Have you read Quit Like a Millionaire by Kristy Shen and Bryce Leung (aka. Millennial Revolution)? I just finished the book and I enjoyed it tremendously. Quit Like a Millionaire is a great introduction to the modern FIRE movement. If you want to know more about financial independence and retiring early, this is the book to read. Kristy is the primary narrator and she shares her journey from childhood poverty to retiring a millionaire. Her story is quite fascinating, but it’ll make you cringe in some parts too.
Childhood poverty
Childhood poverty is sad. Nobody wants to see a child suffer. It’s not their fault their parents were poor or they were born in the wrong country. Kristy overcame this obstacle and become a millionaire through hard work and perseverance. She doesn’t see childhood poverty as a handicap. For Kristy, poverty gave her creativity, resilience, adaptability, and perseverance. She also asserts that childhood poverty is a common experience among the millionaires she has met.
Can this be true? I’ve always assumed that it’s much more difficult to become rich if you’re born poor. Poor kids have a lot of problems to overcome. Everything has to go right for them to escape poverty.
According to a 2012 Pew Economic Mobility Project study, only 4% of those raised in the bottom quintile moved up to the top quintile as adults. 43% of poor kids grow up to be poor adults. This makes sense to me. It’s much easier to earn more when you have advantages like private education, family connections, and wealthy friends.
At first glance, it seems the statistic contradicts Kristy’s observation. She said childhood poverty is quite common among the millionaires she met. Common? How can that be?
After thinking about it more, I think I can explain it. The key here is that income doesn’t equal wealth. Also, Kristy is active in the FIRE movement. The FIRE millionaires are a bit different than normal.
Income doesn’t equal wealth
This is a subtle point. At first glance, we might assume that a millionaire has to be in the top quintile of family income. However, that’s not true. You can become a millionaire from any of these quintiles. If it’s possible for a janitor to amass $8 million, then it’s possible for anyone to become a millionaire.
Unfortunately, most families spend most of the money they make. The household saving rate in the US is 6%. It’d take a very long time to become a millionaire if you save just 6%. The median household income in the US was $61,372 in 2017. It’d take over 270 years for this family to become a millionaire household. A 6% saving rate is just too low. I assume they just save the money in a checking account. If they invest it, they will have a million dollars in about 40 years. That’s still a very long time.
Anyway, that’s why most people aren’t millionaires. They spend too much and don’t invest enough.
Of course, there is a correlation between income and wealth. It is way easier to save if you make more income. Kristy and Bryce were in the top quintile by the time they were 30. They saved over 50% of their salary and became a millionaire household in less than 10 years.
Personally, I think Kristy was very lucky to be part of the 4% that moved from the bottom to the top quintile. Her family was poor when she was young, but she overcame it with education and perseverance. Yes, it’s possible to become a millionaire when you make less, but it will take a lot more time.
FIRE millionaires
It is possible to become a millionaire even if you don’t make a lot of income. But it is way easier if you make more money. Intuitively, millionaires must be more common as you move up the income quintiles. However, Kristy believes childhood poverty is a common experience for many millionaires. There is a discrepancy here.
This is when I realized “common” has a different meaning for Kristy and me. To me, common means looking at a sample of all the millionaire households in the US. In this case, relatively few millionaires experienced childhood poverty because the socioeconomic mobility in the US isn’t that great. Only a small percentage of people with childhood poverty become wealthy. I mean how many janitors have $8 million? Probably just one or two.
However, common has a different meaning to Kristy. Kristy and Bryce are outspoken advocates of the FIRE movement. In this circle, millionaires are dime a dozen. Most (if not all) FIRE bloggers who retired from their career are millionaires.
Yes, we’re one of those FIRE millionaires, too. We use the 4% safe withdrawal rate as a guideline. That means we had to save up at least 25 times our annual expense before considering early retirement. Most people save a bit more so they’d have some margin. Anyway, the target number for early retirement is usually over a million dollars. Hence, millionaires are somewhat common in the FIRE community.
Are FIRE millionaires different than regular millionaires?
