The New Critique of FIRE Math
I’ve started seeing more articles questioning whether traditional FIRE math actually works. While I don’t agree with all of the conclusions – some critiques toss aside decades of solid research a little too quickly – there’s one argument that deserves serious attention. Unstable or unexpected spending is a major contributor to FIRE plans failing in practice.
Not market crashes.
Not the 4% rule.
Spending that refuses to behave.
The Quiet Assumption Behind Most FIRE Plans
Most FIRE math rests on a quiet but critical assumption: your expenses are predictable. We take a clean annual number, plug it into a calculator, and treat it as a constant. That figure becomes the foundation for your savings rate, your FI number, and your sense of security. But life doesn’t operate on clean annual averages.
When Real Life Refuses to Be Predictable
Real spending is uneven. One year your costs are comfortably low, and the next they spike because a roof fails early, healthcare costs rise, a family member needs help, or a “one-time” expense quietly becomes recurring. When spending behaves this way, even a carefully constructed FIRE plan can start to wobble.
Why Lumpy Spending Breaks FIRE Math
The core issue is that FIRE math is linear, while life is lumpy. If your expenses swing significantly from year to year, your FI number becomes a moving target. A plan built around a $60,000 lifestyle can unravel if $80,000-spending years show up more often than expected. Early in retirement, those high-spending years are especially dangerous, amplifying sequence-of-returns risk and forcing withdrawals at exactly the wrong time.
The Math Isn’t Broken – The Inputs Are
This is where some FIRE critiques miss the point. The math itself isn’t broken; the inputs are flawed. Averages hide risk. Spending $60,000 on average doesn’t mean your plan is safe if your real-world range swings between $45,000 and $85,000. The wider the spread, the more margin of safety you need. FIRE works best for people who understand not just what they spend, but how much that spending fluctuates.
Accounting for Irregular but Inevitable Expenses
One of the most effective fixes is to stop treating irregular expenses as surprises. When you look at spending over multiple years, patterns emerge. Home maintenance, medical costs, travel, and family support may not happen monthly, but they are predictable over time. Once these costs are averaged in and treated as part of your baseline, your spending number becomes far more realistic.
Why Your FI Number Should Reflect a Higher-Spend Year
Another powerful shift is building your FIRE number around a higher-spend year rather than a “normal” one. The better question isn’t what a typical year looks like, but what an expensive year demands. Planning around that higher figure dramatically reduces the chance that you’ll feel underfunded or forced to make changes after reaching financial independence.
Buffers Matter More When Spending Is Volatile
Unstable spending also requires a stronger buffer. Emergency Funds designed for tidy lives tend to disappear quickly when reality intrudes. For people with volatile expenses, holding six to twelve months of baseline spending – or maintaining a separate volatility fund – can prevent selling investments during market downturns. That buffer isn’t a drag on returns; it’s protection against bad timing.
The Case for a Volatility Fund
A traditional Emergency Fund is designed for true surprises: job loss, sudden medical events, or a major, unexpected disruption. But many FIRE setbacks don’t come from emergencies at all – they come from predictable unpredictability. The expenses weren’t shocking in hindsight; they just didn’t show up neatly on a monthly budget. That’s where a Volatility Fund earns its place.
A Volatility Fund exists specifically to absorb uneven spending. It’s not there because something went wrong. It’s there because life happened. Home repairs, higher-than-expected medical bills, family support, big travel years, or clustered expenses often arrive in bunches. When these costs hit during market downturns, pulling from investments can permanently damage a FIRE plan. The Volatility Fund acts as a buffer between your real life and your portfolio.
Unlike an emergency fund, which often sits untouched for years, a Volatility Fund is meant to be used and replenished. Think of it as a shock absorber rather than a fire extinguisher. It smooths out the spikes so your long-term strategy doesn’t have to change every time spending jumps for a year or two.
Sizing a Volatility Fund starts with understanding your personal spending range. If your baseline spending is $60,000 but your expensive years regularly push you to $75,000 or $80,000, that difference is your volatility. Holding one to three years of that gap – rather than one to three months of total expenses – often makes more sense for people with lumpy lives. This approach directly targets the risk you actually face instead of relying on generic rules of thumb.
Where the Volatility Fund lives matters, too. Because its job is stability, not growth, it should be kept in low-risk, highly liquid assets such as high-yield savings accounts, money market funds, or short-term Treasuries. The goal isn’t to beat inflation every year; it’s to prevent forced selling when markets are down and your spending is up. That tradeoff is usually worth it.
For people already financially independent or close to it, a Volatility Fund can quietly replace anxiety with confidence. When markets dip or expenses rise, you’re no longer asking whether you “miscalculated” your FIRE number. You already planned for this. You’re buying time – time for markets to recover, time for spending to normalize, and time to make thoughtful decisions instead of reactive ones.
Most importantly, a volatility fund reframes how we think about FIRE. Instead of chasing a perfectly optimized number, you acknowledge that real life includes variation. FIRE doesn’t require eliminating uncertainty; it requires managing it. A Volatility Fund does exactly that – absorbing the mess so the rest of the plan can stay intact.
Flexibility Is the Real Superpower
Flexibility matters more than precision. The strongest FIRE plans allow for optional income, temporary spending reductions, or pauses in withdrawals during down markets. These aren’t signs of failure. They’re evidence that the plan was built to adapt rather than break.
Stress-Testing for the Life You’ll Actually Live
Stress-testing turns a hopeful plan into a resilient one. When you model scenarios where spending rises by 20 to 30 percent, markets fall early, or both happen at once, you find out whether your plan relies on luck or durability. If it holds up under those conditions, you’re no longer assuming things will go right – you’re prepared for when they don’t.
FIRE Isn’t Fragile – But It Isn’t Forgiving
FIRE math doesn’t fail because it’s wrong. It fails because it assumes stability in a world that rarely offers it. When spending is unpredictable, the solution isn’t to abandon FIRE. It’s to acknowledge reality and build accordingly. The people who stay financially independent long-term aren’t the ones with the cleanest spreadsheets. They’re the ones who planned for the mess.
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