Is FIRE Out of Reach for Gen Z?

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FIRE can be daunting when you’re starting out. When you’re young, you want to enjoy life and have fun. Saving for retirement is important, but it looks like a distant future when you’re in your 20s. Surviving on your own is already difficult for Generation Z. Achieving financial independence seems out of reach. Unfortunately, the cost of living is higher than ever due to inflation over the last few years. Housing, transportation, food, and entertainment are all very expensive now. It’s harder to save when you don’t make a lot of money.

Zoomers think the older generations had it easier and they may be right. But I don’t think FIRE is out of reach for Gen Z. Let me share my experience and give some unsolicited advice.  

90s was the best decade

The 90’s was the best decade for FIRE! We had peace and prosperity. The Cold War ended, the internet became widely used, housing was affordable, and life was simpler back then. A young Gen Xer in the 90s could live frugally and save a good amount every month.

In 1996, I graduated from the university and got a full-time job. My one-bedroom apartment costed $450 per month. It was less than 10% of my income. Food and transportation were cheap too. My old Toyota Celica held up for a couple of years and gas was just over $1 per gallon. I didn’t have any student loan debt because tuition was more reasonable back then and my parents helped out. It was a great time to start saving and investing toward FIRE. I started investing in my 401k right away and maxed out my contributions a few years later.

Life is harder for Zoomers

Today, FIRE seems out of reach for someone starting out. The average student loan debt in 2023 was $38,420 for all borrowers. Being in debt isn’t a good way to start your adult life, but that’s the norm today.

Everything has become much more expensive over the last few decades. These days, an average American household spends about 25% of their income on housing. A one-bedroom apartment in Portland costs about $1,500 per month today. That’s 23% of Portland’s median household income, $78,500. A young person starting their first job probably makes less than the median income. Housing could easily take up more than 30% of their income. Yikes!

Food, transportation, and entertainment are also more expensive than ever. Have you looked at the price of a new car? The average price of a new car is over $48,000 in 2024. Wow, I don’t even want to think about upgrading. Hopefully, most young Zoomers have a reliable hand-me-down vehicle. Zoomers also have a ton more stuff to spend money on – cell phone, gaming, pets, NetFlix, laptops, Taylor Swift concert tickets, fancy vacations, therapy bills, and more. Life is tough for the young’uns.

Young people are complaining the previous generation had it easier. Gen X was lucky to start working when the cost of living was lower. They were able to save more and had many good years in the stock market. Okay, I’m glad I was lucky to start in the 90s, but it isn’t all bad for Gen Z.

Zoomers have some advantages too

Zoomers grew up in a turbulent time. Their family muddled through the Great Recession and the COVID-19 pandemic. They watched their parents struggle. As a result, Zoomers are more financially savvy than previous generations. The average Zoomer starts saving for retirement at age 22. That’s 15 years earlier than the average Baby Boomer. They might not be able to save much, but they know it’s important to start investing as early as possible.

The cost of living is higher now, but young adults also have more options. It’s much more acceptable to live with your parents now. That’s one way to save on housing and food expenses. Today, young adults can also stay on their parent’s health insurance plan until 26. It’s okay to mooch off your parents. They understand that life is harder for young people.

Most importantly, Zoomers have the advantage of youth. Life might seem harder today, but it’s always tough at the starting line. They have years of compounding ahead of them. If they start saving and investing now, FIRE will become more accessible later.

Unsolicited advice for Zoomers

When times are hard, stick to the basics. That’s my unsolicited advice for Gen Z.

  • Live modestly. The key is to minimize lifestyle inflation when you’re starting out. Many young workers spend too much money to improve their lifestyle as soon as they get their first full-time job. Instead, try to live like a student for a few more years. Drive your old beater into the ground, share an apartment with a roommate, and enjoy free/cheap activities.
  • Increase your income. In the old days, the best way to increase your income was to get raises and promotions. Those days are long gone. Now, the best way to increase your income is job hopping. Either way, it’s best to specialize and excel in your field. Side hustles are just a distraction when you’re young, IMO.
  • Learn to invest. The easiest way to invest is to contribute to your Roth IRA and 401k. These tax advantage accounts are a great way to invest. You save on taxes and the stock market is a proven way to build wealth. You can start small and increase the contribution to the max over time. Young people might not be able to invest much, but compound interest will multiply the initial investment over many years. Also, open a brokerage account and learn to invest with passive index funds and individual stocks.

That’s it. These principles are simple, but they will build good financial habits. FIRE might seem out of reach when you’re 22, but it’ll be much closer when you’re 35 if you follow these advices. Truthfully, FIRE will have a different meaning for the younger generation. Early retirement isn’t for everyone. Zoomers are creative and many of them already found ways to generate income through nontraditional means. That’s the way to go. If work is fun, you won’t need to retire early. Keep investing and financial independence will become a reality someday.

Do you think it’s harder for young people today? Do you have any advice for Gen Z?

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

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!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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