Fantasy vs Fact in Early Retirement - Inside the FIRE Movement

Clarke McEwan Accountants



Would you be willing to spend 10 to 15 years working two jobs, living in rented student-style digs and saving and investing every possible dollar, if it meant you could retire in your 30s? A growing number of millennials think FIRE is worth the sacrifice.

How does a 20-something rebel against the system in 2019? For a growing number of millennials, the answer is simple: by saving money. More specifically, they are radically reducing spending to stash away at least 50 per cent of their income and retire in their 30s or 40s.

FIRE (financial independence, retire early) is an international movement of people who seek financial control and flexibility by strict budgeting and frugal living. They have an aversion to debt and work extra jobs to boost their income early in life, then rely on low-cost growth investments such as exchange-traded funds (ETFs) to both build capital and draw from in early retirement.

It's about having the freedom to pursue your dreams and ambitions (no matter what your age), says Deacon Hayes, author of You Can Retire Early! Everything You Need to Achieve Financial Independence When You Want It. When your net worth is 25 times your annual expenses, you're considered financially independent.

FIRE was born in 1992 out of the best-selling book Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez. In the book, the authors correlated expenses and time spent at work to hours of your life.

The movement first gained popularity in the US, spread through a 1990s newsletter called The Complete Tightwad Gazette. Today, the FIRE message is shared through blogs and podcasts, with one – FIRE Drill – downloaded 7000 times per episode, securing it a spot in the top 100 investing podcasts on Apple's US charts.

You'll find other specialist forums on Reddit devoted to the FIRE movement in Australia, the UK, Europe, Canada and Asia.

Rich dad, poor dad, retired millennial

FIRE is one of those radical ideas that divides people because it involves some of the most personal things human beings deal with – money, relationships and self-worth.

Due to the passions stirred by the FIRE movement and his job in the public sector, the millennial behind the blog www.aussiefirebug.com prefers not to disclose his full name. "Matt" says he was always good at saving and being frugal, and discovered the FIRE movement online in 2014.

"FIRE is basically like financial independence [FI] on steroids," he says. "I knew FI was possible, but the people who had achieved it were all much older than me, so I assumed it must take decades of saving and investing."

Matt's investigation of FIRE strategies convinced him that FI as early as your 30s was possible, and the hundreds of people who comment on his website seem to agree.

"Careful spending in the consumer system we live in is also probably a positive, as is the willingness to be flexible about how you can earn a living in response to the way the world is developing." Dominic McCormick, Investment Consultant

One writes: "You merely need 10 years of pure sacrifice. I started late in my career, first decent job at age 30 and little money. Rented a small room, paying little and close to work. Worked hard, overtime etc. Scrooge for first five years. I took every dollar as gold because I understood the power of compounding.

Post five years, started to go easier on finances. Invested from day one. Fortunately it was 2008/2009 onwards. Bought a mixture of shares and Aussie properties. Had a like-minded partner, so it was a breeze. Retired age 38. Partner works one to two times a week. Two kids. Net worth A$2 million including super."

Matt says Australian FIRE chasers focus on investing in shares via ETFs and listed investment companies and believe there's a good chance they will be able to live off 4 per cent of dividends from their portfolio forever, which also factors in inflation. (This includes cashing in some of the shares over time.)

This investment strategy is common to FIRE groups in other countries, although some include other sources of investment such as rental property.

Financial independence, retire when?

Sydney-based investment consultant Dominic McCormick believes that, on the one hand, a rebellion against materialism is long overdue. "Careful spending in the consumer system we live in is also probably a positive, as is the willingness to be flexible about how you earn a living in response to the way the world is developing," he says.

Psychologist Jane Enter, of Cape Byron Medical Centre, agrees. "Millennials are extremely smart and they have looked at the way that boomers consumed and worked, and said they want greater balance and to do life differently."

The FIRE movement is also characterised by a desire to avoid reliance on government handouts.

However, the investment strategies used for FIRE by many millennials may be overly optimistic, McCormick believes.

"There seems to be excessive reliance on the rule that you can withdraw 4 per cent of the portfolio each year, and the growth as well as the income will reliably replace this."

What would happen in a deep or extended bear market, he asks. Even those who are older may face problems, "and we're talking about millennials who are looking at at least 50 years of retirement".

