Monday, September 14, 2020

FIRE Buys You Class...Whether You Want it or Not

Pursing financial independence is an exercise in class mobility. No matter what economic class you start in, or what class you like to tell people you're a member of, when you have enough money to never have to work again, you're functionally wealthy: you're now part of the upper class.

Doing so at an age so young that it can barely be understood by friends and coworkers just underscores the point. 

You're not just wealthy, you've become part of this new class at an insultingly young age, and everyone around you would appreciate it if you would at least feel a little bit bad about it.

The Minnesota "Fuck You"

Now, there are people who will disagree with me. There are people who will say that FIRE can be achieved while maintaining one's position in the oh-so-coveted middle class, because you're still spending and living like a typical middle class family. 

These people are wrong. A wealthy person doesn't magically become middle class just because he climbs into a Toyota or cooks some meals at home.

Still, I understand why the newly rich cling to this fiction. While no one wants to be poor, the irony is that few people truly want to be seen as rich, either.

Why? Because everyone wants to be middle class.

To be middle class is to have enough, but not to be spoiled. To find dignity and meaning in your work, but not in an elitist way. 

To be middle class is to have community: to be part of the esteemed-but-never-defined class of workers that is responsible for America's greatest achievements. The middle class also receives a larger share of benefits than the lower class: tax subsidies for everything from our retirement plans to the interest on our homes, and political power at every level of government. And, most of all, the middle class enjoys status. The status that comes from being just right: right there in the middle.

The catch with FIRE is that it's essentially a movement that takes above-average earners, at least nominally from the middle class, and turns them into people who now qualify as upper class, whether they want to or not. 

The average middle class family can only retire from work late in life, if at all, and typically only with a reliance on taxpayer funded social welfare programs like Social Security and Medicare. By definition, early retirees are achieving this milestone, well, earlier. And often they do so without any reliance on Social Security: a common utterance among FIRE adherents is that anything they get from this program will be 'a bonus'.

And then there's, you know, the wealth that allows someone to be considered financially independent and to make work optional. One might call a person with that amount of wealth, "wealthy", as opposed to middle class.

But what does it matter the class we consider someone to be in? Isn't it a matter of semantics?

We spend a lot of time in personal finance focused on how we can change something about our money. How can we earn more of it? How can we invest it more optimally? Most of personal finance is centered on changing our money situation for the better.

But little to no attention is paid to how money, in turn, changes us. Are we better people for it? Even if we're better off overall, are we better in all respects? 

Or as Paul Piff, assistant professor of social psychology at UC Irvine asks, does money make us mean?

If we become wealthy, do we view our friends and family the same way? Do they view us the same way? 

I try to ask myself these questions because I notice that a lot of the worldviews of the world's most wealthy people are fairly abhorrent. They seem consumed with matters of finance and support any policy that grows or protects their wealth. 

Becoming wealthy might provide a lot of advantages, but becoming a better person isn't necessarily one of them.

Joining the wealthy's ranks is perhaps not without risks. As we approach our financial independence figure, will I start embracing the viewpoints of the people I despise? Will I game the Medicaid system to get free healthcare for my kids, all the while railing about government waste and handouts? Will I cease caring about policies that help the less fortunate, in favor of policies that help me minimize the taxes I pay?

But it might change us, too.

*Photo is from mSeattle at Flickr Creative Commons.

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  1. This is where the long journey comes in. Usually, it takes years to reach FI. By the time you get there, you're set in your way. It isn't sudden wealth like winning the lottery. I don't think you'll change when you finally reached FI.
    Of course, you won't be the same person that started the FI journey years ago. It's a slow change. Hopefully, you're happy with the result.

    1. That's a great point, Joe. Unlike with a lottery winner or a windfall inheritance, FIRE is, at least relatively, pretty slow. Quicker than a normal retiree though.

      As you said, whatever changes are happening are happening over years.

      If nothing else, I suppose I can go back to the early days of this blog to see how my thoughts, and I, have changed.

