101 Guide to the FIRE Movement and How to Achieve FIRE

This article is going to be about the FIRE movement, what it is and the basics on how to achieve FIRE. Since there are already a lot of articles written about FIRE, I will focus on providing high level definitions and then providing my own insights and perspectives on it.

What is the FIRE Movement?

First, FIRE is an acronym that stands for Financial Independence, Retire Early. I think I first heard about this term 4-5 years ago and ever since then, I have been fixated on the idea of achieving at least FI and then having the option to RE. I’ll probably write more about this in another article.

So the FIRE movement is really just a lifestyle goal that many people still in the workforce have where they can eventually save enough money and/or have enough assets to be able to retire earlier than the traditional retirement age and pursue their own interests and what not. If they choose to not retire, they at least have the option of it and that’s the ultimate point.

Contrary to popular belief, you do NOT need to be a millionaire to FIRE. In order to retire early, you simply need to have enough passive income to sustain your lifestyle or to have a large enough nest egg that you can withdraw from that will last you for several decades (25x your annual living expenses is generally the number people target). If your living expenses are low enough, you definitely don’t need to be a millionaire to achieve some level of FIRE.

What are the different types of FIRE goals?

Again, FIRE isn’t just about retiring early, to many it is, but rather it’s about achieving some level of financial independence where work is (mostly) optional.

It seems as the FIRE movement has become more and more popular, the concept of FIRE has definitely expanded with different types of “FIRE goals.” From my research, there are ultimately 5 types of FIRE goals, each with its own unique lifestyle choice embedded into the goal:

  1. FIRE
    1. Regular FIRE
    2. Lean FIRE
    3. Fat FIRE
  2. Barista FIRE
  3. Coast FIRE

Regular FIRE 

When most people think about FIRE, they are thinking about “Regular FIRE” which is to accumulate enough assets or savings to be able to retire early and live a comfortable life. No frills or excess and your living expenses are around that of the average American ($55-75k).

Lean FIRE

It wasn’t only until the past year or so did I hear about Lean FIRE, but basically Lean FIRE is where you reduce your living expenses to a really low amount and spend less than the average American on an annualized basis ($30-40k)

Just because you’re spending less than the average American doesn’t mean you’re living a difficult life. Take a look at this guy’s blog, he retired at the age of 33 and is living it up on < $40k a year in annualized expenses.

Fat FIRE

Fat Fire is when you’ve accumulated enough in savings or assets to be able to live off a higher than average income every year. Likely around $100k or more for many.

Fat Fire is basically where I’d like to be when I choose to “retire early,” but my idea of retiring early is to simply retire from corporate life and pursue my own interests.

Barista FIRE

The biggest complexity of FIRE often is healthcare and so Barista Fire is a lifestyle where you’ve saved enough money or assets to be able to only work part-time, maybe as a Barista or a position that gives you benefits. The pay isn’t necessarily meant to do much other than to supplement your monthly drawdowns.

Coast FIRE

This is when you save enough money to the point where you can just “coast” through work going forward. It’s more psychological than anything, since you may love your job and hitting your number just provides you reassurances that you’re “done” and you don’t necessarily need to contribute to your brokerage anymore. Coast Fire is in some ways synonymous with “FU money” where you have enough money now saved up that you can just leave your job and not look back.

The Basics on how do you Achieve FIRE?

You now know what FIRE is, the different types of FIRE goals, now let’s talk about how you achieve FIRE.

Achieving FIRE is basically doing three things and doing them really well:

  1. Saving as much money as possible
  2. Earning as much money as possible
  3. Have your money work for you as much as possible

If you can do the above three really well, you are well on your way to achieving FIRE.

Saving as much money as possible

This is a fundamental principle of achieving FIRE, especially the Retire Early portion. You need to be able to save as much money as possible in order for you to then have that money work for you. The best way to go about doing this is living well below your means and ideally saving 30%+ of your paycheck.

For some people, saving 30% of your paycheck is easy, for others, not so much. When you try to save as much money as possible, often that comes with a little sacrifice. That might mean, not getting coffee from Starbucks or Dunkin Donuts everyday or it might mean bringing your lunch vs. going out to eat. It also might mean not living in a really nice part of town or buying that single family home that you’ve been keeping an eye on for the past several months.

