What is the FIRE Movement?
FIRE stands for Financial Independence, Retire Early. The FIRE movement has been gaining popularity in recent years as more and more people become fed up with the traditional work model.
The premise of FIRE is simple: save a large percentage of your income so that you can eventually live off of your investment returns and never have to work again.
For some people, that might mean retiring in their 30s or 40s. For others, it could mean never retiring at all and just working on projects that they’re passionate about.
Savings Rate
How large of a percentage you need to save depends on a number of factors, including how early you want to retire and how much money you think you’ll need to support yourself in retirement. The standard rule is called the 4% rule, which means you will want to save enough money to cover your annual living expenses with 4% of your portfolio. Another way to think about it is to save 25x your annual expenses.
How We Found FIRE
I was first introduced to the FIRE Movement by engineer friends. Leave it to the engineers to be all about this stuff. At the time, my boyfriend and I made very little money. We thought that is just a pipe dream for us, but we understood the ideas behind it and that it was a real possibility for our engineer friends. I’ve always been very interested in frugal living, mostly out of necessity and in the interest of living an efficient life.
At the time my boyfriend and I were saving for #vanlife. Well, we were saving for a Suburban that we could build out and live in for a year. He was a professional track and field athlete at the tail end of his career, and I was just looking for the next exciting life phase after working a steady job for 4 years. We were in our mid-late 20’s and figured, better now than never.
Real Life Strikes
So we did all that, got married, and my husband started a job coaching collegiate track and field and I started two photography businesses. Now in our early 30s, our jobs became grinds, as jobs do, and we started thinking about the money principles that our friends told us about all those years ago. Which is how things came full circle to now, where we are trying for the financially independent part of FIRE so that even if we don’t want to retire early, we can choose to work in only the capacities that we want. Basically, we want to relieve ourselves of the need for the grind. We both like working hard, but we want our hard work to also have a purpose and meaning that we find enjoyable.
For reference, we are now Coast FI (you can see the meaning of that and other types of FIRE below) as a photographer and a Track and Field Coach, not the two highest-earning professions around. But like my dad likes to say, it’s not what you earn, but what you spend.
We Started Businesses
Before starting my business I never made more than $50k a year. Even so, I managed to pay off my $20k of student loans in the first year after I graduated while working at a total of 7 jobs that paid me a combined total of $35k in my first full working year out of college.
Free from that debt I felt like the world was my oyster! And that’s really what FIRE is all about- creating a life you are excited to live each day, not reorganizing your life in order to afford and maintain the stuff you own.
Here are a few more pieces of info that are helpful to know about the FIRE movement, and what it all means for you.
The 4% Rule
The 4% Rule is a principle often cited in the FIRE community (Financial Independence, Retire Early). This rule states that you can safely withdraw 4% of your portfolio each year in retirement and that your portfolio will last for at least 25-30 years. So, if you have $100,000 saved, you can withdraw $4,000 per year. In other words, if you have saved $1 million dollars, you could withdraw $40,000 per year and still have a good chance of not running out of money over a 30-year period.
This rule is based on historical data and has been found to be accurate in a variety of different market conditions. While the 4% rule is a helpful guideline, it’s important to remember that every situation is unique. Withdrawal rates should be customized to your individual circumstances, taking into account factors such as inflation, investment returns, and living expenses. With careful planning and a bit of luck, the 4% rule can help you achieve financial independence and retire early.
How to Achieve FIRE?
There is no one answer to this question since it depends on a number of factors such as how much money you think you’ll need to support yourself in retirement and when you want to retire.
There are many ways to achieve FIRE and it is possible for almost anyone who is willing to make some changes in their spending and saving habits.
A few of the most common ways to achieve FIRE are:
-Save a large percentage of your income: This is perhaps the most important factor in achieving FIRE. You need to be saving as much money as you can so that you can eventually live off of your investment returns.
-Invest wisely: Where you invest your money is just as important as how much you’re investing. You’ll want to choose investments that have the potential to grow over time so that you can reach your financial goals sooner.
-Live below your means: One of the best things you can do for your FIRE goals is to live below your means. This will allow you to save more money and reach financial independence that much sooner.
