What Is FIRE (Financial Independence, Retire Early) and Is It Right for You?
Filed in Finances
Let’s dive into the FIRE movement—Financial Independence, Retire Early—and exploring whether this ambitious lifestyle is right for you.
Let’s get this party started!
More and more people are looking for ways to escape the ‘9-to-5’ grind and design a life of freedom and purpose. You can design that life by working towards and achieving FIRE.
So, what exactly is FIRE?
FIRE is a movement focused on financial independence and the ability to retire early by achieving a specific savings and investment goal. Those who are working towards fire are saving and investing aggressively so that you can retire at a much earlier age than the traditional retirement age.
Everyone’s retirement number (age and money) will be different. It depends on what you plan to do in retirement, how much money you plan to spend or live off of every year, and how long you plan to be retired and live off of you retirement money and not necessarily be bringing in a monthly income.
Most people who are working on achieving FIRE are aggressively saving, typically 50-70% of their income.
I worked with a couple who had a goal of FIRE, and they lived off of one spouses income and they saved and invested the second spouses entire income. They were saving a minimum of 50% of their household income and by doing this they were living lean and saving aggressively and they were well on their way to achieving their dream of FIRE.
For this family, they wanted the OPTION to quit their day jobs in the future and not HAVE to work for someone else. They didn’t plan to traditionally retire early and not work, but they wanted to have enough money saved up so they could say “F-U” to their current 9-5 and they could build their business or take on a different job as they pleased. They were also planning it out so they could take 6 months to travel around the world with their children. FIRE is not intended for most people to save up aggressively and then be super lazy from age 45 on. Haha
Who Are Those Seeking FIRE Status?
Those wanting to achieve FIRE status are also typically investing strategically and most are generating passive income. Whether that be from a real estate investment and management company, so they buy the real estate building and a different company manages the tenants, repairs, and maintenance, or they are building and having another type of business that will be set up to have passive income.
Passive income refers to income streams that require minimal ongoing effort to maintain. For those pursuing FIRE, passive income is a cornerstone to achieving financial independence, as it provides consistent income to cover living expenses without actively working.
Other examples of passive income can include: Dividend Stocks, Index Funds and ETFs, Digital Products or Online Courses, Royalties–Earn royalties from creative work, such as writing a book, licensing music, or selling stock photography. Affiliate Marketing–Partner with companies to promote their products and earn a commission for sales. Side Hustles that Transition to Passive– Start a side hustle like a blog or YouTube channel that eventually earns ad revenue or sponsorships passively.
Another core principle of achieving FIRE is Living below your means to build wealth faster. Most people who are working towards FIRE are living lean, being super frugal, and you wouldn’t guess by looking at them and the way they live that they have a lot of money in the bank!
There are different FIRE paths:
- Lean FIRE: Retiring with a minimalist lifestyle and lower expense
- Fat FIRE: Retiring early but maintaining a more luxurious lifestyle.
- Barista FIRE: Achieving partial financial independence but working part-time to supplement income.
Be sure to check out the Financial Mission Podcast episode on this very topic, https://www.buzzsprout.com/2143456/episodes/16128554
Steps to Achieving FIRE
- Calculate Your FIRE Number:
- Formula: Annual expenses × 25 = Total savings needed to retire (based on the 4% rule).
- Example: If your annual expenses are $40,000, you’ll need $1,000,000 saved.
- Cut Expenses Ruthlessly:
- Identify areas to save (e.g., housing, transportation, food).
- Embrace a minimalist mindset to reduce lifestyle inflation.
- Increase Your Income:
- Side hustles, career advancement, or starting a business to generate additional income streams.
- Use the surplus income to save and invest more aggressively. For me, I could invest all of my income generated from my photography and coaching business while living off my nursing income.
- Invest for Growth:
- Focus on low-cost index funds, real estate, or other long-term growth paths.
- Build a portfolio that aligns with your FIRE goals.
- Maintain Discipline and Consistency:
- Stay focused on your goals, even when tempted to spend. Remember, Your life will look and feel differently than the majority of others.
- Reassess your progress regularly and adjust your plan as needed.
- By hiring a financial coach, who can help keep you motivated and hold you accountable is a great idea for those looking to achieve fire. Hey! That is what I do, for more info, JWC.com
Part 3: Pros and Cons of the FIRE Lifestyle
Pros:
- Freedom and Flexibility: Control over how you spend your time. Not having to answer to a “boss” or follow the rules of a company.
