Financial Independence and Retiring Early: Your Guide to the FIRE Movement

You might have been seeing a lot in the media recently about the growing interest in the FIRE movement, which originated in the US and has now cultivated millions of followers around the world. For the uninitiated, FIRE stands for Financial Independence, Retiring Early, and is used to describe people who gear their entire lives to ensuring they have enough savings and investment to retire in their 30s.

In a world of growing inequality and increasing retirement ages, the idea of finishing work forever at 35 seems like a pipe dream but thousands of people have proved that it’s possible. Here’s all you need to know about joining the FIRE movement yourself. 

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The Goal, In Numbers 

The movement has a clearly defined set of goals, put together by financial experts who have determined what the average person needs to retire early. You need to essentially have accrued a net worth equal to 4o times your annual expenses.

This means if your annual expenditures amount to $40,000, you’ll need $1 million in savings and assets before you can liberate yourself from work. The reason it’s a movement is that it requires serious commitment – most adherents try to save at least half of their earnings for years on end. 

Always Try and Get Something for Free First 

A central tenet of the FIRE philosophy is to never pay for something unless you absolutely have to. Most practitioners are experts in couponing, dumpster diving, and hitting up contacts for free stuff. Many would rather live at home with parents instead of wasting money on rent, and will never eat out unless it’s paid for. 

It applies to every area of life, including entertainment. For example, if a FIRE fanatic is fancying a fun night of casino games such as slot machines, they’d rather do it for free. That’s why they’d only ever opt for an online casino which offers free spins so that they don’t have to fork out their own cash for every game. They take this idea and apply it everywhere else too.

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Save, Save, Save 

If hustling for freebies is the first rule of FIRE, saving like crazy is the second. FIRE followers believe people on any income can save a substantial portion of their income if they are prepared to make the required lifestyle changes.

In order to reduce outgoings, practitioners will do everything from living on a houseboat to moving to a developing country, to living on subsistence diets, to making clothes last several years at a time. Importantly, those savings should be diverted into high-interest accounts and 401Ks.

Low Risk, Reliable Investments

Cash isn’t the only route to FIRE. Investments are a crucial part of it too. Most adherents keep it low-risk and spread out. They’ll typically place their income into “tracker funds”, which follow the stock market and charge low fees as they are not actively managed.

They will also invest in sure-thing assets such as property, land, and dividends from top companies. If they get lucky and any of these assets skyrocket in value, then they can clock out a few years earlier than planned. 

There is no easy route to FIRE but there are tenets from this movement that we should all apply to our personal finances. We might not be fortunate enough to be able to retire early but the principles above are all necessary for healthy finances.