What is FIRE?
It’s not the exothermic chemical process of combustion nor a meaning that you got fired from your job, FIRE stands for Financial Independence, Retire Early.
Financial independence is when you have a net worth high enough that you can cover your expenses without your money running out.
Technically speaking, you have assets large enough that they generate an income through growth- either in the stocks, bonds, real estate, and/or other assets.
The income or growth generated is equal to or larger than your expenses.
This part is mostly self explanatory. You retire before the typical retirement age (65 in the USA).
The FIRE Movement
The main goal of FIRE is to aggressively save a large percentage of your income so that you can become financially independent and retire early- in your 20s, 30s, 40s, or 50s.
Typical savings rates are 50-75% (or more)- the higher your savings rate, the quicker you’ll be able to retire.
Frugality plays hand-in-hand with FIRE. The less you spend, the more you can save.
Boosting your income and keeping your expenses the same is another goal of FIRE. The more money you have, the more you can increase your savings rate.
Why would people want to retire early?
Many people either do not enjoy their careers or enjoy other activities more than their careers. This could be time with family, volunteering, sports, gardening, or any activities that you enjoy and find a purpose with.
Do you find little purpose in your career? Does your work cause more stress than good? Would you rather be pursuing other things in your life?
Maybe FIRE is right for you.
There are different forms of FIRE-
- Coast FIRE
- You have your savings at a level where if you stopped investing completely today, you will be able to FIRE in X years assuming an X% growth rate.
- Lean FIRE
- You can live off your investments, but you would forever have to be very frugal.
- You have enough savings to cover your expenses and a little extra with a 3-4% withdrawal rate.
- Fat FIRE
- You have significant savings where your yearly withdrawal rate is a very small percentage of your overall savings (less than 1-2%) and this completely covers your expenses with extra leftover.
Mrs. Free Runner and I are pursuing somewhere between FIRE and Fat FIRE.
What type of FIRE is your goal?