BlogBuilding Wealth

What is FIRE (Financial Independence, Retire Early)?

If you’ve ever dreamed about say adios to your 9-5 and being financially independent, you may have heard of the FIRE movement. FIRE stands for Financial Independence/Retire Early), and the concept involves:

  • Saving a massive amount of your income (usually 50% or more)
  • Living well below your means
  • Investing heavily in low cost index funds

Using these principles, FIRE proponents are able to for shave off years, and even decades, off the traditional retirement age, which is usually 65.

How Did The FIRE Movement Start?

The main ideas behind the FIRE movement originate in the 1992 best-selling book Your Money or Your Life written by Vicki Robin and Joe Dominguez. They popularized the idea of achieving financial independence rather than spending the best days and years of your life working in a 9-5 to make money. 

The core concept of their book is that most of us float through life unknowingly exchanging our time for money. Time, as our most precious and scarce resource, is spent earning money so we can buy fancy purses, the latest electronic gadgets, the big house, and the new car. Robin & Dominguez made the argument that people are trading their lives to buy things that don’t actually bring them value. And thus, a movement was born.

The FIRE Community Today

While Your Money or Your Life fueled momentum as a grassroots movement, it was another 25 years before he FIRE movement began to take shape. 

The Great Recession of 2008 created an entire subset of people became disillusioned with the status quo. People began to understand the true cost of the American consumerist culture and keeping up with the Joneses. And some began to realize that traditional financial advice simply fed this idea that you work for 40+ years, set a side a little money, and hope to enjoy a few years of “living the dream”. 

One of the most well known FIRE advocates is Mr. Money Mustache. After retiring at 30, Pete Adeney started a blog, Mr. Money Mustache, to spread his ideas of using a frugal lifestyle to buy your freedom. He and his wife saved over 60% of their incomes during their brief careers and they both retired shortly before their son was born. 

His blog gained momentum and he built a dedicated following of readers, or “Mustachians”. Much of the attention now paid to FIRE can be attributed directly to his blog. The current FIRE community has expanded to include a wide array of writers, bloggers, and podcasters — normal people pursuing a not-so-normal life. 

Some of the most well known books on FIRE include Financial Freedom, How to Retire Early with Real Estate, Work Optional, ChooseFI, Quit Like a Millionaire, The Simple Path to Wealth, and The Millionaire Next Door. 

Why Do People Pursue Fire?

Financial independence isn’t easy to achieve. It’s a long road, taking many people a decade or more to achieve. What do people get when they reach financial independence? What drives them to create a plan and stick with it?

Freedom To Pursue Work You Love

For many in the FIRE movement, financial independence isn’t actually about retirement — it’s about having the ability to choose work that you enjoy doing. Financial independence gives you the chance to choose the work that you do, without worrying about how much you make. It’s more about freedom than anything else.

Spending More Time With Family

Financial independence means you can spend as much time with family as you want. You can stay home with your kids while they’re young, enjoy time with your spouse, and spend extended time visiting your parents without worrying whether your boss will care. FIRE proponents are acutely aware of the finite nature of their time, and they’re determined to make the most of it.

Freedom To Travel, Live and Work From Anywhere

On average, private-sector employees get 10 days of paid vacation after one year of employment. Worse, 1 in 4 private-sector employees doesn’t get any paid vacation or holidays. With FIRE, you can travel as much as you want, with complete disregard to how much PTO your boss wants to give you. Financial independence provides the opportunity to explore, travel and move around the world, without having to worry about being constrained by traditional employment.

For some who reach FIRE, they take advantage of geo arbitrage: the difference in the cost of living between two areas. Often, those pursuing FIRE live in high cost of living areas (and areas where they are paid well) and then retire to low cost of living and low tax areas.

Others who reach FIRE choose to travel full-time or nearly full-time, focusing on staying in countries where the cost of living is low. Those countries include places in South America, southeast Asia, or Eastern Europe. 

And extended travel isn’t just for people who have reached FIRE. Many people on their path to FIRE choose to take a sabbatical for an extended period of time (like a year), to travel and enjoy the FIRE lifestyle.

Are you interested in pursuing FIRE? Are you already on the path to FIRE? Leave a comment below!

Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button