting my family to visit me for Christmas as I was on duty. Shifting schedules, including night shifts? Also check – this happened every week, and this didn’t give my body clock a lot of time to adjust. During those limited free hours, I found myself trying to find answers in the form of financial knowledge to eventually achieve financial freedom. In an attempt to escape, it’s no wonder, looking back now, how I got attracted to the world of investing.

Nowadays, you might have heard of the FIRE movement – short for Financial Independence, Retire Early. It’s not really new as it was sparked by a 1992 book “Your Money or Your Life”, written by Vicki Robin and Joe Dominguez. But it has become highly popular in the last decade, especially with Millennials. 

FIRE in a nutshell

Goal: retire as early as possible


·         Aggressive saving, at least 50% up to 75% of annual income

·         Retire once you’re able to save 25x-30x of your annual living expenses

·         Once retired, spend only up to 4% of your savings per year

What do I think of FIRE?

Let’s start with the negatives so that we can end on a positive note.

The greatest criticism of FIRE is that it mostly applies to those with high incomes as it would be impossible to save 50% of your salary if you’re not earning that much. I’m sure the authors and practitioners mean well, but an oversimplified formula like this won’t fit everyone. What I don’t like about it is it may set an unachievable goal that would end in frustration or disappointment for those that are unable to practice this to the letter.

There are also other dangers that FIRE has not considered. What about unexpected expenses like medical costs or accidents? What about inflation, would the savings be enough to cover the natural increase in living expenses? What happens if you live longer than you expect? These are risks that should be considered whether you’re planning to retire early, on a normal timeline, or not at all, ala soft retirement. To be fair, I may have oversimplified FIRE in this discussion; there’s a chance that the people behind FIRE may have considered this. If they did, good. If not yet, I advise building up your defenses for whatever may happen.

Criticizing something doesn’t mean it’s all bad. We can learn some important points from this as long as we pay proper attention. As Bruce Lee once said, “Absorb what is useful”.

I like how FIRE makes you focus on a goal and a process. Oftentimes we’re so overwhelmed with how to achieve our goals that we end up not doing anything. Our goals are not limited to just investing; it may be about our careers, improving our health, or it can be any aspect of our life that needs some improvement. Having a clear sight of the goal and what we can do even in small, imperfect steps, takes us closer towards it.

Another concept I really appreciate from FIRE is its minimalistic approach. Since you’re saving as much as you can, you have to assess which purchases are really essential. It’s a good practice to review your expenses and identify which are necessary and aim to reduce those that doesn’t really “spark much joy into our lives”.

Have you heard of the marshmallow test in the 1980s where the tester puts a marshmallow in front of a child, tell him that he  can have a second one if he can go 15 minutes without eating the first one, and then the tester leaves the room? The implication is that those children who can delay their gratification and wait 15 minutes succeed more later in life. The book “Rise of the Superman” by Steven Kotler (no superheroes in this book, this is about flow and sports performance) has a different take on this test: there are people that put more value in the present and there are those who value the future more. It’s a different look, rather than attributing it as a measure of success.

All in all, FIRE is a good trend as it introduces financial discipline to reach a goal down the line, but it’s extreme saving method and incomplete defense against the unexpected trades the present for the future. A comprehensive approach balancing the Now, the What-ifs, together with the Tomorrows, would be more sound.  



IMPORTANT NOTICE: This document is for general information purposes only. It is not an investment advice and does not constitute any offer, or a solicitation to buy or sell any investment product. Further, any opinion stated by the author does not necessarily reflect the position of Allianz PNB Life.

Head of Investments
Henry Yang is a Chartered Financial Analyst (CFA) holder and a graduate of the University of the Philippines with a degree in Electrical Engineering. He spent the initial years of his career in building maintenance, electrical design and installation of construction projects, and teaching engineering. Later, he pursued his Master's in Business Management from the University of the Philippines - Los Baños as well as held investment-related roles at a top local bank, a U.S.-based investment company, and a global insurance competitor. Currently, he serves as the Head of Investments at Allianz PNB Life Insurance, Inc.