Young couple enjoying a sunny cafe together.

Are You Ready To Join The FIRE Movement?

Sarah Li Cain11-minute read
December 16, 2021

Interested in retiring early?

Maybe you want to move to Florida and lie on the beach all day. Maybe you want to strike out on your own, working part-time on your Etsy shop. Maybe you’d like to volunteer at your local library.

Whatever your dreams may be, it’s time to look into the Financial Independence, Retire Early movement. FIRE marks the exact moment when your passive income streams make enough to cover your expenses.

Yes, it means you won’t have to commute to a job you hate.

Yes, it means you won’t have to worry about scraping enough money to pay the bills.

And it is possible, even for the average family.

The entire concept can sound intimidating (and seemingly impossible), but many people have been able to achieve financial independence – they’re living life on their own terms.

You can, too. So let’s get started.

The FIRE Movement In A Nutshell

The FIRE movement is a trend that promotes the idea of living healthy financial lives in order to retire early, typically in your early 30s or 40s. Considering the average retirement age is 62 for women and 64 for men, technically you’re considered FIRE if you retire before then.

Here’s how it works: You save a large chunk of your paycheck – many FIRE devotees save at least half of their take-home pay – and stick it in an investment vehicle of your choice in the hopes that one day it’ll reach the point where the earnings match your expenses.

That’s technically the point where you can consider yourself FIREd.

As for when you know you reach FIRE, that moment falls on you. Maxwell Lee, co-founder of real-estate investment company Glocal Network, said he knew he reached FIRE when his wife left her job.

“My wife decided to become a teacher because it was her childhood dream, which resulted in a massive pay cut,” he says. “At that point, our big life decisions were no longer motivated primarily by finances.”

The ultimate goal of FIRE is to be able to create a lifestyle where you have the freedom to make choices outside of your financial responsibilities. For example, instead of worrying about taking on a job because it pays more, you can pursue your passion and work part-time doing something you love without worrying about how you’ll pay the bills.

No wonder it’s appealing for those who feel stuck in their lives – they’re constantly working, financially strained and want to get out. However, the point isn’t to escape a life you hate; FIRE devotees argue it’s about building a life you love.

Although the FIRE movement has been criticized for how restrictive it can be (more on this later), it can help you think critically about your financial life and whether what you’re doing is really working for you.

Variations Of Financial Independence

As FIRE has gained traction, there have been a number of folks who have come up with variations of the movement. Some argue that it makes the whole concept more inclusive. Here are the most common variations:

Lean FIRE – This is someone who has enough passive income to cover basic necessities and tends to skew toward a more frugal, minimalist lifestyle. Some, in an effort to reduce their expenses, move to a country with a lower cost of living.

Fat FIRE– This term refers to someone who has a higher standard of living and is able to save more than the average person, possibly due to their higher income or the fact that they’ve saved longer.

Barista FIRE– These are people who quit their 9-to-5 but don’t touch their retirement savings. Instead, they let it grow and find an alternative source of income like a part-time job to cover their expenses.

Coast FIRE– Similar to Barista FIRE except that Coast FIRE folks have enough to fund their current expenses and traditional retirement but choose not to touch it. They may have part-time jobs.

Before Looking At The Numbers

It sounds exciting to escape the drudgery of work and relax on the beach all day. Before we dive into the numbers behind achieving early retirement, we need to talk about your why, or your plan of what you’ll do once you’re FIRE – aka have a ton of time on your hands.

Planning to figure it out after you retire isn’t necessarily the best course of action because you may feel like you’re wandering aimlessly. Think about it – you work hard for years with your head down, earning and saving money like nothing else. Once that ambitious feat is over, do you think it’s possible to transition right into full-on relaxation mode or know what you’ll want to do as a passion project right away?

Although it seems far away, start thinking now about the type of life you want to build. It’ll help you with a vision, which can serve as motivation when the going gets tough. Plus, doing so will help you determine the exact number you’ll need to reach your version of FIRE.

Arianna Sylvester from Rochester, NY, who at age 35 achieved FIRE and now runs multiple businesses with her husband, said that getting clear on their goals helped tremendously.

“It is great to be debt-free and to be able to retire and live off your income, but make sure you’re not just doing it as a part of a trend,” she says. “Make sure you’re not sacrificing your own happiness, or that of your spouse, to achieve some arbitrary goal.”

Tom, her husband, agrees. He and Arianna now own a wine and liquor store, a real estate business and coach business owners on how to create a sustainable business — their passion project — to help supplement their savings.

“Focusing on FIRE allowed me to leave my job so I could spend more time with family,” he says. “Building three different businesses provided me the flexibility to walk away from a six-figure job and put our family first.”

