The acronym FIRE stands for Financial Independence, Retire Early. It's a movement focused on achieving financial independence and retiring decades earlier than traditional retirement ages, often in one's 40s or even 30s. This involves aggressively saving, investing, and potentially reducing expenses to build a large enough nest egg to support oneself without relying on employment income.
Core principles of the FIRE movement:
Financial Independence:
Having enough passive income (from investments, etc.) to cover your living expenses without needing to work for a paycheck.
Early Retirement:
Retiring significantly earlier than the typical retirement age (55, 60, or even 65).
Aggressive Saving and Investing:
Saving a large percentage of your income and investing it in a diversified portfolio of assets (stocks, bonds, real estate, etc.).
Frugality:
Minimizing expenses and reducing lifestyle inflation to accelerate the savings process.
Mindful Spending:
Being intentional about where your money goes and prioritizing experiences and things that align with your values.
Different approaches within the FIRE movement:
Lean FIRE:
Requires a very low annual spending and a high savings rate.
Fat FIRE:
Allows for a more comfortable lifestyle in retirement with higher spending needs.
Barista FIRE:
Involves semi-retirement, working part-time or in a lower-paying job that provides some income while the passive income covers the rest of the expenses.
Coast FIRE:
A strategy where your investments have reached a point where they are expected to grow to your FIRE number by retirement age, even if you stop saving.
Reaching FIRE:
Calculating your FIRE number:
This is the amount of money you need to have saved to generate enough passive income to cover your expenses.
Developing a savings and investment plan:
This involves figuring out how much you need to save each month and how you will invest your money.
Tracking your progress:
Regularly monitoring your savings, investments, and expenses to stay on track.
Adjusting your plan as needed:
Life changes and you may need to adjust your savings goals or investment strategy.
FIRE is not just about money, but also about:
Freedom and flexibility: Being able to choose how you spend your time and pursue your passions.
Personal growth: Learning about personal finance, investing, and developing new skills.
A sense of accomplishment: Achieving financial independence can be a significant personal achievement.
Core principles of the FIRE movement:
Financial Independence:
Having enough passive income (from investments, etc.) to cover your living expenses without needing to work for a paycheck.
Early Retirement:
Retiring significantly earlier than the typical retirement age (55, 60, or even 65).
Aggressive Saving and Investing:
Saving a large percentage of your income and investing it in a diversified portfolio of assets (stocks, bonds, real estate, etc.).
Frugality:
Minimizing expenses and reducing lifestyle inflation to accelerate the savings process.
Mindful Spending:
Being intentional about where your money goes and prioritizing experiences and things that align with your values.
Different approaches within the FIRE movement:
Lean FIRE:
Requires a very low annual spending and a high savings rate.
Fat FIRE:
Allows for a more comfortable lifestyle in retirement with higher spending needs.
Barista FIRE:
Involves semi-retirement, working part-time or in a lower-paying job that provides some income while the passive income covers the rest of the expenses.
Coast FIRE:
A strategy where your investments have reached a point where they are expected to grow to your FIRE number by retirement age, even if you stop saving.
Reaching FIRE:
Calculating your FIRE number:
This is the amount of money you need to have saved to generate enough passive income to cover your expenses.
Developing a savings and investment plan:
This involves figuring out how much you need to save each month and how you will invest your money.
Tracking your progress:
Regularly monitoring your savings, investments, and expenses to stay on track.
Adjusting your plan as needed:
Life changes and you may need to adjust your savings goals or investment strategy.
FIRE is not just about money, but also about:
Freedom and flexibility: Being able to choose how you spend your time and pursue your passions.
Personal growth: Learning about personal finance, investing, and developing new skills.
A sense of accomplishment: Achieving financial independence can be a significant personal achievement.