Hmmm… I wonder if FIRE millionaires are different. We’re a very small subset of the millionaire households. There are over 11 million millionaire households in the US. On the other hand, there are probably just a few hundred FIRE millionaires. Maybe in this subset, childhood poverty is a more common experience. Why would that be?
My theory – millionaires in the FIRE community figured out what “enough” means. My parent was in the lower quintiles for many years. Our modest lifestyle is luxurious compared to my childhood. I could work longer to have a bigger spending budget, but that’s not important to me. My life is already very good. More spending isn’t going to improve it much. I’d rather have more time and autonomy. That’s why I’ve been retired for 7 years. Childhood poverty set a low baseline for me.
In contrast, regular millionaires have higher ambition. Once they have a million dollars, they’ll shoot for two. After they have two million, they’ll aim for 5. More money means more spending for most people. I think it’s much harder to retire early with that kind of mindset. That’s normal.
That’s just my opinion. Now, it’s your turn. Do you think FIRE millionaires are different than regular millionaires? What’s the reason?
You can buy a copy of Quit Like a Millionaire from Amazon. It’s a pretty good book.
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Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!
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I grew up well below poverty after my parents divorced, and my dad basically disappeared. My mom was a dysfunctional mess who further struggled with health issues, and was basically not a very good mother. However, she sat me down for a talk once and changed my life forever with her words. She said to get out of poverty, I would need to work my butt off in school and in extracurriculars so I could get accepted to a wealthy Ivy League university that would pay for my education. After that, if I chose a practical, in demand degree, I would be set. That’s exactly what I did. I went to Cornell on basically a free ride. Unfortunately, my poverty mind set led me to accept WAY below market pay for most of my career, and I’ve struggled with severe burn out in the last few years. But, I’ve still done ok, and I plan to “retire” next spring around my 49th birthday. At that point, I hope to rediscover some wonder about this world and life and find some things that will make me happy and maybe still add value to others.
Hi Joe:
I like the article but wasn’t very fond of your statement, “It’s not their fault their parents were poor or they were born in the wrong country.” The statement seems to indicate poor countries are the “wrong countries.” What position is anybody in to state there are “right” countries to be born into and “wrong” ones. Also, we can’t simply assume that because one country is wealthier than another that the wealthier country is the superior country, correct?
I get your point. But I still think it’s better to be born in a rich country than a poor one.
You just have a lot more opportunities.
I think it definitely helps give someone the ‘drive’ and the ‘grit’ to try and get out of the rat race and live a better life. It varies though, I think it really depends on how the person deals with the cards they got, and how they overcome adversity. Not everyone can overcome adversity with such strength.
As someone who does come from childhood poverty, I do think that FIRE millionaires have a fair amount of differences from “regular” millionaires. Starting out in my career, I never dreamed I would hit a million dollar net worth, but I’ve been steadily working towards that goal and have been amazed at how my mindset has shifted. I would think there’s a fair amount of complacency that comes with being a regular millionaire whereas those in the FIRE community appreciate things on a much larger scale.
I’m sure you’ll get there someday. It’s inevitable if you keep at it and avoid big screw-ups.
Good luck on your journey!
Hi Joe – like many others I do agree with you that FIRE millionaires are different to some other types of millionaires – mainly as they relentless control costs, and are much better at understanding value on a personal basis. They generally don’t skimp on what bring value and joy (ala KonMarie) but ruthlessly cut other costs.
Poor family to become the millionaires hard to think. Very hardworking, take the decision at right time in your business or job may be you become millionaires…
The difference between “enough” and “always wanting more” is huge, and I tend to think that FIRE people grasp the idea of enough much better than the majority of the population. Understanding “enough” not only means that you probably don’t need as much money, it also is an incredibly freeing feeling.
I think it really depends on your personality too. I’m more laid back than many of my friends.
That helped me learn what enough means.
I think the difference for Kristy is she is both smart and was raised by parents who, whatever their faults may have been, still had values that stressed education and deferred gratification.
It’s very non PC to say, but there is definitely a culture of poverty in the U.S. where the above values are simply not stressed at all.
I would also say that the typical poor person raised in the U.S. has a lower IQ than the typical poor person who grew up in Communist China. The repressive economic system in China at that time held back people with high IQs in a way that wasn’t happening in Western countries.