- Focus on What Matters: Prioritizing values, relationships, and passions over material things. Like, the example earlier, maybe traveling with your family while your children are still young is your dream and reason. Perhaps selling your home and buying an RV to travel and live is your goal, (it was mine for 5 minutes one time and then I remembered that I don’t like storms and storms in an RV is not my idea of a good time! Haha).
- Stress Reduction: Financial independence reduces money-related anxiety.
Cons:
- Intense Sacrifice: Requires extreme saving and spending discipline, especially for the vast majority of us! We don’t make enough income to NOT have to sacrifice if we want to achieve FIRE.
- Risk of Burnout: The aggressive pace can lead to stress. Be super careful with this one, I’ve struggled with burnout which I didn’t deal with and it led to a huge mental health crisis. Don’t push yourself so hard that you burnout.
- Uncertain Future: Financial independence doesn’t guarantee happiness or fulfillment. THIS IS HUGE and an important reminder that we have to choose happiness IN THE PRESENT TIME. With whatever we have going on. No more saying or thinking, “I’ll be happy when….fill in the blank I get that job, I save a million dollars, I quit my job, I get married, I move to Tennessee)” we have to make the choice to be happy through the journey. For some happiness and fulfillment come easier than for others.
- I personally have decided to follow my purpose and what fills my cup, which is exactly what I am doing right now, recording this podcast, building my business, spending quality time with my family and loved ones. Sure, I could sit here and say, I’ll be happy when I can quit my 9-5, or when my business makes enough income to retire my husband, but the truth is, I am choosing to be happy in the process and journey. BUT, I am not settling any more. I am pursing my passion and building the biz that I WANT.
Is FIRE Right for You?
- Assess Your Goals:
- Do you want to retire early, or is it more about financial freedom?
- Are you willing to make sacrifices in the short term for long-term gains?
- Consider Your Lifestyle:
- Are you comfortable living frugally?
- What are your non-negotiables in life?
For me, I would love to be able to retire early, but to me, that means, I am working because I want to work-not because I have to work. I am also not willing to sacrifice my boys’ love for sports, hunting, and making memories with their family and friends. So, I might give up some superficial items and try not to over-consume on stuff, but I am allowing them to play hockey, football, and baseball. They go do things and make memories with their friends and we go on vacation as a family. These are not things I am willing to give up so I can retire early someday.
This was the same situation we had when we decided to pay off our consumer debt. We had over $100k of debt and we wanted to pay it off quickly, however, I was not willing to live off rice and beans and take my kids out of their activities to pay down our debt quickly. BUT I did and our entire family did make HUGE changes, and we did sacrifice to pay our debt off.
In fact, we sold our big gorgeous 1 year old destination camper, that was like our second home to accomplish this goal. Even though we didn’t always want to do what we did, we made the decision to do things and live differently and make changes to be where we are financially today, and we are in a much better financial space, with a net worth WAY more than I ever anticipated at this season of life. We’ve been blessed beyond measure and I am so glad we took the steps needed to get us here.
- Evaluate Your Current Financial Situation:
- Do you have debt to pay off?
- How much can you realistically save and invest?
- Alternative Approaches:
- You don’t need to pursue full FIRE to benefit from the mindset.
- Focus on achieving financial independence at a pace that works for you.
Again, this is definitely where we are in our journey. We want to be mindful of our spending, not over-consume (as much), save money for our short-term and long-term goals, and retirement. We want to use cash for as much as we can, including things like new appliances, upgrades to our home, different vehicles, etc. I don’t plan to take out another vehicle loan ever again! However, we do have debt on our farm and it might be like that for a long time.
You see the thing is, we can only do as much as we can do without burning out or getting SUPER overwhelmed. We are teaching our boys how to manage money responsibly, and choose to be happy with what they have. We are trying to show them that we don’t need all the material things to make us happy. It is a journey, but we are doing our best to instill these values in our family.
Where do you want to go from here? Are you on a new mission to achieve FIRE? Are you hoping for Financial independence? Perhaps you are looking forward to the day where you have enough FU money saved up and can say FU (in a nice and respectful manner of course) to your current career?
Again, FIRE is about achieving financial independence and designing a life on your terms. It requires careful planning, disciplined saving, and a long-term mindset. It can be done and if it is something you want bad enough, I know you will accomplish it!
I want you to reflect on your financial goals and decide if FIRE aligns with your vision.
Do you need help or want help to achieve FIRE? Do you need someone to hold you accountable and teach you how to pay down your debt so you can start saving for the future? Let’s jump on a call to see how I can best assist you to create the life you want to live, so you can quit living a life you don’t love!
xoxo,
Jess Wayne,
Your Financial Coach
