FIRE versus YOLO

“Financial independence, retire early” (FIRE) and “you only live once” (YOLO) are essentially opposite approaches, but they share a common goal—to seek happiness and achieve financial freedom. They’re just focused on different stages of life.

With FIRE, the point is to live frugally, save aggressively and ideally retire earlier than the traditional retirement age—by a decade or more. While FIRE followers plan for future happiness and freedom, YOLO is all about wanting it now. YOLO devotees aim to get the most from life in their younger years, spending on enjoyable and meaningful experiences without worrying about the future.

Managing the risks

Many people who practise the FIRE strategy may feel content forgoing expensive vacations and making other sacrifices, but some might face burnout or experience feelings of deprivation. Also, any planning shortfalls can lead to a future less rosy than expected. While you imagined decades of freedom and following your passions, you could end up living on a strict budget so you don’t outlive your savings.

A FIRE individual or couple may wish to consider allocating a set amount of their income to an annual vacation or another enjoyable experience or purchase—an amount that won’t jeopardize their long-term plan.

Followers of YOLO who neglect long-term wealth planning may regret their carefree days if they end up financially strapped in retirement. They may even face risks while they’re younger and “only living once.” For example, some YOLO enthusiasts will take on a burdensome amount of debt or make speculative investments chasing big profits with limited cash.

YOLO advocates may want to put something away in a Tax-Free Savings Account (TFSA), preferably on a regular basis. They’ll have peace of mind knowing they’re planning for the future while being able to access the funds tax-free if needed.

Not FIRE or YOLO?

Even if you don’t subscribe to either the FIRE or YOLO philosophies, saving versus spending can still become an issue. If you focus too much on saving, you can miss out on enjoying life today, and if you overspend to make the most of life now, you might need to make compromises to your lifestyle in retirement.

Also, situations may arise that call for a save-or-spend decision. “If we purchase a vacation property, will we need to retire later?” “Should I invest my annual bonus or can I splurge?” “Are we okay taking a long trip to Europe with retirement just a few years away?”

Whenever such a decision feels like a dilemma, you can always discuss the matter with us. We can help you determine how spending or saving will affect your financial life now and in the future.