That said, many FIRE followers, including Matt, say they never plan to retire, they just want to be financially comfortable enough to do work they love. Others start later in life and don't have such an enormous portfolio to build.

Financial consultant Ivan Guan, author of FIRE Your Retirement: 3 Simple Steps to Financial Independence and Retire Early and founder of www.sgmoneymatters.com , says: "FIRE is a widely discussed subject among the online community in Singapore.

"Typically, FIRE becomes a topic when people reach their 40s. It is probably because they are sick of their corporate jobs and want to make some changes. At the same time, they have more financial resources [such as savings] and time [as their children have grown up] to devote to FIRE." FIRE-proofing life

McCormick says that, theoretically, the FIRE model could work, if millennials save and invest enough money to not only account for long retirement, but also inflation and unexpected life events such as illness.

"Over a longer time period, it is more likely that some form of disaster may hit. If you are retiring on a very frugal budget, you need everything to go right, including in life and the assets market. Often, FIRE followers just look back at how equities have done recently and assume high single-digit or double-digit returns.

"At the same time, younger people who follow FIRE need to be willing to give up on eating out a lot or going on expensive holidays, and a lot of millennials are about experiencing life as well."

"I don't think of FIRE as restricting my spending," says Matt. "I think about it as a shift in mindset and identifying what truly makes me happy.

"I'm human. I buy stuff I don't need all the time, but I know that spending money on something I don't need will mean I'm delaying my [progress] towards freedom."

He and his partner don't buy the latest smartphones, and they rent a small unit instead of buying a house.

On this, Guan, himself a millennial, concurs: "There is nothing wrong with buying a house if you can afford it. However, tying down your financial resources to a property [especially in Singapore] creates a huge future liability and opportunity cost. If you have a mortgage to pay, you simply can't quit being a slave of your work."

Matt and his partner also focus on the small stuff that adds up. "We make little smart decisions like always packing lunch for work, using credit card rewards for cheap flights and insurance, trying not to buy any clothes at full price, and stocking up on specials at the supermarket [we average A$600 a month at the supermarket, which is quite expensive and something we could really tighten up if needed].

"In a normal year we save 60 to 65 per cent of our income. We still go out for drinks once a week and get a Friday night takeaway. But if we haven't retired within five years – when I am 34 and my partner is 32 – something has gone drastically wrong."

Of course, you could argue that someone in a First World country or a higher-paid career has a better chance of building a bulletproof portfolio. For many people, FIRE is outside of the realm of their day-to-day life because they don't make a living wage, says Elizabeth Willard Thames, author of Meet the Frugalwoods: Achieving Financial Independence Through Simple Living.

"Achieving FIRE in Singapore is exceptionally challenging, considering the high cost of living in one of the world's most expensive cities," says Guan.

However, he believes the FIRE movement awakens a person's desire to achieve more in their lives, not only limited to financial success, but other aspects in life.

"It also helps bring up the society's standard of financial literacy. The bad thing about the FIRE movement is that, if you're not careful, you may end up sacrificing other important things in your life."

Matt agrees a potential disadvantage is alienating yourself from friends or family because they live a vastly different lifestyle than you. The advantage, he says, is peace of mind, options and being able to prioritise what's important.

The value of work

Work is not just about paying the bills. It can be meaningful if it gives you purpose, development opportunities and recognition. "People need meaning and connection, a reason to get up each day. For many, a job can provide that, as well as structure, and connection with colleagues," says Enter.

On the other hand, if you have a job you hate, or you just don't believe in the capitalist/consumerist world most of us live in, then the idea of giving up 40 hours a week of your life to work may rankle a little.

It is believed to be Confucius who said: "Choose a job you love, and you will never have to work a day in your life."

"When you work for your passion instead of survival, the whole dynamic changes," says Guan, "but I must admit it is not easy to achieve."

The answer for many may indeed be FIRE; in other words a focus on becoming financially independent as soon as possible.

It seems life after work, and a big life, is possible, no matter whether you're 30 or 65. According to Guan, "the difference between a dream and reality is action."