Also Kristy’s parents are immigrants. As we see with most immigrants to the U.S.–they work harder than the typical native-born citizen (and apparently, this is also similar in Canada).
Asian culture really emphasizes education. That’s our big advantage.
In the US, people used to be able to get by without college education. That’s probably why education doesn’t feel as important to the lower income quintile. It’s different now. You’ll be left behind without a college education unless you’re really lucky.
Yes, I agree. Unfortunately, the poorest 20% haven’t gotten the memo and there are some people in power who pander to them for their own political and financial gain.
I’m reading Quit Like a Millionaire now, and last week finished The Next Millionaire Next Door. As a millionaire who grew up poor, Kristy’s story resonates with me on many levels. I know statistically that making it from rags to riches is unlikely (my four other siblings didn’t), but I hope that stories like hers inspire all the folks who DID have a head start early in life to not rest on their laurels. I love her line in the book about her college friends who grew up with money and weren’t motivated to achieve because for them, failure WAS an option. I see this every single day and it makes me rethink the level of safety net we need to provide for our own child as an adult.
I hope some poorer kids read this and learn that it’s possible to become wealthy. You just need to work hard and don’t give up. Yes, the odd is against you, but some people will make it. You have to keep trying.
I struggle with the kid question too. He lives such a cushy life. I’m teaching him to be frugal and that will help him. It’s tough to teach grit and hunger, though. We’ll keep trying.
I grew up in a reasonably middle-class family; dad worked, mom didn’t, our cars didn’t have power windows or A/C but we always ate well and never worried too much about paying the mortgage (even during the federal furloughs in ’95 and ’96). We were comfortable. From that, I internalized ‘hardship’ as something that happened to other people… and failed to develop the hunger I see in FIRE-oriented folks to GTFO the rat race in an accelerated manner. My wife grew up a bit better off — her folks both worked, and at higher-paying jobs than my dad; there was a country club membership, and convertibles, and regular nice vacations.
That was then. The last five years or so have seen us crank our 401k and HSA contribs to the maximums, stop blowing money on frivolous inane things, and refinance our mortgage to be entirely debt-free by the time I’m 50. We’ve still got that optimism borne of never knowing how bad things can get… but it serves us well and lets us take risks that might deter those whom life has provided reasons to be more conservative.
Thanks for your input. Optimism is a big differentiator.
Growing up poor made me a lot more conservative. I always feel like something bad is going to happen.
It took me a long time to learn to be more optimistic.
Biggest difference between a FIRE millionaire and your “typical” millionaire: A FIRE millionaire doesn’t enjoy what he did to generate the wealth he has. That is the reason why the retire early part comes into play. Otherwise, the FIRE millionaire will continue to work and would be the same as the “typical” millionaire.
You mentioned “enough” is the main reason and that “regular” millionaires have more ambition. I would have to humbly disagree. Look at what Kristy and Bryce have done including writing a book. Hard to say they are not ambitious.
That’s a really good point about the career. But then, a lot of people don’t really like what they do these days. Only a very few are planning to escape the rat race.
I still think “enough” is valid. Money isn’t the main priority for FIRE millionaires. Kristy and Bryce would make a lot more if they stuck with their job. I’m sure there are less than 10 people in the FIRE community who makes more income after they retired. I’ll check with Kristy how much she made from the book. 😉
Maybe another way to look at it is that FIRE millionaires want freedom versus the “regular” millionaire.
Freedom to choose what they want to do with their time
Independent from financial worries and social perspective
Reassess what are their priorities
Engagement of those priorities
Freedom to live the life they want and value above social norms.
You’re right. We prioritize freedom over more money. You have to think differently to escape from the rat race.
The pew mobility chart is quite interesting even though it is dated (2012).
I’m not surprised that the bottom quintile finds it so difficult to climb out that hole, but 57% moving upward is not bad. Since this chart presents population and quntiles, 20% of the population will always be in the bottom quintile.
I take comfort in seeing the middle quintile’s children have a nearly even chance in ending up in any quintile. That seems to indicate people’s economic status as a child has a modest bearing on their own financial outcomes. That’s certainly my story moving from the middle to the top.
