In a recent segment of the Dave Ramsey Show, there was a caller who had a net worth well over a million dollars and was working three jobs.  He is 40 years old and puts away $100,000 per year.  He said that he was terrified to live paycheck to paycheck.  This was not a joke, or at least I don’t think it was.

Before we get to Dave Ramsey’s comments, I just want to say that there is nothing wrong with living paycheck to paycheck if you have a massive net worth.  We typically hear criticism of living paycheck to paycheck because it is referring to people who have very little or nothing in savings.

If you have a million dollars or more in savings and investments, then living paycheck to paycheck is great.  It means you aren’t digging into your savings.  As long as there is some diversification, then the investments should grow, if anything.  By living paycheck to paycheck, you will be growing your net worth over time.

The caller said he was initially part of the FIRE movement.  That stands for “Financial Independence, Retire Early”.  It was interesting that Ramsey’s cohost didn’t know what FIRE stood for.

The caller admitted that he wasn’t spending much time with his family.  Yet, he continued to work three jobs while obsessively saving money.  You’d think he could at least get up the courage to quit one of his three jobs.

I think the advice from Dave Ramsey and his cohost was generally good.  They knew it was a mental problem.  They told him to quit two of his jobs and to spend time with his family.  They said he could always go back to those jobs a year from now.  They rightly pointed out that he really wouldn’t be living paycheck to paycheck, or at least not in the sense that was being portrayed.

The one interesting comment in the segment from Dave Ramsey that will get the most attention is when he said, “FIRE movement burned down.”  He said people were trying to do something that wasn’t sustainable.

(Watch at the 3:00 mark.)

Misrepresenting FIRE

This reminded me of when Suze Orman was on Paula Pant’s podcast several years ago.  When she was asked about the FIRE movement, Suze Orman said she hated it.  The problem is that Suze Orman was focusing on the “retire early” part of the equation.

This is why I prefer the term “FI”.  It shouldn’t be about retiring early.  It should be about getting to financial independence.  Maybe retiring early can be one option that comes with financial independence, but the focus should be on financial independence in order to have more options in life.

With this caller, he was misrepresenting the FIRE movement to a large degree.  It doesn’t have to be about being completely obsessive with saving money to the point of leading a miserable life and not spending time with your family.  What is the point of that anyway?  Why would you want to be completely miserable only for the possibility of finding happiness way down the road?

This guy had already achieved a good net worth at a relatively young age.  You could quibble whether he is already financially independent.  But he certainly has more choices than someone who has little in savings.  It is ridiculous for him to be working three jobs while not spending time with family.

If this man doesn’t change his outlook on life, he will never be happy.  He could get to ten million dollars (in today’s money) and he still won’t be happy.  He will find reasons to not spend quality time with his family.  He will find reasons to not be happy.

For many people in the FI movement, it isn’t about obsessively saving as much as possible.  It is about making intentional choices with money.  Sometimes it is just about not being stupid.

For some, it just means not being wasteful with money.  It doesn’t necessarily mean deprivation.  Instead of paying 3 dollars at the convenience store for a soda, maybe you could have bought a big bottle of soda for half the price and kept in the refrigerator at home.

It’s not even to say you shouldn’t pay more at times for convenience.  It’s just about being conscious about where your money goes and thinking about whether purchases are giving you value.

I think the stories about people obsessively saving and living a ridiculously frugal lifestyle are what get the headlines.  They make the amusing stories in documentaries.  You don’t hear about families who are living a fulfilling life while managing to put 20% of their income away and setting themselves up for financial success down the road.  These are the boring stories.  But these are real stories that do exist.  They may or may not call it working towards FI or FIRE, but that’s really what it is.

In conclusion, the advice given by Dave Ramsey and his cohost was good advice.  I think Dave Ramsey took an unnecessary cheap shot at FIRE because most people pursuing FIRE are not like the guy who called in.  There are people who are pursuing FIRE who are happy and spend time with their families.