Editor's Disclaimer: the above article is intended for insight only and is not advised as an alternative to conventional investment planning

Save your business time and money using cloud accounting

By Clarke McEwan • October 28, 2025
Accounting tasks don’t have to eat into your business time. With the right cloud accounting software and setup, you can save time and money – while also getting tighter control over your finances. #accounting #software #finance

Trust Resolutions – Why Timing and Evidence Matter

By Clarke McEwan • October 10, 2025
As the trustee believed the income was classified as interest (this was challenged successfully by the ATO), the trustee assumed that the income would be subject to a final Australian tax at 10%, under the non-resident withholding rules. This was clearly more favourable than having the income taxed in the hands of Australian resident beneficiaries at higher marginal rates. However, the ATO argued that the distribution resolutions were invalid and the Tribunal agreed. Why? The main reason was a lack of evidence to prove that the distribution decisions were made before the end of the relevant financial years. While there were some documents that were purportedly dated and signed “30 June”, the Tribunal wasn’t convinced that the decisions were actually made before year-end and it was more likely that these documents were prepared on a retrospective basis. The evidence suggested the decisions were probably made many months after year-end, once the accountant had finalised the financial statements. The outcome was that default beneficiaries (all Australian residents) were taxed on the income at higher rates. Timing of trust resolution decisions is critical For a trust distribution to be effective for tax purposes, trustees must reach a decision on how income will be allocated by 30 June each year (or sometimes earlier, depending on the trust deed). It might be OK to prepare the formal paperwork later, but those documents must reflect a genuine decision made before year-end. For example, let’s say a trust has a corporate trustee with multiple directors. The directors meet at a particular location on 29 June and make formal decisions about how the income of the trust will be appointed to beneficiaries for that year. Someone keeps handwritten notes of the meeting and the decisions that are made. On 5 July the minutes are typed up and signed. The ATO indicates that this will normally be acceptable, but subject to any specific requirements in the trust deed. If the ATO believes the decision was made after 30 June (or documents were backdated), the resolution can be declared invalid. In that case, you might find that one or more default beneficiaries are taxed on the taxable income of the trust or the trustee is taxed at penalty rates. This could be an unexpected and costly tax outcome and could also lead to other problems in terms of who is really entitled to the cash. Broader lessons – it’s not just about trust distributions The timing issue is not confined just to trust distribution situations. Other areas of the tax system also turn on when a decision or agreement is actually made, not just when it is eventually recorded. For example, if a private company makes a loan to a shareholder in a given year, that loan must be repaid in full or placed under a complying Division 7A loan agreement by the earlier of the due date or lodgement date of the company’s tax return for the year of the loan. If not, a deemed unfranked dividend can be triggered for tax purposes. If a complying loan agreement is put in place then minimum annual repayments normally need to be made to avoid deemed dividends being recognised for tax purposes. A common way to deal with loan repayments is by using a set-off arrangement involving dividends that have been declared by the company. However, in order for the set-off arrangement to be valid there are a number of steps that need to be followed before the relevant deadline. The ATO will typically want to see evidence which proves: · When the dividend was declared; and · When the parties agreed to set-off the dividend against the loan balance. If there isn’t sufficient evidence to prove that these steps were taken by the relevant deadline then you might find that there is a taxable unfranked deemed dividend that needs to be recognised by the borrower in their tax return. Documenting decisions before year-end The key lesson from cases like Goldenville is that documentation shouldn’t be an afterthought — lack of contemporaneous documentation can fundamentally change the tax outcome. What normally matters most is when the relevant decision is actually made, not when the paperwork is drafted. In practice, this often means: · Check relevant deadlines and what needs to occur before that deadline. · If a decision needs to be made before the deadline, ensure that a formal process is followed to do this. For example, determine whether certain individuals need to hold a meeting or whether a circular resolution could be used. · Produce contemporaneous evidence of the fact that the decision has been made. You might consider sending a brief email to your accountant or lawyer explaining the decision that has been made before the relevant deadline , basically providing a time-stamped record of the decision. · Finalise paperwork: formal minutes of meetings can sometimes be prepared after year-end, but they must accurately reflect the earlier decision. Thinking carefully about timing — and building a habit of producing clear evidence of decisions as they are made — is often the difference between a tax planning strategy working as intended and an expensive dispute with the ATO.