What surprises me is that people in the top quintile have a 60% chance their kids will move down the quintile ladder. That would mean that the odds are my kids will make less money than me. I was rather hoping not to raise trust fund babies.
I like that chart too. It’s really neat.
Ideally, all quintile should look more like the middle quintile. Apparently, many countries have better socioeconomic mobility now.
There is another chart that shows children vs parent earnings. It doesn’t look good. In the past, 80%+ of the children earn more than the parent. It’s slowly declining. Maybe 50% now.
https://www.npr.org/sections/thetwo-way/2016/12/09/504989751/u-s-kids-far-less-likely-to-out-earn-their-parents-as-inequality-grows
I love Ronald Read’s story. When I get asked who IMO is a real life hero or someone I highly respect is, I always reply “Ronald Read”… (Big pause, bewildered look, Who?, is the usual next word I hear). Then I explain his story as best I can. It’s kind of like that movie St. Vincent.
What’s funny is most people kind of focus on the “fixing his worn clothes” aspect, wondering why he just didn’t buy new ones (with all that money) rather than investigating how he amassed such a great net worth through simple means.
His story is pretty amazing. Anyone can become a millionaire if you live frugally, invest consistently, and avoid big screw-ups. 🙂
I think there are more than a few hundred FIRE millionaires. I know that I have a non-blogging friend from college who is one. Depending on the definition of RE, we’re another. For what it’s worth, my friend grew up in a very rich family. My wife was always on the borderline on child poverty, but I wasn’t. I know that had an impact to push her towards a degree and career that makes a lot of money. I just did it because it’s what I was supposed to do.
At first, I was going to write a few thousands, I figured it’s better to undercount. 🙂
Your point is very valid. Poor kids will consider money more. I’d never go to school for a degree that is harder to make money with. We consider the ROI much more.
Thanks for the write-up, Joe! Education was the key to getting my family out of poverty, and I believe that is still most people’s best bet. Believing that you can get out of poverty and having support and role models that help you get there is also a key factor. That’s why we wrote this book to prove that just because you were born into poverty does not mean you will never get out of it. By just being born in or being able to immigrate into a first world country is a huge advantage that most in the world do not have. Thats something to be grateful for.
Thanks for reading and taking the time to write this post! I’m so happy I got to share your family’s inspirational story story in my book!
I agree about education. A bachelor degree is not optional these days unless you’re super smart and entrepreneurial. It’s much easier to get a degree in a good field and FIRE like we did.
I agree that anyone can escape poverty. But it’s much more difficult if you’re born into poverty.
I think you have to be very lucky too.
I’m of two minds with respect to the transition up the economic classes. On the one hand I see my own situation. My family was lower middle class. Growing up my father was usually unemployed. My mother made ok money as a nurse. Both my parents before they split spent every dime they had.
Conversely my income is double what my parents made as I grew up. Our assets are nearly fi. So it can be done.
But… as a foster parent I also observe that these things tend to repeat themselves. Those in foster care are more likely to have kids go into the system. The same can be said for poor staying poor.
I suspect the difference is not the money itself but rather the culture. My extended family didn’t believe in education. My mother believed it was the key and that perseverance had to go with it. Her pushing is why I changed my status, not inheritance or connections. I suspect most lower income kids don’t have that influence.
I think you’re right about the culture. Many Asian families believe the key to more wealth is education. It’s ingrained in many of us.
If you don’t believe in education, then it’s much more difficult to move up.
I think there needs to be a new term for describing a millionaire because a million just isn’t what it used to be.
People talking about the millionaire lifestyle nowadays really need closer to $3 million to replicate the same lifestyle from 30+ years ago.
It seems like FIRE millionaires are simply younger and more resourceful. They’ve leveraged the internet to make extra income in retirement.
Congrats on the book you guys!
Sam
Sam – I agree with you that the bar is a lot higher now and a million dollars isn’t what it used to be.
I recently did a calculation (and wrote a blog post) about how I think a family of 4 would need about $480,000 a year for an upper middle class lifestyle in NYC and about $1.1 million a year to live an upper class lifestyle.
