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Joining the FIRE Movement: Financial Independence, Retire Early

What is the FIRE Movement?

FIRE stands for Financial Independence Retire Early, a lifestyle prioritizing saving and investing over spending to achieve financial freedom or retire early. Traditionally retirement begins to take place around age 65, but for FIRE savers, retirement could be in their 50s, 40s, or even 30s.

How FIRE Works

In a nutshell, FIRE is achieved by drastically reducing one’s expenses, increasing one’s income, and investing in a mix of tax-advantage accounts as well as taxable brokerage accounts. Sounds easy enough, right? That depends on your situation.

FIRE followers typically save 50% or more of their income. Throughout most people’s careers, there is some upward mobility in their income through annual raises, promotions, or job hopping. But for FIRE to work, not only does someone need to increase their income quickly, but they also need to reduce their expenses drastically to save enough, and this is where it becomes difficult for some. For example, it might be easier for two adults to work towards higher wages while extreme saving, whereas it might be more difficult for a family of four to achieve the same results.

As you read this, you may be thinking of ways to reduce costs to accelerate your path to financial freedom. To determine if FIRE is an achievable lifestyle for you, you’ll need to find your FIRE number.

The Rule of 25

FIRE followers use the rule of 25 to find their FIRE number or the amount they’ll need to become financially independent for the rest of their lives.

The rule of 25 says you need to save 25 times your annual expenses to retire. To find your number, determine your monthly expenses and multiply that by 12 to get to your annual expenses. Then, multiply that yearly expense by 25 to get to your FIRE number.


$2,000 monthly expenses X 12 months = $24,000

$24,000 annual expenses X 25 = $600,000

The example above most likely fits a scenario where a home is already paid for and other expenses are meager. Below is another example of a FIRE number that might represent someone who has or anticipates having a mortgage, vehicle(s), and other expenses:

$5,000 monthly expenses X 12 months = $60,000

$60,000 annual expenses X 25 = $1.5 million

These two examples show how expenses drastically affect the amount of money you may need in the future when considering retirement. For this reason, many FIRE followers prioritize reducing their expenses now and keeping costs low by following a budget.

The 4% Rule

Because money earns income through compound interest when invested, a retiree should be able to theoretically withdraw a percentage of money annually without running out of funds.

FIRE followers use the rule of 4%, which says that retirees can withdraw 4% of their savings for the first year, adjust for inflation in future years if necessary, and not run out of money in retirement. However, this calculation is based on a 30-year retirement goal, so if you plan to retire earlier than that, this may not work for you.

Using the 25x and 4% rules, you can get a clearer picture of what it takes to achieve FIRE. You’ll also need to consider which accounts you will fund for retirement. While 401(k)s and Roth IRAs are excellent tax advantage savings vehicles, you can’t withdraw without penalty until a certain age. However, a taxable brokerage account has no age or contribution limits but is not a tax-advantaged account. You may wish to consult with a financial advisor for a strategy that best suits your goals.

FIRE Alternatives for Every Lifestyle

FIRE methods have evolved over the years to offer FIRE alternatives that may be more appealing:


For people who don’t want to be frugal and wish to keep their current lifestyle before and after retirement. You’ll have to earn, save, and invest A LOT to achieve this.


For people who aren’t afraid to live on the bare minimum, invest and save as much as possible, even in retirement. Think of this as a minimalist lifestyle that doesn’t necessarily require climbing the corporate ladder to retire early.

Barista FIRE

For people who want to work part-time and are somewhat minimalist. With enough savings and investments, you can retire from full-time work to part-time or side hustles to retain more of your current lifestyle.

Coast FIRE

For people willing to save more upfront so they can coast to retirement. You would invest enough money to grow it to your FIRE number based on an expected rate of return, then you can stop saving for retirement and use your income for other things. Of course, you can always start saving and investing for retirement again if your returns don’t go according to plan.

If you’re seriously considering joining the FIRE movement, start with a spend-free challenge so you can save more ASAP. 


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