What is FIRE?

FIRE is an acronym for Financial Independence Retire Early. It is a lifestyle movement for people to gain financial independence and retire early in life. It’s also the concept that changed my life.

While I love the intellectual challenges at school (yes I am a nerd), I quickly found out upon graduation that work was much less fun and way less intellectual. Most of the time, it was about building relationships (read politics) and endless meetings (also known as soul-sucking-gatherings-in-rooms). Annual performance reviews were way tougher than exams because there wasn’t a right or wrong answer. It was often a ‘did you showcase your work enough’ or ‘did others talk a bigger game?’. Anyway I think you get my drift now.

Often, stuck in briefing meetings that droned on endlessly, my mind started to drift and project my life decades into the future and it didn’t seem like things were going to get any better. All my life, I had checked all the boxes and got the grades, and this is it? I refused to settle, and started to look for a way out, a path that looked better than the one I was on.

 
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FIRE is the game-changer.

It’s the gameplan to hustle your way out of the corporate treadmill as fast as you can. When I stumbled across FIRE in my 20s, I didn’t believe it would work. Back then, I wasn’t earning or saving enough for it to be a realistic goal for me, but over the years, as I devoured more research around FIRE and crunched the numbers, I realised that most people can achieve it if they save and spend deliberately.

Sure, the most common FIRE personas in the community are white male software engineers working for tech companies earning shit tons of money, but get this, I am not white, I am not male and I am not an engineer. However, I do admit that working for a tech company is what got me where I am today. Choice of industry is not the only factor though, I have plenty of colleagues who have the same earning power as me and are nowhere close to retiring. Other than my full time job, I also made myself and my money work extra hard to get to FIRE today.

Also read ‘Why people don't believe women who FIRE


Having dived deeper into the maths around FIRE, I wouldn’t say it would work for everyone, but if you earn an average American annual income of $56k, avoid debts, spend frugally and start saving early then yes, I am confident it can work for you too.

How does FIRE work?

The key to FIRE is in maximising your savings rate. You can do so by increasing your income or decreasing your expenses.

 
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Savings = Income - Expenses

The goal is to accumulate enough savings until the resulting passive income exceeds your living expenses in perpetuity.

An easy rule of thumb to find out your FIRE goal is to multiply your annual living expenses by 25 times.  So if your living expenses are $40,000 a year, your FIRE goal is $1 million. This is assuming that you will draw down your total assets at a safe withdrawal rate of 4% per year over your lifetime, which is backed up by the famous Trinity Study.

A simple calculation of how your finances would work when following the FIRE path is shown in the table below:

FIRE income expenses table.png

As you can see, once the income from your investments exceeds your inflation adjusted expenses, you will never run out of money. It comes with caveats around the performance of your investments which we will dive deeper in another post, but your expenses are the key factor and that is entirely within your control.


There are some variations of FIRE

If you are new to the concept of FIRE, you might be living under a rock since Wikipedia says that 11% of wealthier Americans aged 45 and older have heard of the FIRE movement while another 26% are aware of the concept. Here are some variations that have been layered on top of the core concept.

  • Barista FIRE - retiring and then working part time at Starbucks to get free health insurance and coffee

  • Lean FIRE - retiring with <$1million and living on $40k yearly

  • Regular FIRE - retiring with around $1-$2.5 million and living off $40k-$100k yearly

  • FAT Fire -  retiring with >=$3million and living off $100k+ yearly


I hope I have provided you a good overview of what FIRE is all about and helped you start thinking about whether it’s possible for you. The rest of my blogs dives deeper into how I have achieved FIRE and how you probably can as well. If you are starting to discover the FIRE movement, I encourage you to read on or check out other top FIRE bloggers to inspire you.