That’s easily north of $10 million in investable assets to generate $480,000 in cash.
Wow, $480,000 per year? That’s insane. But I guess that’s NYC.
My friends are teachers and they make much less than that.
That’s a really good point. FIRE millionaires are very resourceful. I don’t know anyone who stops working completely. It’s good to work a bit after retiring from your main career.
Joe,
I think it’s very important in a debate like this to differentiate millionaires from self-made millionaires. I grew up poor but went to a fancy private college on scholarship, and here’s the truth: the vast majority of people I went to college with have either already inherited more than a million dollars, or will do so eventually. Some of them are hard workers who would have earned millionaire status eventually on their own; many of them aren’t. But one thing that characterizes all of them is that they never worried much about money. They could take whatever career risks they wanted – or just be relatively lazy — because they knew their ultimate retirement as millionaires was assured. This isn’t just the trust-fund kids: it goes even for upper-middle-class kids who will inherit IRAs and/or houses in areas where real estate has appreciated. Those kinds of inheritances will often take people a lot closer to a million, if not over it.
And yet, despite such evidence all around us, people love to trumpet statistics like the one that says 79% of American millionaires are self-made. This is nonsense, and a great example of the ways statistics can lie to us. Now, I do believe that 79% of the people who took that particular millionaire survey claimed they were self-made. This is probably partly due to selection bias – proud self-made millionaires are much more likely to respond to such a survey in the first place – and partly based on the self-deception of those who, as the saying goes, “are born on third base but think they hit a triple.” A stunning number of privileged people – including some pretty famous ones currently working in government! – feel the need to convince the world, and perhaps even themselves, that their wealth comes from hard work rather than privilege. In many cases, for many millionaires, it comes from a little bit of both – but you’d better believe they’re going to emphasize the hard work part!
Now, when it comes to truly the truly self-made millionaires, I totally agree with Kristy that growing up poor can give us the resilience, drive, and desire to do it on our own. And your point is well taken – the fact that she hangs out in the FIRE movement means she’s met a disproportionate number of hard-working, non-privileged, genuinely self-made people similar to herself. This is a great crowd to hang out with, and it’s helped me see that FI is possible for anyone, from any background.
So the point I’d like to emphasize for your readers is this: don’t ever be discouraged by comparisons to the wealth of others, regardless of how they obtained – or claim to have obtained — that wealth. Those of us who truly grew up poor will have a much longer and harder road to becoming millionaires, but with hard work and persistence we can all make it there eventually.
I think you’re right. It’s inconceivable that 79% are self-made. This sounds wrong to me. It’s way easier to become a millionaire when your parents are well off.
I should have put that point in the main post. Don’t be discouraged. If you work hard and keep trying, you’ll have a chance at becoming a millionaire. That’s what Kristy’s story is all about.
I don’t know if it is from having a grown up poor or being exposed to what poor is. What I mean from that is I was in the upper quintile growing up and I am in the upper quintile now. My parents have given me some thing along the way but they did not just give me everything. I make a six figure income and have 2 masters degrees (which I paid for). I am a single parent (well was, my son is 24 and doesn’t live at home now, but had primary custody from 9-24 for him). I grew up over seas, and have seen true poverty. The slums of Philippines, the low rent sections of Singapore, etc. have all had an impact on me. That exposure helped me push myself to be who I am today.
My son on the other hand lived with his mother from birth until he was 9. She didn’t have much money at all and could barely afford to live and eat. My son grew up with not knowing where his next meal would come from (yes I paid my support). However him grown up now, I don’t know if his frugality came from learning what his mother was like (he always says he doesn’t want to end up like her) or if he sees the lessons I have taught him about frugality. I would say a little of both.
I think being exposed to some poverty is probably very useful. It shows you what life could be like if you don’t work hard.
Sounds like your son had a rough childhood. Hopefully, he’s doing well financially now. Being frugal really helps. Thanks for your comment.
I think you make a good point that regular millionaires seem to shoot for more money than FIRE millionaires. They tend to enjoy making as much money as they can for as long as they can and focus on following their career path.
