Being a FIRE Millionaire Doesn’t Mean You’re Rich

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Being a FIRE Millionaire Doesn't Mean You’re RichThere’s an interesting mentality that I notice creeps up periodically.  It’s the idea that some people think that being a millionaire makes you filthy rich with plenty of money to throw around.

Folks who aren’t as entrenched in the personal finance world tend to think that if you’re a millionaire, you actually have $1 million ready to spend.  In other words, if you’ve hit that mark, you must be sitting on bushels of cash just ready to be spent.

This is probably a common way of thinking if you don’t fully understand how early retirement works.  I know I thought the same thing before we continued to grow our finances.

However, that’s really not true, particularly with those who are LeanFIRE or regular FIRE folks.  By the way, if you’re not familiar with these terms, my boy Steve’s got you covered… Early retirement explained.

In all actuality, many folks in early retirement are running around with the same amount of money to spend as they had when they were still working and saving.  If I wanted to, I could run to the local bank and come up with around $2,500, but that’s about it.  Everything else is tied up elsewhere – and purposefully so.


The situation

Before I start this, be aware that this is not about most of the people in my life.  I’ve only heard this a few times overall and it doesn’t really bother me – I just find it interesting.

Being a FIRE Millionaire Doesn't Mean You’re Rich - The situation
“You got this, right, rich guy?!”

Maybe we’re planning to go somewhere or do something with people we know and the comment comes up, “Well, you guys are retired – you can afford it.”

Maybe we’ll be out to dinner or just at a bar for some beers and you hear, “You guys should pay – you’re rich!”

These kinds of remarks are mostly jokes, but with an obvious hint of sincerity behind the words.  The suggestion is that clearly we’re actually rich and just have overflowing wallets.

And the thinking isn’t too foolish.  It’s just some naivety in not understanding the area of money and investing.  Ask me about why we don’t have carburetors in cars anymore and you’ll likely see my own naivety in that subject.

P.S. What the heck do carburetors do anyway?


The money “problem”

A million dollars is a sizable amount of money.  It’s not the “most” money and having a lot of those millions is certainly better than having one, but it’s still nothing to balk at.

Being a FIRE Millionaire Doesn't Mean You’re Rich - The money "problem"
I could have gone with a million different pictures, but I thought the Milky Way seemed the most appropriate… if that’s what this even is!

Regardless, once you start having money beyond an emergency fund, you need to do start something with it.  If you stash it under your mattress, it’s going to disappear in one of three ways:

  1. Your “best friend” is going to have a fatter wallet after robbing you blind.
  2. A disaster’s going to happen and your cash stash goes bye-bye.
  3. Inflation’s going to eat away at that money until it can’t buy you more than some Tic Tacs and a Milky Way.

That third one’s actually the most interesting though because inflation can hurt you even if you put your money safely in the bank.

So let’s say you save up enough money to live off of and keep it in the bank.  Most banks are paying ridiculous amounts of interest right now anyway (our credit union is offering up to 0.15%).  But even the online banks like Ally (which I love!) are offering rates of less than 2.5%.

Look, the online banks are much better than the rates at local banks and credit unions for sure (actually almost 17 times better in this case!).

But the problem is that these rates aren’t giving you enough return to save your money from inflation.  Cost of goods rise and at an average inflation rate of 3.10% since 1913, the value of your money sitting in the bank becomes less and less over time.

So what do you do?  When you begin to understand this concept, you start to find other places to put your money.  You look for investments that will at least keep up with the rate of inflation such as TIPS, but preferably you strive to do even better to get the most bang for every buck.

Put concisely, you need your money to keep making money.

Many of you probably already get this.  You’re putting money into the stock market, real estate, or other investments so your money can grow for you.

It would be great if you could just sit tight on your money and not have to worry about it.  Unfortunately, though, it’s really a situation where you invest it or lose it over time.

And when all’s said and done, the goal is to have your nest egg provide you with enough income to pay for your lifestyle.  Not only that, but it has to last until you die and possibly longer if you have a desire to pass some of your wealth onto any offspring.

