Everything You Need To Know About The F.I.R.E. Movement
If you’re all about chasing that bag and relaxing in retirement as soon as possible, the #FireMovement may have made its appearance on your FYP more than once. When the F.I.R.E. movement catches your eye, it’s hard to look away.
The Fire Movement is something that everyone should be aware of, and the sooner, the better. F.I.R.E. is an acronym, and it stands for “Financial independence, retire early.” In short, the movement calls for putting your best effort towards trying to retire as young as possible.
Here’s how it works:
The F.I.R.E. Movement 101
To retire early (like in your 30s early), you need to save and invest aggressively. The goal is to save and invest somewhere between 50–75% of your income so that you can retire comfortably in your 30s or 40s.
Yeah, so it’s not all peaches and cream; F.I.R.E. takes “work hard, play hard” to a whole new level and requires extreme discipline.
To achieve financial independence and retire early, you need to do two things: keep your expenses extremely low and find ways to increase your income. The general idea is that the higher your income and the lower your expenses, the faster you can reach financial independence.
Under the gaze of the F.I.R.E. Movement, financial independence isn’t just about avoiding credit cards, debt, and borrowing from family; it’s about reaching the point where you don’t have to work a full-time job if you don’t want to.
Being financially independent means you don’t need anybody else’s money, and you can live off of what you saved up until your early retirement. Of course, you can still work a side hustle or part-time job, but it’d be for fun and passion rather than dependence.
FIRE is about improving your quality of life by achieving financial freedom.
How To Achieve F.I.R.E.
As previously mentioned, to achieve FIRE, you need to keep your expenses low and your income high. You need to have enough money to pay for your lifestyle. This is when you ask yourself what kind of life you want to live in retirement – does it include a new car every couple of years, or will a bike suffice? You can shoot for a lean FIRE or fat FIRE.
Lean FIRE is suitable for those who don’t have as large of an income or ability to save but do feel comfortable with living on a smaller budget. Under Lean FIRE, you’re still looking to retire early and achieve financial independence, just with less extravagance and luxury.
Fat FIRE, on the other hand, is for those who don’t want to live as modest of a lifestyle. Fat FIRE is for those who expect to live on a higher than average income in retirement. This category often includes those whose annual income is over $100,000, and they expect to live on at least that much in retirement.
Whether you’re aiming for a Lean or Fat FIRE, your goal will require budgeting, restraint, and self-awareness. Again, you need to put away a minimum of 50% of your income to accomplish FIRE. Typical budgeters sometimes can’t even manage to get their everyday living expenses to under 50% of their income.
The most popular budget is the 50-30-20 budget. 50-30-20 is when 50% of your income goes to your needs, 30% goes towards wants, and 20% goes to savings. If you want to achieve FIRE, you have to cut out your “wants” completely; that means no take-out, vacations, or weekend adventures.
No matter how nice FIRE sounds, it’s not always for everyone, but if an intense couple of decades spent saving sounds like a small price to pay for complete financial freedom, keep reading.
Extra Tip: There are other kinds of FIRE you can look into, including Coast FIRE and Barista FIRE.
Planning for Early Retirement
As you plan for early retirement, you need to think deeply about your ideal lifestyle and what it will cost you. Luckily for you, there are tons of FIRE movement calculators and FIRE movement spreadsheets that you can use to crunch the numbers.
The calculators will ask you to plug in your income, annual expenses, and current age. From there, some will tell you how much you need to invest and how early you can expect to retire if things go smoothly. Online calculators are an excellent starting point when exploring FIRE; they’ll give you a better idea of what you can expect moving forward.
Diving into the FIRE lifestyle can be overwhelming. Without being extreme about it, financial planning is intense, even when thinking about traditional retirement. If you’re seriously considering FIRE, you should definitely speak with a financial advisor and develop a proper game plan.
Why Everyone Should Consider F.I.R.E.
Even if you don’t think FIRE is right for you, the concept should make you question your current situation. Your feelings on FIRE can reflect your relationship with money and work.
Your finances and work-life balance take up a lot of mental space, and FIRE addresses both. Taking a couple of days to do some deep thinking about what you want money and work-wise can change the trajectory of your life.
You might realize that owning a home is your priority, that credit cards bring you more anxiety than is worth it to you, that FIRE is right for you, or that you want a job that lets you work from anywhere around the world.
Sadly, we all have to worry about money at some point, but the best way to address it is by setting yourself up with tools and information that give you peace of mind.
At Extra, we believe that keeping up with your finances should be carefree and straightforward; that’s why we created the Extra debit card. Extra is the first debit card that builds credit and earns reward points, meaning you can manage your money, build credit, and avoid debt.
While you’re trying to figure out how to plan for your financial future, turn to Extra. Your credit score will always matter, and the Credit Wizard will always be here for you.