FIRE millionaires tend to give up their high-paying careers and scale things back a bit. They might continue to make money, but it seems like it’s generally through doing something different and possibly less time-consuming.
Sounds like an interesting book – I’ll have to check that one out!
— Jim
It’s natural to spend more when you make more. FIRE people are way different than regular people. We have a different mindset and value time more than money. That’s very unusual.
I love that you dig into the concept of the millionaire janitor etc. It can be so tempting to hold up the idea that “anyone can do it,” but the odds really are skewed against those who grow up poor.
Exactly, only a few people can do it. But it is possible. There are many examples and they make good stories.
A FIRE millionaire is similar to a typical first generation millionaire (aka new money). They both got there through hard work, risk taking (starting a business, stocks, etc.), and frugality. The old money millionaires are most likely not like the FIRE types because the frugality muscle has been replaced with an IV of capital.
I wonder if that’s true. Kids with more resources don’t have to be frugal. They have more support and can afford to take more chances.
Then again, FIRE probably isn’t attractive to the old money type.
Everyday Millionaires by Chris Hogan is a good read. Busts some of the myths about millionaires and shows people that they can get there too regardless of their status (spoiler alert: its due to hard work and focus 🙂 )
I’ll check it out. Thanks for the recommendation. I agree that hard work and focus are very important.
While they are certainly more international these days, Kristy and Bryce are Canadians which would have a significant influence on their observations and the path to millionaire status. Overall Canada has more social and economic mobility than the US, for a number of reasons of course, but a significant one is health care. A serious illness in the US could have long-lasting intergenerational impacts financially but it is not a concern for most Canadians. As a fellow Canadian on the FIRE path the health care planning that Americans need to think about post FIRE is something I’m grateful I don’t have to worry about.
For the super curious Kristy and Bryce’s financial mentor, Garth Turner, who helped them get to FIRE has his own blog (www.greaterfool.ca). He mentions them occasionally but it’s a great blog for anyone curious about what’s going on in Canada with respect to investing, house prices, politics, and economics.
I think you’re right. Socioeconomic mobility in the US is lower than other developed countries. Healthcare is a big part of it.
Most people are afraid to retire because they’re afraid of the cost of healthcare. Canadians have the advantage there.
I’ll check the site. Thanks for the recommendation.
Wow. What a loaded post! Did I win the book? ha,ha!
Brushing the trust fund babies aside, remember the Vanguard motto: It’s not how much you make, it’s how much you save.
People are people, but I do think FIRE millionaires are a bit different “if” they started at zero.
Love saving and investing people! Reign in your lifestyle! Give back when you can!
I also think that you have to have… energy, motivation, a vision. : )
That’s a good question. Thanks for the book tip. I love reading books like that and will read it for sure. I’ve never really thought about that difference, so I don’t have a good comment. I guess I won’t get the free book. Tom
I grew up in abject poverty. The first 3 years if my life we had no running water and no electricity on an indian reservation. Through my dad’s GI bill our family was able to move to a 3 bedroom house.
There were 9 of us. Bunk beds were our friends.
I was teased constantly at school because I often had holes in my shoes, dirty hair, 2 pairs of pants and 2 shirts.
My family lived on $1000 a month…welfare…for 9 people. It was never enough.
When I graduated high school, my parents kicked me out…I had no where to go. I lived in my car.
I vowed….I would never be poor again. I would never receive welfare.
I got 2 college degreees… racking up a ton of student loan debt.
I learned that my parents lived in poverty…I learned from poverty.
I still use coupons. I wait till things go on sale, I pick up pennies on the ground, I do not splurge on anything.
I am calculated and I know exactly where each dime goes.
I think that there is a difference between FIRE millionaires and wealthy millionaires. Every single FIRE person I know is like me. They KNOW exactly where their money is going, how their money is making them money and exactly how much money they need to live their best life.
Thank you for your comment. You came a long way.
Being frugal is an ingrained habit for me too. I don’t want to splurge even when I could afford it.
It served us well so far. Why change it?
Based on the number of millionaires I have met myself, I definitely think fire is different. The frugal lifestyle is probably not general among millionaires. Lifestyle inflation is probably the norm in society, and that is what makes fire so difficult to achieve for most people.