  2. "Are we better people for it? Even if we're better off overall, are we better in all respects?"

    This is a question I keep asking myself, and unfortunately striving for FIRE doesn't necessarily make us better (at least in my case). As I start budgeting again, one of the things I'm looking to cut is my local newspaper subscription and some semi-charitable contributions...which is probably a terrible idea (and makes me a not so great person) in the larger scheme of things.

    1. I don't think that makes you a not so great person, friend. You're an undeniably great person.

      There are lots of ways we can direct our money to the things we think deserve it.

  3. I appreciate the willingness to bring some uncomfortable topics out into the open lately. It’s hard to justify choices that go against our values or ethics when we are willing to have a dialogue out in the light. I can imagine I would struggle with what to take advantage of as a suddenly “low income” family when that’s not the full story - it’s easy for me to demonize the government, to play the single mother card, to justify that others are also taking advantage, or to suggest to myself that I deserve something. Of course, living a life where we feel like we are contributing and in line with our beliefs about the kind of people we are (good ones, hopefully) is a more reliable path to the peace and happiness we commonly and mistakenly associate with money or retirement.

    1. "Of course, living a life where we feel like we are contributing and in line with our beliefs about the kind of people we are (good ones, hopefully) is a more reliable path to the peace and happiness we commonly and mistakenly associate with money or retirement."

      Oh, that is very good. I need to write about that someday.

      I am concerned with what sort of temptations we'll face once we are "low income" as you note.

      As I was telling a friend recently, I'm excited for the freedom that FIRE will bring us...but I do worry I might lose a bit of myself in the process.

  4. I think it's very easy to get sucked into the money-hoarding mindset and continually justify it as putting on your own oxygen mask.

    There's a vast difference between saving yourself and remembering you exist in a community and it gets easier and easier to lose sight of that as you distance yourself from the community that isn't pursuing FIRE.

    I feel like that resonates in how people double down on racism and sexism, or how they'll give "later" when they're financially set (but can't bring themselves to part with $5 now even though they're doing really well), anything that maintains the status quo in which they're succeeding.

    Sometimes, though there are definitely plenty of us who do NOT think this way, it feels like there's something in remembering the humanity of giving back and being a part of the community when you're not the one in need that is incompatible with a large swath of the FIRE community. Maybe this is just part of the idea that FIRE doesn't make you better or worse, it just intensifies what's already there.

    1. "I think it's very easy to get sucked into the money-hoarding mindset and continually justify it as putting on your own oxygen mask."

      YES. I have the best readers: I can tell because they're all better writers than I am.

      I do wonder if FIRE just intensifies whatever is there, friend. That (hopefully) would be a good deal for our situation. Like they say with golf: it doesn't build reveals it.

  5. I had a similar conversation with a friend recently where she expressed surprise that others perceived people with our incomes/assets as rich. According to the data though we are! Thanks to easily accessible information (like the Pew Research Center's income calculator) it's unfair to try to argue that we "really are middle class" because we're surrounded by people who earn/spend more than us in a high cost of living area. In my observation, having something to lose changes people and their political preferences. Perhaps this provides some motivation for the FIRE collective to support policies that build financial capability for all, so more of us have something to lose. Thanks for elevating this conversation through your post!

    1. Hi Tara,

      It was a shock for us, too, when we realized we were not middle class any longer. I don't know if it's fully sunk in yet.

      As you said, having something to lose really does change something in us. Maybe it's loss aversion that's to blame for political preferences changing: once we have this wealth, we'll do a lot to make sure we don't lose it.

  6. Just wanted to say I like your articles and think you are very insightful. One of the top finance blogs.

  7. Its actually quite opposite, the pensioners and FIRE are among the lowest income earners, typically sitting in the bottom 10-20 percent.

    I agree that FIRE buys you time (if you know what to do with it). There are very few people who did FIRE outthere and actually stopped working (including blogging).

    Being middle class, depending on where you live is between $50 to $150K in the USA. FIRE people dont have that.

    1. You're conflating wealth and income. But thanks for stopping by.