The Math Behind Early Retirement

Let’s get to the good stuff: the numbers.

Most followers of the FIRE movement use a few simple calculations to figure out how much they’ll need to retire and become financially independent.

First, there’s the rule of 25. It simply means that you need to save 25 times your annual expenses before retirement and stick it in an investment vehicle (we’ll talk about the different ways to generate cash flow later in this guide).

For example, say your annual household expenditures are $45,000. That means you need to invest at least $1,125,000 for retirement.

Why the rule of 25? To help successfully implement the 4% rule. In essence, this means you can withdraw up to 4% of your investment portfolio each year without depleting the principal amount. Meaning, you’ll never run out of money in retirement.

The 4% rule determines how much you could withdraw from this amount once you retire.

That’s it!

How To Get Started

We’re finally here – looking at the practical ways to achieve FIRE.

Step 1: Calculate Your FIRE Number

How will you know when you can retire early if you don’t know your numbers? It may be scary to look at what seems like a big number, but without it, you’re wading through the dark.

First, determine what kind of FIRE you’d like to achieve. Or start with the rule of 25, whatever makes sense. Then, consider your current expenses. determine your yearly spending and multiply that by 25. That’s your FIRE number.

Here’s where it gets fun – determining a date. You can change this later, depending on how aggressive you want to get with savings, but for now it’ll give you a good benchmark to work toward.

Step 2: Prioritize Paying Off High-Interest Debt

Debt can seriously derail any sound financial plan, so it’s best to pay these off as soon as you can. High-interest debt includes (but is not limited to) credit cards, personal loans and student loans. Work on paying off more than the monthly minimum to knock these out quickly.

As for low-interest debt like your mortgage, that’s up to you whether it’s worth it to pay off quickly. Some people argue that it’s not worth it, as you can free up the cash for investing, whereas others say it’s a good idea because you wouldn’t have to worry about the weight of debt hanging over your head.

Step 3: Lower Your Expenses

Time to scrutinize every dollar you spend. One of the best ways to get to FIRE quickly is to lower the amount you’ll need to spend in retirement.

When getting started, tackle your largest expenses first, which tend to be housing, food and transportation. Can you move into a smaller place? Refinance your mortgage? Rent out part of your home?

Maybe you can trade your current car for a cheaper one and reduce your monthly payments. Or carpool to work. Maybe you can eat out less and learn to love cooking.

Something else to consider is negotiating your existing bills. Most companies want to keep your business and will be more than happy to lower your rates. It doesn’t hurt to try.

Step 4: Learn To Love Saving

Saving money can make it seem like you’re depriving yourself, especially when you’re used to things like fancy dinners out or buying a new outfit every weekend. However, being frugal doesn't mean that you can’t have a life. Besides, think of what the money you’re saving will buy you: your freedom.

Instead of spending hundreds of dollars going out, consider free or low-cost activities like street fairs, going to the library or hosting a picnic at a park. There are plenty of fun, frugal things to do. You’ll be surprised at how many there are once you start looking.

Step 5: Find An Investment Vehicle

Once you’ve gotten into the habit of saving, it’s time to think about how you want to invest your cash. There are plenty of options to generate cash flow from your passive income sources. What’s important is that all these investment options involve some sort of risk, so check with a financial professional to understand the pros and cons of each.

Investing in real estate – There are many options that include REITs (real estate investment trusts), purchasing physical properties and renting them out, and flipping homes. Remember, do your due diligence to understand the risks involved.

Parking your cash in the stock market – You don’t need to be a day trader to take advantage of the stock market. Many FIRE devotees love investing in exchange-traded funds (ETFs), which are low-cost index funds. There are plenty of brokerages to choose from.

Income from a business – Some build businesses that help generate passive income sources. This includes money from products or services or even advertising.

There are other investment options, but these seem to be the most popular among FIRE followers.

Step 6: Increase Your Income

You can only decrease your expenses so much before you need to set your sights on increasing your income. That way, you can save and invest even more money, getting you closer to FIRE.

Here are a few ideas to get the ball rolling:

  • Ask for a raise at your current job
  • Look for another position with a new company and ask for more money
  • Apply for a promotion at your current company
  • Start a side hustle
  • Sell your items
  • Buy a small business that’s profitable and has the potential to grow

Step 7: Keep Chugging Along

This is the stage where you keep financial independence at the forefront. Keep watching your expenses and looking for ways to increase your income. You’ll also want to keep track of your finances (including your investments) and adjust your plans or method of achieving FIRE if necessary.

For The Love Of Credit Cards

Many FIRE followers love credit cards – some turn optimizing their use into a hobby.

