For most people, the idea of retiring at 40 is a dream come true. And for most people, it will remain a dream. Escaping the “life script” of getting a good job, working there until you’re 65 and finally enjoying your life is the reality. But for people who practice FIRE (Financial Independence, Retire Early) this lifestyle is one they have worked hard to create and enjoy every day.
What is FIRE?
FIRE is a movement that has caught on like, well, fire. The basic premise of it is that you spend your 20s and 30s working, saving and investing like crazy. You cut your expenses down to the bare bones while increasing your income steadily. Then, with enough money saved to live comfortably, you retire in your 40s and live the rest of your life on your savings. There are variations on this theme, but the overall premise is to retire well before the traditional 65-year norm.
While the FIRE movement is about retiring early, it’s more about having the freedom to craft your life and pursue your dreams. One woman in her 40s travels all around the world, sleeping in hostels, tents, couch surfing and traveling the oceans on cargo ships. Another FIRE follower spends his time studying anthropology at the local community college and devoting his time to volunteer work. Yet another in his 30s spends his time designing board games.
The “why” is different for everyone. Some people simply want more time with family. Others want to start a business or engage in hobbies. Still others just want the freedom to choose their lives every day.
FIRE devotees swear by the “rule of 25,” that states that when your income is 25 higher than your expenses, you are truly financially independent. Most FIRE followers have a vision for their lives that isn’t possible with the constraints of the traditional workplace.
The Rules of FIRE
The rules of FIRE are simple. Increase your earnings, practice frugality and invest the difference in high-earning investments. Some people invest in rental properties, others into passive income streams. Still others live really scaled-down lives in tiny homes, vans and mobile homes to save money. For people practicing the FIRE system, new cars, expensive mortgages, high-interest credit and luxurious vacations are out of the picture—for now, at least.
Habits of FIRE Followers
FIRE followers track every penny. They pore over bank statements meticulously. They create spending plans, they budget every dollar and control where it goes. They know exactly what their life costs annually and they look for every opportunity to decrease the number. While they all choose different paths to FIRE, there are some habits that are pretty universal:
-Save 50-75% of earnings
-Lower housing costs
-Drive older, used cars
-Lower tax liability
-Increase income through multiple income streams
-Reduce grocery, cell phone and utility bills
The FIRE movement is all about working hard and going full speed during the 20s and 30s and enjoying the 40s and beyond, financially free. Embracing these principles can help you to live your best life at any stage.