Accessing superannuation funds for medical treatment or financial hardship

By Clarke McEwan • October 10, 2025
Superannuation is one of the largest assets for many Australians and offers significant tax advantages, however, strict rules apply to when it can be accessed. While super is most commonly accessed at retirement, death or disability, there are limited situations where earlier access may be possible. Early access is generally available in two situations: · Financial hardship – where you are receiving a qualifying Centrelink/DVA payment for a minimum period and cannot meet immediate living expenses. · Compassionate grounds – Funding for certain specific scenarios which include preventing a mortgage foreclosure or meeting medical expenses for a life-threatening injury or illness or to alleviate severe chronic pain. Compassionate grounds access requires an application to be made to the ATO which needs to be accompanied by relevant medical certificates or mortgage information. If approved the ATO will provide instructions to the individual’s superannuation fund to release an amount to cover the expense. We have included some ATO links with more detailed information on compassionate grounds and financial hardship below. When accessing superannuation under compassionate grounds you would usually collect the relevant supporting documentation and personally make the application for approval using your MyGov account. It has come to the ATO’s attention that there may be medical and dental providers exploiting this access and assisting super fund members to access amounts for cosmetic reasons (you may have even seen advertisements pop up on your social media showing people with a new sparkling smile – and a lower super balance). The ATO’s concerns are discussed in Separating fact from fiction on accessing your super early. Superannuation fund members and SMSF trustees should be aware that there can be substantial penalties applied when super is accessed outside of the legislated conditions of release. You should never provide another party with access to your MyGov login or allow a third party to make applications on your behalf. Penalties may also apply for making false declarations. Should you have any questions or concerns relating to proposed access to your superannuation please reach out to us. Related links Accessing superannuation under compassionate grounds Accessing superannuation due to financial hardship

Government Review of Supermarket Unit Pricing: What It Could Mean for Your Business

By Clarke McEwan • October 10, 2025
Submissions closed just a few weeks later on 19 September 2025, marking the end of a very short opportunity for stakeholders to have their say. A Quick Recap Unit pricing is what allows shoppers to compare costs per standard measure (e.g. $/100g or $/litre) across different pack sizes and brands. Since 2009, large supermarkets have been required to display this information to help customers spot value. While compliance has been relatively low-cost and penalties limited, the Government’s review signals that much tighter rules could be on the way. Why Now? The ACCC’s recent supermarket inquiry highlighted that while unit pricing helps, there are still gaps. The big concern is shrinkflation—when pack sizes quietly reduce while prices remain the same or higher. With cost-of-living pressures dominating headlines, the Government is looking at clearer, fairer pricing to rebuild consumer trust. What Might Change? Proposals considered in the consultation paper include: · Shrinkflation alerts – supermarkets may need to flag when a product becomes smaller without a matching price cut. · Clearer displays – larger, more prominent unit prices both in-store and online. · Wider coverage – expanding the rules beyond major supermarkets to smaller retailers and online sellers. · Standardised measures – eliminating confusing “per roll” vs “per sheet” comparisons. · Civil penalties – introducing fines for non-compliance. The Commercial Impact For suppliers, packaging decisions could come under closer scrutiny. For retailers, costs might arise from updating shelf labels, software, or e-commerce systems. But there are also opportunities: businesses that embrace transparency could build loyalty and stand out in a competitive market. What You Should Do Now that the consultation period has closed, Treasury will consider submissions and the Government is expected to announce its response later this year. Businesses in food, grocery, and household goods should stay alert—the final shape of the rules could affect pricing, packaging, and compliance obligations across the sector. At Clarke McEwan, we can help you model potential compliance costs, assess financial impacts, and prepare for upcoming regulatory change. Reach out to discuss how this review might affect your business.

ATO Interest Charges Are No Longer Deductible – What You Can Do

By Clarke McEwan • October 10, 2025
Leaving debts outstanding with the ATO is now more expensive for many taxpayers. As we explained in the July edition of our newsletter, general interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. Refinancing ATO debt Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities. While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as: · GST · PAYG instalments · PAYG withholding for employees · FBT However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not. Individuals If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity: · Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. · Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction. Example: Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible. However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible. Companies and trusts If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business. However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them. Partnerships The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts. However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity. Practical takeaway Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible. Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates. The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction. If you’re unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.

Measuring the health of your business with ratio measures

By Clarke McEwan • October 3, 2025
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