Fake FIRE Or FIRE Fraud: A False Type Of Financial Independence

Fake FIRE or being a FIRE fraud is when you claim you are FIRE (Financial Independence Retire Early), but you're really not. Fake FIRE or FIRE fraud is a false type of FIRE that is gaining a lot of steam because of the desire for instant gratification.

People who are Fake FIRE want things and want things now. They come up with terms such as Slow FIRE, Coast FIRE, Lean FIRE, Barista FIRE because they want the benefits and status of being financially independent immediately without putting in the work.

Instead of wearing shoes, these FIRE frauds would rather carpet the world to conform to their financial situation.

There are definitely different levels of fire, including Fat FIRE. However, let's not kid ourselves by going to such extremes as to make up the most ridiculous terms and situations to say we are FIRE.

The Real Definition Of FIRE (Financial Independence Retire Early)

You are really only FIRE if your passive income covers all your desired lifestyle living expenses. Once this happens, you are free to choose to continue working or making income from your interests if you want.

Fake FIRE: A False Type Of Financial Independence

If your passive income doesn't cover your desired lifestyle living expenses, you are Fake FIRE. If your passive income makes enough to only buy you a rubber chicken dinner once a week, you are Fake FIRE.

You need to make enough from your passive income to pay for rent/mortgage, food, clothing, healthcare, travel, transportation, and kids if you have them. If not, you are Fake FIRE or a FIRE fraud.

Examples of Fake FIRE / FIRE Fraud

I've been writing about FIRE since 2009. It is incredible how many permutations of FIRE there are to fit people's current situation.

Instead of taking steps to become truly FIRE, people have taken a shortcut with the definition of FIRE to make themselves feel better about their situation.

Fake FIRE is like getting a belt extender and saying you comfortably fit in a chair. Real FIRE is recognizing you've got a lot of work to do, exercise and eat right for years, and then fit into the chair.

Here are some examples of Fake FIRE or being a FIRE fraud.

A Retired Man With A Working Wife

I call this WIFI (Wife Financial Independence). For some reason, men have an issue with saying they are unemployed, a stay at home dad, or living off their wives. It's an ego thing.

Stay at home moms don't say they are retired. They say they are stay at home moms.

Men need to learn how to swallow their pride. There is no shame being a stay at home dad or having your spouse be the breadwinner. Being a stay at home parent is the best!

A Blogger Who Spends 40+ Hours A Week Trying To Make Money

Savvy bloggers will market themselves as FIRE, saying they've retired early and are living off their net worth. But behind the scenes, know they are pumping out endless affiliate content for the sole purpose of making money.

They aren't blogging for fun, to develop a community, or to share knowledge. Their #1 focus is to blog to make money.

There is no problem making money from your website. You deserve to make money from anything you create. Just don't pretend you are FIRE when you rely mainly on making money from your website to say you're FIRE.

Here is an example of a FIRE blogger who spends all his time writing affiliate posts. He has skillfully marketed himself as a FIRE blogger.

Fake FIRE Blogger

Telling Everyone You Live On Less Than You Do

Some people try Fake FIRE by saying they only live on a spartan amount of money e.g. $25,000 a year. As a result, they say they are financially independent and can live off their investments.

But behind the scenes, they are spending much more money. Given their higher expenses, their retirement portfolios, which often cannot be touched without a 10% penalty before age 59.5, cannot generate enough money.

Here's an example of a FIRE fraud. One guy says he lives on less than $30,000 a year, but then says he bought a second home for $300,000 after a divorce. How do you only spend $30,000 a year if your second home costs 10X that? But due to some voodoo magic he has put on his followers, nobody bats an eye.

In order not to be a FIRE fraud, you must build a large enough after-tax investment portfolio to produce enough taxable passive income. When people say they have $1 million in their 401(k), that's nice. However, an untouchable 401(k) without paying a 10% penalty is useless if you want to retire early.

Below is an example of building a taxable portfolio to Lean FIRE on $30,000 a year at the age of 45. The reality is, you'll need much more because a 4% withdrawal rate is too aggressive now.

Lean FIRE financial requirements by age chart

Blogger Who Spends 30+ Hours Delivering Groceries During A Pandemic

When I retire I want to spend 30+ hours a week delivering groceries during a pandemic! Said no one ever.

Yet, there's one blogger who quit his corporate job in his 30s. He said he made all-in about $300,000 a year. You would think if you were making multiple-six figures a year for a decade, you could live a more relaxing life.

But the reality is that his net worth or retirement portfolio, whatever it is, only generates about $640 a month or $7,800 a year. As a result, he delivers food for Instagram as much as possible to make $4,000+/month.

It is quizzical why he thinks he's really FIRE. Perhaps the Dunning-Kruger phenomena is big in the FIRE community.

Fake FIRE Is Part Of The Human Condition

You're only a FIRE fraud or Fake FIRE if you tell everybody you are FIRE and you are not.

We all want to achieve financial independence sooner, rather than later. However, partially thanks to tremendous bailout money by the Fed and the government, it's become much harder to retire early and stay retired.

Interest rates are way down and future risk asset returns will likely come down as well. As a result, we must lower our safe withdrawal rate and build larger net worths.

You don't have to feel bad about not being FIRE yet. It takes a long time to build a passive retirement portfolio to be real FIRE.

For example, it has taken me about 20 years after college to build enough passive income to provide for my family and not have to work. Yet, I'm still looking to build about $50,000 more a year in passive income given we had a second child in late 2019.

I have no doubt the cost of raising children will continue to go up. Therefore, I am not really FIRE either, given my circumstances have changed. And that's fine. I'm on a financial independence journey.

The next time you're disgruntled at someone who is real FIRE and you want to pretend you are FIRE too, see how long that person has been saving and investing. If you haven't saved and invested as long, you're not comparing apples to oranges.

Fake FIRE will be around as long as people want to feel better about their career or financial situation. FIRE frauds will continue to exist so long as there are hucksters trying to sell you a dream not based on reality. But at the end of the day, the only person they are tricking is themselves.

Enjoy your financial independence journey. Keep on saving and keep on investing. If the direction is correct, sooner or later you will get there!