Because of that, being a millionaire doesn’t mean that you’re sitting on buckets of cash.  It ends up meaning that you have your money invested and out-of-sight for the most part.


The FIRE millionaire fixed income

Because we’ve made it to millionaire status a couple of years ago, we should have tons of money at our disposal, right?  Wrong.

The irony is that we’re basically on a fixed income now.  Sure, it’s not a fixed income in that we technically could take out a little more or less from our portfolio every year if needed.

However, if we want to ensure that we have enough money to live off of until we die and possibly leave some to our daughter, we literally can’t spend as we please.  As a regular FIRE retiree, we need to spend in the same ballpark as we always have.

Being a FIRE Millionaire Doesn't Mean You’re Rich - The FIRE millionaire fixed income
Who doesn’t do naked accounting?!

The reason for this is that we’ve based our early retirement off the premise that we’re only going to be taking out X number of dollars per year for expenses.  If we take out any more, we could possibly be removing too much principal.  And that would mean less money in the pot that could continue to grow.  Spending more than our allocated amount each year could possibly be throwing our future out the window.

The 4% rule in effect on a million dollars means that you would have about $40,000 per year at your disposal (adjusted annually for inflation) for all your expenses.  That’s great, but that’s not a ton of dough in your pocket.  In fact, the average American household blows through almost $68,000 per year!

If you go by those numbers, a millionaire early retiree household can actually seem poorer than most families in the U.S. overall.

P.S.  They’re not – they’re actually just a little more efficient with how they decide to spend their money!

In other words, it’s really a matter of choices.  And there are no wrong ones if what you do makes you happy and you’re taking your future into consideration.  But $40,000 per year is not necessarily the life of the rich and famous.


Net worth ≠ Available cash

The idea of “well, you can afford it” isn’t exactly true.  I could probably afford whatever it might be, but only if I wanted to take the chance of needing to go back to work again.  And I definitely don’t want to do that!

Being a FIRE Millionaire Doesn't Mean You’re Rich - Net worth ≠ Available cash
I’m not sure what this has to do with the topic – I just thought you guys would like to see a pic of me and Mrs. R2R naked on a seesaw…

Just because your net worth looks good doesn’t mean you have gobs of cash to throw around.  Many people think that your net worth is a symbol of how much money you have sitting in your wallet or in the bank… it’s not.

Most folks that have started to sock a decent amount of money away know that money is tied up in investment and retirement accounts, real estate, businesses, etc. – not usually in the bank.

People sometimes think – with no ill-will – that we now have money to just blow, but that’s really not the case.  Your net worth is not the same as your available cash.

Your net worth is definitely a crucial number and much more vital than just having a good income.  However, it’s not synonymous with cash on hand or you could end up in a world of hurt if you spent it as such.

And just a reminder, I’m talking specifically about “lean” and “regular” FIRE folks.  There are a good number of FatFIRE people who very well might have enough money set aside to live out their wildest dreams.  Those are the folks I like to hang out with! 😉

We’re not rich – we have only enough to maintain our current standard of living.  And guess what – I’m absolutely fine with that.  I’m happy that we’re blessed enough to enjoy each day without the necessity of working in an office any longer.

But this millionaire doesn’t consider himself rich by our money alone.  I do, however, feel that we’re rich with the freedom to enjoy every day now as we see fit.


Do you think being a FIRE millionaire means you’re rich?


Thanks for reading!!

— Jim

You know you wanna share this!!

20 thoughts on “Being a FIRE Millionaire Doesn’t Mean You’re Rich”

  1. A large percentage of our net worth is in our retirement accounts. We could access it, but not immediately. A good chunk is locked up in real estate too. Although, we’re selling this year so most of that will transfer to the stock market which is more accessible.
    Anyway, I think rich means having more than $10 million. So no, most FIRE millionaires are not rich. 🙂

  2. Great points, Jim. We’ve gotten those comments before even though we’re not even FI yet and I leary’s think, “obviously these people have missed the point!” When you move to Panama, hopefully your $$ will go farther and make you feel richer!! 🙂

  3. New reader here. Thanks so much for your post! Trading money for time makes so much sense. To me, $3M will suffice as designation for being “rich,” although I believe I will be totally happy around $1.5-2M, probably even much less. Love your sense of humor and your viewpoint. You are 5-10 years ahead of me on the FIRE journey, so I am keenly interested in your experiences. I could easily see myself in Panama or Costa Rica to geoarbitrage (did you seriously consider CR?). Have not ruled out Greece either as it seems drier, less buggy. Anyway, well done on your blog and FIRE. Keep the posts coming.