There are many different ways to achieve FIRE, but the most important factor is saving a large percentage of your income. If you can do this, you’ll be well on your way to reaching your financial goals.
What Are the Benefits of FIRE?
There are a number of benefits that come with achieving FIRE.
Some of the most common benefits include:
– having the freedom to retire early
– never having to worry about money again
– being able to pursue your passions full-time
The benefits of FIRE depend on what people want to get out of it. Some people might enjoy having the peace of mind that comes with knowing they don’t have to worry about money while others might appreciate being able to retire early.
No matter what your reasons for wanting to achieve financial independence, FIRE can provide you with the tools and resources you need to get there.
Types of FIRE
Traditional FIRE:
This is the FIRE movement that most people are familiar with. You save a high percentage of your income, usually 50-70%, and invest it in a diversified portfolio of stocks and bonds, and once you’ve reached enough wealth, you can retire.
The goal is to save enough money to cover basic living expenses, including housing, food, healthcare, and other necessary expenses, with a moderate amount of savings, typically around $1-2 million or more.
To achieve traditional FIRE, individuals often prioritize high savings rates, investing in a diversified portfolio of stocks, bonds, and other assets, and reducing unnecessary expenses to free up more money for savings. Traditional FIRE also emphasizes the importance of diversification and risk management to ensure a sustainable retirement income.
Fat FIRE:
The concept of Fat FIRE is based on the idea that if you can maximize your income and savings, you can achieve financial independence with a larger amount of money, allowing for a more comfortable and luxurious lifestyle in retirement. This means that individuals who pursue Fat FIRE often prioritize high-income careers, maximizing their earning potential and investing heavily in stocks, real estate, or other high-return investments.
The exact amount of savings required for Fat FIRE will depend on individual circumstances and lifestyle preferences, but generally, Fat FIRE advocates aim to save enough money to support a comfortable and luxurious lifestyle in retirement, often with a target savings goal of $2-3 million or more.
Lean FIRE:
The concept of lean FIRE is based on the idea that if you can minimize your expenses, you can achieve financial independence with less money. This means that individuals who pursue lean FIRE often prioritize living below their means, reducing unnecessary expenses, and being intentional with their spending in order to save as much money as possible.
The exact amount of savings required for lean FIRE will depend on individual circumstances, but generally, lean FIRE advocates aim to save enough money to cover their basic living expenses, such as housing, food, and healthcare, while minimizing other discretionary expenses. By living a frugal lifestyle, they are able to retire early with a lower amount of savings, often around $500,000 or less.
Coast FIRE :
Coast FIRE is a type of financial independence/retirement strategy where an individual saves enough money early on in their career to cover their living expenses for the rest of their life, even if they stop contributing to their retirement savings. Essentially, it means that they have “coasted” to financial independence and can choose to continue working or retire early without worrying about saving additional money for retirement.
This is the category that we fall into. We found the FIRE movement in 2014 but didn’t think it was possible for us until 2018 or 2019. We’ve always been savers, but in the 5 years since then, we have gone from clueless to Coast FI!
With Coast FIRE, the idea is to save aggressively in the early stages of your career, often during your 20s and 30s, and then allow those savings to grow over time without further contributions. This can allow for greater flexibility and freedom in later years, as individuals have the option to work part-time or pursue a lower-paying but more fulfilling career without worrying about meeting their basic financial needs.
Barista FIRE:
Barista FIRE is a term that was coined recently and it refers to people who are working towards financial independence but have not yet reached their goal. They are still working, but they have made changes to their lifestyle so that they can save as much money as possible.
One popular way to achieve Barista FIRE is by living in a van or RV and traveling around the country. This allows you to save money on rent and other living expenses, while still being able to work and earn an income.
Which FIRE aligns with your life?
So which type of FIRE are you? Or are you still undecided if you’d like to join the FIRE movement at all? Some of this stuff is just good advice for saving for retirement, even if you plan on working until you’re in your 60’s or 70’s.
Have you heard of the FIRE movement? What do you think of it? Let us know in the comments!
