FIRE stands for financial independence, retire early. FIRE is a movement dedicated to a program of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow. By dedicating up to 70% of income to savings, followers of the FIRE movement may eventually be able to quit their jobs and live solely off small withdrawals from their portfolios.
The first and most important thing with FIRE is to decide what FI and RE actually mean to you.
Financial Independence (FI)
Financial independence means to us that you have enough money that you could support yourself without ever working or generating any more money for the rest of your life
Retire Early (RE)
Retire early means basically what it says– that you retired before the stereotypical sixty-five. In order to retire
Who Is FIRE For?
Some people want to achieve financial independence so they can “work” at something they love without having to worry about their finances. Others may just want to keep enjoying an easy-going minimalist lifestyle.
The Formula Behind FIRE
The basic math behind FIRE is ridiculously simple: spend less than you earn and “save the difference in low-fee investments like index funds,”
Low-fee investment options such as index funds are popular and recommended. In general, it is recommended that people should save twelve times their yearly spending to fund retirement at the standard age of 65. The FIRE movement recommends people save up to 25 times what they would regularly spend in a year – generally more than 50% of their income.
Here are popular index funds used by FIRE community:
For US investors:
VOO Vanguard S&P 500 ETF (MER: .04%, YIELD: 1.91%)
IVV iShares Core S&P 500 ETF (MER .04%, YIELD: 2.04%)
SPY SPDR S&P 500 ETF (MER .09%, YIELD: 1.89%)
VFV.TO Vanguard S&P 500 Index ETF (MER: .08%, YIELD: 1.61%)
XUU.TO iShares Core S&P US Total Market ETF (MER: .07%, YIELD: 1.66%)
XUS.TO iShares Core S&P 500 Index ETF (MER .09%, YIELD: 1.88%)
ZSP.TO BMO S&P 500 Index ETF (MER .09%, YIELD: 1.53%)
Types of FIRE:
- “Fat FIRE” refers to an individual with a more traditional lifestyle who saves more than the average retirement investor.
- “Lean FIRE” refers to stringent adherence to minimalist living and extreme savings, necessitating a far more restricted lifestyle.
- “Barista FIRE” refers to followers who have quit their traditional 9-to-5
job,but still employ some form of part-time work to cover current expenses that would otherwise erode their retirement fund.
- “Coast FIRE” also applies to followers with a part-time job, but these proponents do have enough saved to fund their retirement and current living expenses
How to FIRE the right way
It’s vital that you calculate the amount of money you will need to be financially independent. This number will vary greatly depending on your expenses, where you plan to live, how much you expect to make and how many years you are planning for. Some FIRE aficionados estimate that “once your net worth is 25 times your annual expenses, you’ve achieved financial independence.” You can do the planning on your own or consider getting help.
- Track your Financial – I recommend using MINT app.
- Start cutting your expenses – Entertainments, Restaurants and Grocery spending
- Reduce your bills. Cell phones, negotiate your credit card interest
- Increase your Income – Build Side Hustles – Graphic Design, Web design, Teaching, negotiate for an increase or find a job that has a higher salary
- Adding Passive Income Streams – Blog, Affiliates, Stock Dividends, Interest Income, Rental income
- Start eliminating debt aggressively
- Start contributing to your Investing account Index Funds
Where to find FIRE communities?
- Reddit Canadian FIRE community
- Reddit Lean FIRE community
- Reddit Global FIRE community
- Reddit Fat FIRE community
- NOTE: Please contact me if you found another community so I can add it here.
News articles about FIRE
- Forbes – The 9 Craziest Ways These Millennials Are Saving Money To Retire Early
- Yahoo – 9 Tips to Conquer FIRE: Financial Independence, Retire Early
- Forbes – Achieving Financial Independence at Any Age
- Australian Times – Investing in a share market portfolio in the FIRE community
- New York Times – How to Retire in Your 30s With $1 Million in the Bank
- CNBC – How to retire early – very early
- CNBC – You can retire early even if you’re not a Silicon Valley ‘tech bro’ earning six figures
FIRE Blog and Podcast lists
- Pete – MrMoneyMustache.com
- Jacob Lund Fisker – EarlyRetirementExtreme.com
- FIRECracker & Wanderer – Millennial-Revolution.com
- Jeremy & Winnie – GoCurryCracker.com
- The Mad FIentist – MadFIentist.com
- Tanja Hester – OurNextLife.com
- Carl (Mr. 1500) – 1500 Days to Freedom
- Joe Udo – RetireBy40.org
- Justin – RootOfGood.com
- Steve Adcock – ThinkSaveRetire.com
- PoF – Physician on Fire
- Big Ern – Early Retirement Now
While many have found success with the FIRE movement, the truth is that most people would never be happy living such a lean lifestyle. But that doesn’t mean you can’t learn something from the FIRE movement. If you can take small steps to cut expenses and grow your investments, you might just find yourself on track for early retirement, too—maybe not by 30, but certainly well before you turn 65.