FIRE! Financial Independence Retire Early. This is a community I learned about a few years ago while surfing YouTube. FIRE is a community of people that decide they are not interested in working for their entire lives and instead try to spend less, save more, and retire at a young age.
For some this means that from college graduation to age 40 they will ‘suffer’ and save most of their income. For others they can do this by age 30, or they want to work their entire life but be stress free knowing they can retire at any time they please. The purpose is to take control of your life and start making conscious decisions instead of doing what society deems “normal” and retiring with little money saved at age 65 or older. These people do what makes them happy which is to be financially free as young as possible.
I must quickly acknowledge that I am not a member of any forums or groups in the FIRE community. But I do follow the principals and much of the lifestyle of these FIRE communities and thanks to FIRE I have been able to attain Financial Independence very early in my life.
FIRE on its own just means you have enough money to retire before you reach age 65, you have successfully retired early and have enough money to live forever. If you find out how much money you spend each year and multiply that by 25, that is how much you will need to have to reach FIRE. For example, if you spend $40,000 per year on your expenses (not savings) you will need $1,000,000 to have the exact same lifestyle as you do now.
Some people don’t want to cut back and save 50% of their income and just want to save 10-20% and retire at an older age. I personally would like to have less money and retire much earlier so cutting my expenses to about $20,000 per year means that it would only take $500,000 for me to reach full FIRE. For easy math, if I made only $50,000 per year and I invested the extra $30,000 (I understand that doesn’t include taxes) then I would be able to save that $500,000 with no investing in just under 17 years. If I started working at 22 years old that would put me at age 39 for retirement. Once $500,000 is saved I would have to invest it and get a return averaging 4% yield every year to live with that money never running out. Any extra money should be saved back into the fund so that it can still grow, and your spending can increase each year with inflation. For context, the S&P 500 averages a bit over 9% throughout history. Living on 4% and letting the additional 5% grow leaves room for bad years in the market as well as growth with inflation. If I invested into the market $30,000 each year instead of just saving it as cash that could allow me to be worth $500,000 much quicker than 17 years, it would be closer to 9-10 years which is quite amazing.
There are a few types of FIRE. Lean FIRE which is someone who spends less than the average person and saves about 25x their income. Fat FIRE when someone who spends more than the average person and saves 25x their income. I have reached the stage of Coast FIRE. This means that I no longer must save for retirement if I don’t want to. The money I have invested can stay invested until the normal retirement age of 65 and I will have enough to retire. Meaning that all of the money I earn can technically be spent (even though I won’t do that), another way to look at it is that I only have to make enough money to live and none to save if I choose that path. The last FIRE is Barista FIRE. Barista FIRE means that you only must make a little bit of money to sustain your living standards. You have saved enough so your investments can pay for most of your life, but you need to make a tiny bit of money each month to help pay for the rest of your bills. This basically means you no longer need to work full time and can live comfortably on a part time job, like working as a barista, a handyman, or maybe even your own business. You could also work the same job just less hours.
My expenses are very low, I only spend money on things I love, and I love saving money. The book I Will Teach You to be Rich helped me figure out many savings methods I use. Every dollar that I save and invest literally makes me happier, not because of the money but because it gives me more freedom. I have lots of friends that think I’m suffering, or that saving money makes life boring. They don’t save because they want to “live in the moment”. I think that’s complete crap. I travel a ton, I eat out at restaurants that sound delicious, hanging out with friends is a common occurrence, and I have multiple hobbies that I love to spend my time and money doing.
Saving money on things I don’t care about is why I am able to save 50%+ of my income. I rarely purchase new clothes, I have very cheap rent, no car payment, and no debt. Now that I have reached 6 figures in my investment accounts, I no longer must save money if I don’t want to. However, I will save more because I want to be at a point where work is 100% optional and where I can spend all my time doing the things, I love weather or not they pay me anything.
FIRE to me means I can pursue the things I wish, it means that I can travel and explore the world, it means I can make 10% the amount of money I previously did and still be happy with that income because I love my job and don’t need the money. The main reason I will continue to save so much of my income is because I want to have money to help others. I want to be able to teach other people how to save their money, how to cut expenses, and how to also retire early. It is also a goal of mine to donate over a million dollars in my lifetime as well as fund college for less fortunate people and other philanthropic goals. I’d love to start a few businesses that I don’t rely on for my income and instead can make them more enjoyable to the clients and customers because the focus is not on making money but on providing the best product.
So, have I reached full FIRE? No. But I have reached Coast FIRE and now I can focus on making just enough money to survive and use the rest of my time doing things I love. Now instead of 100% focus on paying the bills and saving money I have freedom.
Freedom is something money can buy, and I am fortunate to have reached this level at such a young age.
You can check out my other blog post to see exactly how I made my money.
I highly recommend starting this process by saving at least a few dollars each paycheck and by finding out exactly how much money you would need to retire. It may surprise you that it’s much less than you would expect. Also, many times once you retire your expenses are lower because you have your home paid off, don’t have to buy clothing for work or spend gas to drive there. You can also lots of times move to a cheaper area if that’s something that interests you.
Everything in this post is just my experience, I understand not everyone has been as fortunate as myself but just taking one step in the right direction is good progress.