Perspectives: rich & REGULAR on Index Funds and the Meaning of FIRE
Forging a Financial Path Forward
With over 130 million people in the U.S. receiving at least one dose of the COVID-19 vaccine and the job market slowly rebounding, there are glimmers of hope amid the ongoing public health and economic crisis. Still, the pandemic has had (and continues to have) an unprecedented impact on many lives. Unemployment, reduced wages, and business closures have reshaped people’s financial priorities and spending habits.
As many Americans reassess their financial lives, The Balance asked several personal finance experts and influencers to share their own experiences from the past year and how they’ve informed their perspectives on budgeting, investing, and achieving financial independence. Today, we speak with Julien and Kiersten Saunders, aka rich & REGULAR.
While their name “rich & REGULAR” is partly inspired by the celebration of “being average,” Atlanta-based couple Julien and Kiersten Saunders found that, like many, last year was anything but. Kiersten had left her 9-to-5 marketing job prior to the pandemic, which was their only consistent source of income. And as 2020 dragged on, the pair’s short-term plans for income generation and growing their multimedia business were put on hold, as was daycare for their child.
Fortunately, though, income from selling their real estate properties allowed them to carry on and focus on their family and long-term wealth production plans—and dedicate time to writing their upcoming book for Penguin Random House. Part personal journey, part guide, the as-yet-untitled book is aimed at equipping the Black community to think differently about work, life, and money, and reflects the pair’s belief that the “traditional work-obsessed, back-breaking path to financial success” isn’t viable.
It’s a doctrine the Saunderses have followed since they aligned with the Financial Independence, Retire Early (FIRE) movement several years ago, and one they’ve continued to promote through their successful blog and “Money on the Table” video series.
The Balance recently spoke with rich & REGULAR about smart investing and what FIRE means to them.
This interview has been edited for length and clarity.
Do you feel millennials in particular have become more financially savvy, or at least aware, over the last year?
The narrative of the stock market growing in record numbers while the economy sinks taught people, like, here's where you should put your money. Go spend it and drive the economy or you can invest in some company, and if everybody else invests with you, then you make a lot of money. I think millennials are savvier in that sense. Now, as tenured investors, we know the conversation is far more complex than that. It's not nearly that simplified, but within a year's span, it seems like everybody is a smart investor and everyone feels smart.
What is actual smart investing to you?
We're index fund investors. We have since liquidated our real estate, so we're no longer real estate investors. But the index fund investing is what we do and recommend because it gives you a little bit of every stock in that index. So instead of trying to pick one winner, you just say, I believe the whole thing will win and the winners and losers will cancel each other out. And if this index rises, then I get more money. It's just a simplified way of investing that takes the risk out of being able to spot a winner with limited information.
Look at this way. Even when we're not talking about the underlying mechanics of finance, let's just talk about American culture. Americans are obsessed with work. It's a part of who we are. We celebrate big companies, entrepreneurs, and consumption. I’m 100% confident that will be true 50 to 100 years from now. When you buy an index fund, you can own a little slice of every single publicly traded company that basically benefits off of American culture, which shapes global culture.
Every single one of these ads that are driving people to buy more, you get a little bit of that at the end of the year when these public companies start to issue dividends. It's about owning an actual slice of the American pie and everyone can do that.
You’ve been advocates of the FIRE movement for some time. What does achieving financial independence mean now?
The original version of FIRE was that financial independence meant you had saved 25 times your annual expenses, and you could draw down 4% every year and never have to earn another dollar in life. And early retirement meant that you quit your job and ...
You don't perform any income-earning activities. The only income source you will use is the portfolio that you are drawing down from. And that's one version—a very strict version.
I think the definition that we're leaning toward now is just this idea of taking full responsibility for your income. You're not reliant on institutions to give you your income. You know that you can generate your own.
You can survive based on your own skills, exchanging your intellectual capital or some other type of capital. In the 21st century of digital entrepreneurship and landscapes, capital is something as simple as an idea or a brand, a viral tweet, or a TikTok dance. Those things have produced income for people that has changed their lives.
When it comes to discussing financial independence, especially with millennials, we're not talking about saving your paycheck anymore. Live off your paycheck and then go create some capital that you can exchange for money outside of your W-2 job. And even the “live on your paycheck” thing is really only an issue because in the U.S., there are so many institutional things that are tied to employment, whether it's health insurance or your ability to get a mortgage.
But in the future, I don't know that it's going to be as relevant to talk about how much of your paycheck you are setting aside every two weeks. That just feels outdated, like calorie-counting or old-school diets.
You think it’s time to move beyond a W2-focused mentality to achieve financial independence?
By and large, most people need to put jobs in their rightful place. I think too much of our identities are tied up in the jobs and the job titles that we hold too much of our faith in. Our long-term potential to build wealth is tied to whether or not you get promoted or this vision that you have for your career will come to fruition. And oftentimes for most people, by design, that doesn't happen.
People really need to see their jobs as a means to an end. We should not be betting on long-term employment because those who've been saving 10% to 15% still don't have enough. So why would we continue to follow that rule of thumb? This idea that you only save 10% to 15% over a 30-year career is flawed because most people cannot guarantee that they will have a consistent 30 years of employment, nor can they guarantee that they will have a consistent 30 years of maintained spending because you have kids, people get sick, people pass away, life happens.
The calculations are flawed. They don't factor in extreme inflation in some areas of our society. We tend to think of inflation in terms of milk, eggs, and the price of gas, but it's also housing and education. All of this stuff erodes your 10% to 15% and you have to account for that, which is why the notion of saving 30%, 40%, or 50%, like we talk about in the FIRE community, isn't so outrageous. If the prices of houses are going to go up 400% over a decade, then you're going to need more than your standard amount.
Is that where there's a big risk, where people see that 30%, 40% and maybe just get scared away from FIRE?
The reason why that feels bad to most people is because it feels to them like, I need to live in 30% less space, or I need to consume 30% less food, or the quality of my clothing decreases by 30%. And it's one of the other reasons why we say, focus on income then.
[People may say], I only make $1,000, and I can't live off of $700. Well, I'm not saying you have to save 30% linearly across the year. If you make $12,000 a year, you need to find $3,000-$4,000 to set aside along the way.
Maybe it’s just about figuring out how to earn an extra $5,000. You don't have to be the best at anything to earn that. But if you earn $5,000 and you invest that $5,000 and you do that every single year, you max out your IRA, and you might be a millionaire independent of your W-2 income.
What are some of the misconceptions around the FIRE/financial independence movement?
Let's say you did earn or say you reached the traditional mile marker for FIRE: 25 times your annual consumption. And then tomorrow, the market responds negatively and your portfolio reduces by 10%. Do you not consider yourself financially independent anymore? Do you feel less secure in your ability to lead a comfortable life? Just yesterday, you were celebrating that you had bought your time back.
That’s a really important point. The analogy we use is around a gas tank. Let's say you're in New York and you're trying to drive to LA. You're not going to decide not to leave because you don't have a full gas tank. If you have a half gas tank, you know that you can make it from New York to New Jersey and then you get some gas. You will figure out how to get some more gas in Jersey, and then you won't have to stop again until you get to Ohio. Keep on going. And I think that that's the way that people need to think about retirement. You are not going to load up gallons of gas in the car at once and overflow it.
So there are degrees to financial independence. It is very much a feeling, a point at which you become comfortable with how much money you have, its ability to sustain you, and what you anticipate you will encounter along the rest of your life.