If you saw from my last post, I’ve been doing some reading lately. The term FIRE movement, which stands for Financial Independence, Retire Early, has come up quite often lately. It’s peaked my interest, so I thought it was worth a post.
What is FIRE?
Those that are a part of the FIRE movement are people who retire early and spend the rest of their lives treating work as optional. The term was coined back in 1992 by Vicki Robin and Joe Dominguez in their book Your Money or Your Life. The premise is saving and investing a good chunk of your money as early as possible so that you can live off dividends and passive income streams for the rest of your life. While this sounds impossible, it has caught fire lately with lots of millennials. These people take high paying jobs, work for a few years, and stockpile money while living as cheaply as possible, and then “retire” around age 30. Then, they spend their remaining years doing whatever they feel aligns better with their goals and values.
Is the FIRE movement for me?
While I can’t answer this question for you, it’s worth considering the sacrifices you may have to make in order to achieve FIRE. Most people who have achieved FIRE have started extremely young (think 30 and below), save about 70% of their income, and do not have families. Not to say that those with kids cannot achieve financial independence, but expenses with kids rise. Also, since I wasn’t even aware of this concept until a year ago, I am a little late to the game as far as compounding interest would have it. While my husband and I have goals of retiring early, retiring in our 30s is not realistic as life with 4 young kids costs a little more than when we were a dual-income, no-kids household.
If you’re considering FIRE, some questions to consider are:
- Am I debt free?
- Am I willing to make large sacrifices now (i.e. work more, pick up side hustles, eliminate more expenses) in order to achieve my goals?
- Can I save and invest the majority of my income?
- If I have a family, how might my pursuit of FIRE impact my family in a positive or negative way?
- What is my number needed for retirement and how will I reach that goal?
How much do I need to retire early?
The basic rule for financial independence is saving 25 times your annual expenses. So if you think you can retire on $50,000 a year, your target number would be $1.25 million. If you don’t think you need as much or if you think you need more, adjust accordingly. Most FIRE experts live frugal, common lives, not splurging on fancy cars, houses, or excursions. Some have also commented that they can live on much less than they originally thought! But it’s your life, not theirs, so decide what number would be contentment for YOU!
After you’ve saved up this chunk of change, the next step is to put your withdrawals on auto-pilot (using a 4% or less withdrawal rate which almost guarantees your money will continue to grow for the rest of your life) and live your life however you want. Work becomes optional and achieving your goals and dreams becomes front and center.
What other resources are out there?
I’m so glad you asked. I have read numerous books, blogs, and articles on this topics. I have listed some of my favorites below. Let me know more about what you think about this topic and if you’d like to hear more about it in the future!
Books
Financial Freedom* – still my favorite, easy-to-read book on this topic.
Your Money or Your Life* – the OG when it comes to FIRE. Definitely read this somewhere along the way!
Blogs
Mr. Money Mustache – arguably the most famous person to achieve FIRE. He has written forewords to all kind of financial books and has hundreds of articles on a million topics related to the FIRE movement.
Financial Samurai – This guy lives in California, so retiring early may seem like more of a gamble, but he has maintained his lifestyle and creating tons of passive income streams after walking away from his job at just 34.
Millennial Money – I love the way Grant’s mind works and think he is a great resource on all things FIRE. He is the author of Financial Freedom, which I linked above.
Mad Fientist – If you like numbers, this is your blog!
Other Helpful Resources
Investopedia has a great article on the basics on the FIRE movement in way more detail than I’ve gone into here.
*If you make a purchase using the links above, but please know I may receive compensation. In which case, thank you!
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