Is Financial Independence the Same as Being Rich? My Thoughts on Budgeting and Wealth Perception

If there is a question that people in the FIRE (financial independence, retire early) world love to discuss the most, it’s at what number you truly become “retirement ready.” There’s a number that everyone in this crowd wants to meet to retire comfortably independently, but does this number differ from the same people who want to be “rich?” 

This is exactly the question one Redditor is looking to figure out with a post in r/Fire, as they recently discussed with a friend whether FIRE and rich are the same. The reality is that these net worth terms mean different things to different people, but that doesn’t mean you can’t find a middle ground. 

FIRE Versus Rich

In this discussion, the original poster and their friend debated whether or not FIRE qualifies as rich. As part of the argument, the Redditor tried to provide some context that the goal of FIRE is to retire early and have enough money to live comfortably without ever working again. 

For their part, the friend looks at this entirely differently and believes the only way to “qualify” as rich is to have some level of millions of dollars. This begs the question of how many millions qualify as rich, but again, this feels very subjective. 

As the Redditor quickly learns from the comment section with their post, “rich” means a lot of different things to different people, and rightfully so. The amount of money I need to retire comfortably will be different than anyone reading this. 

Are you “rich” if you live in a medium-cost-of-living area with $40,000 to live on annually but never have to work again? Alternatively, are you rich if you have a $1 million home, luxury cars, and take exotic vacations every year? There is no easy answer, and the question itself only leads to more questions. 

FIRE Doesn’t Mean Rich

The FIRE movement was never designed or meant to be interpreted as a movement for rich people. This is why there isn’t a particular threshold for people to be rich to qualify for the FIRE movement. Instead, you just need to have enough money to live out your life without needing to work again. 

Of course, things like Coast FIRE, FatFIRE, ChubbyFIRE, etc., have identifiable levels of net worth. With FIRE, the goal is to get to a point where you live off the popular idea around a 4% safe withdrawal rate, and that amount of money is all you need to live on every year. This number is flexible, as you might need 3% or 5%, but the hope is that you are somewhere around this SWR level. 

One thing that isn’t true of the FIRE movement is that you don’t even need a million dollars, which goes directly to the idea that you need enough to retire, but not necessarily a million dollars. There are countless people who are living well off less than a million dollars as part of the FIRE movement by moving internationally. 

What To Do Next

At the end of the day, everyone needs to create a budget for every expense that might be necessary to live. This will include large expenses like a mortgage or vehicle, and putting aside money for an emergency fund. 

The other hope is that you make the right investments to grow your wealth over time without getting too aggressive. There is something to be said for dropping your money in ETF investments like SPY, a popular investment in the FIRE world, and letting wealth grow over time. 

If you want to be rich, it’s certainly something to shoot for, but rest assured that financial independence, as in the FIRE movement, and being rich are not at all the same. Those who want to be rich want at least five zeros in their bank account, likely six or seven. The hope is that everyone reading this can get to a point where they have enough money to live comfortably, but being rich doesn’t have to be a goal in order to accomplish this. 

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