I think it would depend on the persons individual story. But to me if someone totally boot-strapped their way to FIRE from a poor upbringing, then yes they’re probably going to be a pretty different person than someone who was born in to wealth.
I think most people in this community bootstrapped their way there. That’s part of the story.
People born into wealth probably aren’t attracted to FIRE. Especially if they have to lower their lifestyle spending.
I sometimes think “I invented FIRE”, because I was living my life this way, WELL before it was ever “a thing”. I used to say, if I can’t retire by the time I’m 50, I’m going to be pissed off. With the wife still working and me on the fence about going back, I’m still not 100% with just a 1M+ dollar net worth. FIRE millionaires that include a substantial inheritance into their plans are definitely “different” as that is ultimately only “wealth transference” The FIRE millionaires who truly start with nothing, and have no monetary benefit from someone else are ABSOLUTELY different, and it’s a continual struggle to learn and unlearn certain habits. (i.e. being overly cautious, and learning to enjoy spending)
That’s very prudent of you. I used to think $1.5M would be enough, but now I’m not so sure. You need some cushion just in case. Of course, it depends on your personal circumstance too. If you truly hate your job, then it’s best to take early retirement.
I don’t know any FIRE millionaire who inherited a substantial amount. Maybe they just don’t advertise it.
Adam at minafi.com inherited quite a bit.
There’s probably different subsets within both the traditional and the FIRE millionaire population: You’ll find the frugal, 50 years+ “millionaire-next-door” types who don’t care much for traditional status symbols, but would not agree to the Early Retired part of FIRE since they consider running the business they built part of their lives. They might come from a modest background or not.
And you’ll come across the traditional millionaires driven by growing up poor who always feel the need to make more. While they might be better equipped to lead a frugal life based on their childhood experiences, all the things they lacked in childhood is what they want to provide for their own families now.
I think in the end it’s down to personal motivations and priorities, a lot of which are definitely shaped during childhood. It’s not growing up “poor” or “rich” by itself, though, but a combination of factors, like the set of values you develop, and whether you lean more towards stability or change for example. To dig deeper into this would be an interesting research 🙂 .
I think you’re right. It really depends on the personality. Maybe someone in the PF community can write a research paper. Sorry, I’m too lazy for that. 🙂
Honestly, I don’t believe FIRE millionaires are all that different from any other millionaires. We just have a fancy word for it now.
If you look at guys like Warren Buffett and Charlie Munger, they were doing exactly what we were doing, only 50 years ago. They wanted independence, so they under-spent their income and invested as much as they could… and they happened to be very good at it.
I don’t think childhood poverty has a lot to do with it, but instead, a strong desire for independence (most commonly from a 9-to-5 job in the FIRE millionaire case). That seems the most common denominator to me.
I think that children growing up in poor households or have parents that are bad with money can follow one of two pathways. The most common pathway is the one that essentially mimics what they have seen their parents doing because that is all that they are accustomed to. Thus they are destined to follow the same path. The less common pathway is the one where a child uses their parents as a bad example and thus he or she strives to not follow in their footsteps and forges a better outcome.
These children see the mistakes firsthand and recognize the importance of not making them for themselves. This determination is quite powerful and can lead them to achieve great success as they have to fight for everything to claw their way to the top.
As far as Millionaires go, FIRE Millionaires are indeed a subset. They typically do not come from “old money” and by growing up in households that have had average lifestyles (compared to luxurious lifestyles that kids from old money are accustomed to), it is far easier to reach their “enough” level. If your kid is used to champagne and caviar lifestyle, one or two million in the bank just isn’t going to cut it. If they have only had a working class lifestyle during their development, the bar is set lower to feel comfortable with early retirement and a lower nest egg target.
Ahh, but Buffett and Munger never seriously consider early retirement. They continue to keep working and amassing their fortune. That’s very admirable too.
I think you’re right about the strong desire for autonomy. That’s probably the defining trait for FIRE millionaires.
Totally agree with what Mr. Tako said here. We’ve been putting too much emphasis on “FIRE” and it’s getting a bit old fast!