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F.I.R.E. Explained

Financial Independence Retire Early (F.I.R.E.).  Have you heard of this expression before?

There is a growing population in the United States (and abroad) that is striving for financial independence well before the average retirement age of 63 (sometimes even before 30!).  For some, early financial independence occurs as a product of business success, a large inheritance, winning the lottery, etc. (not necessarily planned).  But for this growing F.I.R.E. community, early financial independence is a very deliberate and strategic goal.  Within this group, the phrase Financial Independence Retire Early has become somewhat of a mantra and/or rallying cry.

So what is behind this F.I.R.E. movement?


The reasons people are embracing early financial independence are as varied as their DNA; however, a few of the more common drivers are as follows:

  • Desire to ditch the 9-to-5 (and the boss that comes along with it)
  • Wanting to spend more time with family
  • Looking to start a new business (with financial stability already in place)
  • Hope of transitioning to a more fulfilling, but less lucrative, career
  • Wish to travel more

All of these are completely understandable motivators in which many of us can relate.  And all also have a common thread.  The F.I.R.E. culture is growing because...

People want to take back control of a larger portion of their lives.

This control happens through financial security.  If one develops enough in savings and investments to cover their household's living requirements in perpetuity (and earlier than the norm), that directly translates to fewer years handcuffed to an office desk or schedule you dislike.  The world then becomes full of possibilities as one takes back control of their life.  This is the major "why" for most people.  Control leads to freedom, flexibility, fulfillment and security.

For some (myself included), the "Retire Early" portion of F.I.R.E. can be considered a bit misleading.  Most people who achieve early financial independence don't actually decide to retire.  Instead, they usually stay busy with a more meaningful purpose in life.  Others may take mini-retirements as they go along.  With financial security in place, the option is there to do whatever you choose.  Therefore, a few in this community are saying the more appropriate expression should be F.I.O.R. (Financial Independence Optional Retirement).  I would agree with this sentiment.


Likely everyone can relate to the rationale behind F.I.R.E., correct?  Who wouldn't want the spoils of early financial independence?!  Well, achievement of early financial independence most often takes thorough planning and sacrifice.  It's not necessarily an easy path.  And the "how" is what separates the true F.I.R.E. apostles from the fakes.

In order to achieve early financial independence, most in the F.I.R.E. camp adopt to at least one of the following Tier 1 items, usually in combination with one or both of the following Tier 2 items:

  • Tier 1:  Extreme savings, at a rate of at least 25% (usually much more)
  • Tier 1:  Living frugally, in an effort to reduce living expenses to as minimal as possible
  • Tier 2:  Investing in index funds, to simplify their investment strategy and keep expenses low
  • Tier 2:  Investing for passive income, to replace employment income from the job you’re looking to leave

By implementing one or more of the Tier 1 actions above, a person should achieve financial independence much earlier than their peers.  By adding Tier 2 items to the mix, they are turbo-charging this path.  Financial independence occurs once investment savings reach 25 times a household's living expenses, passive income replaces a household's living expenses, or a combination of the two.  I've broken down the formula for financial independence in a prior post.

It must be noted that all of the practices referenced are a bit non-traditional, which is what makes early financial independence an exception to the rule.  And the first two items (Tier 1) on the list do take sacrifice.  Unfortunately, this is a sacrifice most of the general public is not willing to make, which is what really bonds those in the F.I.R.E. community.


I've also noticed the people within this growing movement tend to share some of the following characteristics:

  • Don't like conformity
  • Emphasize value (and not necessarily in monetary form)
  • Favor experiences over materials
  • Like being in control
  • Show traits of minimalism

Some of these traits might very well be a product of becoming embedded into the F.I.R.E. lifestyle, but I would guess that the opposite is likely true.  More realistically, these traits that were already embedded into the person's genetic code, and that is what attracted them to the early financial independence movement to begin with.

So, what do you think?  Does something in the message behind F.I.R.E. resonate with you?  If so, maybe this community is for you.  Some of the leaders in the space are Mr. Money Mustache and the Mad Fientist.  Check them out, along with groups such as ChooseFI that are leading this movement.

I am a strong advocate for proper planning in route to early financial independence.  It's a path my wife and I are currently on, and one in which I love sharing.  If you are interested in (or are already on) this path and need some guidance, feel free to book an appointment where we can shore up your game plan.  I am happy to help!