FIRE: Financial Independence, Retire Early – the basics

Happy woman smiling and holding wad of dollar bills

Do you dream of never having to worry about money? Being able to leave an unfulfilling job? Having the freedom to spend your time exactly how you want to?

FIRE could be just what you’re looking for.

What is FIRE?

FIRE stands for Financial independence, Retire Early and was inspired by a book called Your Money or Your Life, by Vicki Robin and Joe Dominguez. The best-selling book is all about transforming your relationship with money and achieving financial independence.

Financial independence means you’ve reached the point where you don’t have to work to sustain your lifestyle.

What is the fire movement?

The fire movement is a group of people determined to reach financial independence and retire early by a combination either extreme frugality or aggressive investing.

By cutting down spending and saving a significant amount of income, FIRE followers are able to build enough savings that they can stop work and live off a proportion of their acquired wealth.

The first sparks of the fire movement originated in the US but it has grown in popularity around the world and the principles remain the same regardless of location.

It stems from a rebellion against the idea that we should all work until the age of 65. 

Some people following the FIRE movement aim to be able to retire well before the standard age – even as early as their 30s or 40s. Others simply want to reach a level of financial independence that allows them the choice to work as much or as little as they desire. Freedom to choose without financial repercussions.

How does FIRE work?

Put very simply, people aiming for FIRE keep their expenses low and try to save 50% or more of their monthly income. This allows them to save and invest heavily, meaning that later on they can live off dividends and withdrawals.

The basic FIRE principles are to:

  • Spend less
  • Save more

Living below your means is a key lifestyle choice that allows FIRE devotees to put more money towards savings and investments.

A generally accepted calculation is that you need to accrue 25 times your annual outgoings (for your desired lifestyle) to then be able to withdraw around 4% to live off.

The FIRE method involves a lot of careful financial planning and the figures won’t be the same for everyone. How you FIRE will depend on factors such as your income, outgoings, how much you can save, the age you want to retire at and your estimated figure for how much you want to live off once reaching FIRE.

Is FIRE for you?

FIRE appeals to those who:

  • Wish to retire early 
  • Want to quit working
  • Wish to reach financial independence
  • Are disciplined 
  • Are happy with delayed gratification

Although a lot of FIRE enthusiasts would insist that achieving FIRE is possible for anyone, it’s generally accepted that the higher your income, the easier it is. Those on lower incomes and wishing to work towards FIRE may have to work on building new income streams as simply cutting spending and saving more may not be possible. 

FIRE is probably not for you if you’re just looking to escape from a job you hate – a career change might be a better focus. However, plenty of people aim for financial independence to help them retire early and find more fulfilling ways to spend their time.

Benefits of FIRE

Since working towards FIRE involves fully taking control of your finances and becoming great at money management, there are lots of great benefits that can result from pursuing FIRE.

Financial security

The main benefit of FIRE is the financial security that comes from having built up enough money to live from and cover all your expenses. Not having to rely on an employer to pay your wages or work in a job that’s not fulfilling.

Freedom to choose

Having reached financial independence you gain the freedom to choose how to spend your days and live your life. You may want to keep working or volunteer, but having achieved FIRE you have the freedom to choose when and how you use your time.

Disadvantages of FIRE

The FIRE movement has attracted a lot of criticism, mostly towards the extreme lifestyle choices made by some devout FIRE followers.

Critics denounce the frugal lifestyle adopted by FIRE proponents, purporting that it’s an unhappy or unhealthy way to live. However many people following a FIRE lifestyle enjoy the frugal measures, finding purpose in their determinism to reach FIRE.

Another criticism is of the degree of risk associated with the financial investment side. To reach FIRE a lot of people invest in stocks and shares since the level of return in basic savings is much lower, which obviously comes with a level of risk.  

Different approaches to FIRE

Since the launch of the FIRE movement in the 1990s various approaches to FIRE have emerged based on the specific goals people have and the lifestyle choices and sacrifices they are willing or able to make.

Here are some popular approaches to FIRE:


This approach works best for those who have a high income. It’s followed by those who don’t want to make many changes to their standard of living, so relies on a strong saving and investment strategy


This approach is all about the frugal life and extreme money saving . Lean FIRE requires a low spend lifestyle.

Barista FIRE

Barista FIRE is a sort of hybrid approach between the two, where you still work towards financial independence and your assets cover most of your living expenses, but you still work a part time (enjoyable) job for supplemental income.

Coast FIRE

Coast fire is where you want to achieve financial independence but don’t want to retire early – in other words, you can ‘coast’ towards retirement knowing you’ll be financially independent when you get there. Once you reach Coast FI you no longer have to worry about pension contributions or if there are months you have less money to save towards retirement.

You can see that FIRE isn’t a one size fits all movement, rather an umbrella for varied approaches with the same end goal.

Whatever version of FIRE works best for you, all involve intentionally taking control of your finances and being disciplined in working towards your goal.

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