FIRE Up Your Retirement Approach

Financial Independence Retire Early (FIRE) is a movement that encourages extreme savings as a way for people to stop working decades earlier than the typical retirement age.
Simply put, financial independence means having enough money saved and invested that you don't need to work to cover your everyday expenses. Your savings and passive income streams give you the freedom to retire early and spend your time on other things.

FIRE is an informal movement centered around online communities that share strategies and ideas for achieving financial independence. By adopting FIRE practices early in their working lives, people are often able to retire well before reaching their 60s.

Starting FIRE

The hallmarks of FIRE are extreme savings, frugality, smart investing, and financial discipline. While approaches and strategies vary, there are some tried-and-true principles and practices for achieving FIRE success.

Set clear goals

Determine your desired retirement lifestyle and the target age you want to start living it. You can adjust these along the way, but it’s important to begin with an end goal in mind to know what you’re working toward.

Assess your financial picture

The next step is to create a comprehensive financial statement that identifies all your income, expenses, assets (things you own that increase in value and/or generate income), and liabilities (things that decrease in value and/or cost you money). Your financial statement allows you to see where you’re starting your FIRE journey from.

Track and reduce expenses

With your big-picture financial statement in hand, it’s time to dig into the details and eliminate expenses that move you in the wrong direction. Scrutinize your bank and credit card statements to understand where every dollar you spend is going. Then aggressively slash unnecessary expenses from your daily and monthly habits.

For many, frugality is a difficult adjustment, but your future financially independent self will likely thank you for your sacrifices today. Here are some ideas on how to start cutting your spending and a calculator to help you visualize the big impact small changes can make. FIRE discussion boards and blogs are also packed with creative ways to cut expenses without living like a monk.

Increase your income

With expenses minimized, maximizing your income during your working years—

through career advancement, a second job, side hustles, or passive income streams—is the next key to reaching your goal sooner. Again, eyes on the prize. Remember that your additional income efforts now will pay off in FIRE results.  

Save aggressively

FIRE advocates recommend saving 50-70% of your income. In addition to living frugally, setting automatic payroll deductions into savings, brokerage accounts, or other investment vehicles ensures money is saved before you have a chance to spend it.

Invest wisely
Consistently invest in a diversified portfolio of low-cost index funds, real estate, and income-producing assets to steadily progress toward financial independence. Steer clear of risky investments since unexpected losses can set you back years. Understand the power of compound interest and how the sooner you start putting money away, the more time there is for investments to earn gains on their previous gains.

Minimize and eliminate debt

The debts you owe are investments for credit card companies and lenders. The more you can reduce and eliminate debt payments going out, the more dollars you can put to work in your own investments.

Monitor and adjust

It’s important to consistently track your progress and make adjustments to ensure you are on target to reach your goals. You might find you need to save more or add income streams. Maybe you’ll discover you’re ahead of schedule and can move up your retirement date. Plus, priorities and life situations change over time. Regularly evaluate your goals and strategies to make sure they are aligned with how you currently want your future life to look. 

Choose your own adventure

FIRE is not a one-size-fits-all plan. Every person’s journey to financial independence is different. Some variations on the FIRE experience include:

Lean FIRE: Achieving financial freedom through a very low level of spending.

Fat FIRE: Maintaining a higher standard of retirement living by first accumulating more wealth and larger investments.

Barista FIRE: Supplementing early retirement with income from a lower-commitment job.

Websites and communities devoted to FIRE offer a wealth of strategies, tips, and encouragement to help you with every aspect of the movement. Keep in mind, however, that perspectives and opinions vary, and FIRE bloggers and community members are not financial professionals. If the FIRE experience appeals to you, consider speaking with a financial advisor for guidance on achieving financial independence that factors in your unique goals, career situation, and retirement dreams. 

The FIRE movement offers several lessons and practices that can pay off no matter when you intend to stop working for a living. Planning ahead, saving early, investing wisely, avoiding debt, and keeping an eye on your progress are all smart habits to adopt—whether you hope to retire at 35 or 85.