Using a practice known as travel hacking, people sign up for credit cards to earn large initial bonuses and use specific cards in certain spending categories in order to rack up as many rewards as possible. You can reap benefits such as cash back or points towards free travel and merchandise.

There are plenty of people who’ll happily pay annual fees in the hopes of earning free trips to Europe or thousands of dollars back in cold, hard cash. There are also travelers who use these cards for adventure-friendly perks, such as access to airline lounges.

The catch with travel (or credit card) hacking is that you typically need an excellent credit score to nab the best cards. The first step to a better score is awareness – sources like RocketHQ offer a free credit score-monitoring tool so you can become familiar with how to monitor yours.

Enjoying The Journey

Achieving FIRE is no small feat. At times it can be exhilarating; other times it can seem like a total chore.

Working hard to save money and earn more can mean long hours and turning down desired social invitations. It also means there will be people in your life who don’t understand what you’re trying to achieve and mistake your frugal ways as being miserly. This is why it’s important to find ways to enjoy the journey. It may mean not saving as much and taking some of your hard-earned money to go on a small vacation. Or giving up a side hustle or two to spend more time with friends. Get creative and you’ll be able to enjoy life now without getting bogged down by the need to save and earn a ton of money.

Something else to consider is finding others who are on a similar path. Unfortunately, money is still a taboo subject for many, so it’s crucial to connect with people who are open to talking about money. That’s how you’ll learn and feel like you’re not alone on this journey.

FIRE Movement Myths

Here are some common myths about FIRE:

You need to be extremely frugal – Critics think you need to resort to tactics such as stealing toiletries from hotels or condiments from fast-food restaurants to save a few bucks and there. Or that you’re not allowed to spend money on frivolous items. That’s not the case. Instead, it’s about living a more moderate lifestyle, cutting back on what you don’t value and directing your efforts toward what’s important.

For example, Dustin Heiner, a former systems and procedures analyst with the Fresno County Sheriff, says FIRE has changed his perspective on spending money. “I am more frugal in general with most things, but I’d happily spend thousands of dollars on things like my business, but I was still able to retire early.”

Healthcare will cost an arm and a leg – It can, but it doesn’t have to. Sure, healthcare tends to be one of the biggest expenses for early retirees (before Medicare kicks in), but with careful planning, it doesn’t need to cost an enormous amount. Some choose to lower their modified adjusted gross income to get lower monthly premiums on the Affordable Care Act Exchange, or join health share ministries, or take advantage of medical tourism, where you go to another country to complete medical procedures at lower prices.

People stop working completely – Not true at all. You’ll find a lot of folks who “retire” early continue to earn money through part-time employment, hobbies that produce income, or businesses. Of course, if you want to stop working in the traditional sense, that’s OK, too.

You’ll be bored – People who achieve FIRE have a whole list of activities they want to pursue – many claim there aren’t enough hours in the day to do them all! Some decide to travel or cross off items off their bucket list, so it’s not about sitting in front of the TV and zoning out.

There’s only one way to achieve FIRE – As mentioned above, there are varying degrees of FIRE. You don’t need to invest or earn money the same way as everyone else.

Is FIRE For Everyone?

As much as FIRE devotees would love to tell you otherwise, the answer is no.

There are people out there who simply don’t make enough money to put food on the table. According to the 2017 U.S. Census Bureau, an estimated 39.7 million citizens live in poverty. Folks like these would love to be able to save tons of cash, but in many cases it’s not a possibility.

Even if you make a fairly stereotypical middle-class income, there can be plenty of things that derail your plans. Maybe you’ll encounter a health emergency that’ll wipe out your savings. Maybe you’ll have to deal with a family situation (such as taking care of aging parents) that can do the same.

That said, retirement is extremely personal, and most people can achieve some form of FIRE. Remember, your financial goals and plans aren’t going to be the same as those of your friends, family members or neighbors down the street. Maybe you’ll want to achieve a version of Barista FIRE, whereas someone else won’t be happy until they’ve reached Fat FIRE.

Still, there are some positive takeaways for everyone from the FIRE movement. You can use money as a tool to better your life. No matter your situation, you can benefit from cutting unnecessary expenses, earning more and being more purposeful with your finances.

Your goals will help you determine the right course of action. If you need help, there’s always the option of reaching out to the FIRE community or speaking with a financial professional for some guidance.

Sarah Li Cain

Sarah Li Cain is a freelance personal finance, credit and real estate writer who works with Fintech startups and Fortune 500 financial services companies to educate consumers through her writing. She’s also a candidate for the Accredited Financial Counselor designation and the host of Beyond The Dollar, where she and her guests have deep and honest conversations on how money affects our well-being.