    1. Thanks, Enrique – much appreciated! Panama was pretty much our first choice out of the chute as we started digging into things. It looks like that was smart (or lucky!) since International Living just announced it as the #1 country in the world to retire to in their 2019 Global Retirement Index. I’d be curious how Greece would be – you’ll have to let us know if you start going down that path a little bit more!

      — Jim

  4. “I do, however, feel that we’re rich with the freedom to enjoy every day now as we see fit.”

    Great quote, and the type of “Richness” that really matters. The true value is in Freedom. Money is just the means. Congratulations of achieving FI, you’re going to love your life of Freedom.

  5. I know exactly what you mean. People have made comments to me like “you’re rich.” In reality, most of my money is tied to investments and I have learned to manage my money really well.

    I like to put significant amounts away in savings and investments. For example, I may have $20k, 50/50 split would put $10k into each category; savings and 401k.

    No rocket science here. Just simple math.

    Thanks for sharing. Nice post.


    1. Thanks, Miriam! Very true that it’s not rocket science, probably because it comes easier to those of us in the personal finance realm. Hopefully, we can continue helping others learn to build up their stash as well! 🙂

      — Jim

  6. This is exactly why I don’t tell people I have money — I don’t want to get stuck picking up the bill everywhere.

    Many people assume that wealth means a large amount of cashflow but just isn’t true. In fact, with cash generation rates from bonds or stock dividend at near all-time lows, *most* millionaires are going to have trouble generating enough cash for a proper retirement.

    1. That’s a smart move on your part and probably makes life a little easier. It was a little harder in our case since as soon as folks find out you’re planning to leave the country they want to know if it’s because of work. 🙂 I suppose I could stretch things about writing or whatnot, but I just roll with it. It’s only been a couple of instances – everyone else knows we’re cheap and they’d have no chance of us picking up the bill! 😀

      — Jim

  7. In the past my pursuit for happiness was a roller coaster of emotions that left me exhausted, burnt out and depressed.

    Today I am inspired to exercise daily because it make me feel more whole. The by-product of this is I drink more water, eat healthier and by default (not focus) my weight is reducing.

    I am also inspired to write about my discoveries and journey because it also makes me feel more whole. The by-product is I feel more accountable to myself, I personally grow and have the opportunity to positively help others.

    My point is that financially rich for some feels poor to others. Focus on the activities that enrich your life and you have a high probability of experiencing a richer life, more than only dollars in your bank.

    1. I like this, Peter – very inspiring. I’ve been similarly exercising regularly and eating better since retiring. It’s been a good thing for me and, unfortunately, was something I didn’t feel I could allocate the time for when I was working.

      Now I’m trying to figure out those activities you’re talking about so I can lead that richer life! Thanks for this comment, Peter!

      — Jim

  8. EXACTLY! I spend A LOT less than people who think I’m “the baller” in the friendship! Agree with Mr. Tako too! Don’t assume I am picking up the tab! The hard part of it is how much to reveal because ppl want to know how could I possibly retire early (but do they really want to know, nah- has been my experience). It’s tricky. Also, I’ve only been retired for 14+ months, I have not experienced a serious downturn without having reserve cash, so do any of us REALLY know if this will last in 30 years? Only time will tell. For now, I’ll keep my little bit of rental property, live below my means and read your Blog (hehehe).

    1. You’re absolutely right on figuring out how much to reveal to friends and family. That answer’s going to be different for each of us. In my case, I’m ok with opening up on things, but the consequence is that I now have a harder time figuring out when it makes sense to explain things like why we’re not rich. To each his/her own – pros and cons to each direction for sure.

      Smart move to hang onto your rental property and live below your means. Even smarter move to read my blog.? Welcome to the party!

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