Ultimately, in order to save money means not spending too much of it, so it will require you to really think about “needs” vs. “nice-to-haves.”

Here’s a helpful table on how many years it will take you to reach financial independence based on your annual spending vs. your annual post-tax income. It’s crazy that if you made $100k post tax (right around $140k gross) and spent only $20k a year, you could retire in 5.6 years! This is of course if you save and invest your money passively (more on that below).

Link to Spreadsheet

Earning as much money as possible

As I stated earlier in this article, you don’t necessarily need to be a millionaire to achieve some sort of FIRE goal. You also don’t need to make a 6-figure income to achieve FIRE. For this part of FIRE, the goal here is to just find ways to make as much money as possible. That could mean earning your salary and then doing some freelancing or consulting on the side. It could also mean, investing or flipping houses or anything that can help supplement your salary. The faster you make money, the more you save which can then be invested.

You don’t even need to do all that extra work if you don’t want to. Padding your income simply enables you to save more money which can then enable you to put more of that money to work.

Have your money work for you

This is the final and ultimate step to FIRE. If you’re living below your means and saving the bulk of your salary and making a good chunk of change, that’s all fine and dandy, but you need to put that money to work if you plan to achieve FIRE in an efficient manner.

Most people will just throw their savings into their banks savings account and earn 0.01% of interest every month, for the more savvy, they may put their money in an online savings account or one of those high yield savings accounts and earn 0.5% to 1%, but that’s just not enough yield to make a dent in terms of generating significant wealth over the course of a decade or two to retire early.

You really need to invest your money and generally there are two ways most people use to do just that:

  1. Stock Market
  2. Real Estate

There are obviously a ton of other ways to have your money work for you, but at least from my understanding, the above two are the most traditional ways most people pursue to achieve FIRE.

From reading this blog, you can tell that I leverage the stock market a lot to compound gains in my investment account. However, earlier in my life, I did happen to become a landlord largely due to the financial crisis. Specifically, I purchased a home in Indiana right before the real estate bubble crashed in March 2008 and then proceeded to lose my job in September 2008. Since I was underwater on my mortgage, I decided to rent my property out to pay for my mortgage and eventually this became a positive cash flow operation and I decided to simply keep my rental property as opposed to selling it when the housing market recovered.

I think real estate is a great way to achieve financial independence, since if you have enough rental properties, you can simply live off the monthly rents from your tenants. The return on real estate is generally pretty reasonable, around 6-8% annualized which is in line with the stock market, but what’s nice about real estate is that there are a lot of tax advantages due to this beautiful word called “depreciation.”

When it comes to investing in the stock market, I personally think most people should choose the easiest and cheapest way to do it which is to buy low cost index funds (Fidelity and Vanguard offer great options) and sit on them. 

Here are the S&P 500 stock market returns in the past 10 years and your overall balance if you had $1,000 invested since Jan 1, 2011:

YearS&P 500 ReturnValue of your initial $1,000 investment
20112.11%$1,021.10
201216.00%$1,184.48
201332.39%$1,568.13
201413.69%$1,782.80
20151.38%$1,807.41
201611.96%$2,023.57
201721.83%$2,465.32
2018-4.38%$2,357.34
201931.49%$3,099.66
202018.4%$3,670.00

In the past 10 years, the S&P 500 has had an annualized return of 13.89%! 

Here’s what that would have looked like for various dollar amounts invested on January 1, 2011:

$1,000 → $3,670.00
$2,500 → $9,175.00
$5,000 → $18,350.01
$10,000 → $36,700.02
$25,000 → $91,750.05
$50,000 → $183,500.10
$100,000 → $367,000.20

Remember, this is doing absolutely nothing other than making your initial investment of X dollars into the stock market on January 1, 2011. No additional investments, no trading, no trimming, no timing the market, nothing. Simply living your life and watching your account balance grow.

Now imagine if you had invested all those investment dollars into a CD that annualized 3% (that’s likely being generous) over the last 10 years:

$1,000 → $1,343.92
$2,500 → $3,359.79
$5,000 → $6,719.58
$10,000 → $13,439.16
$25,000 → $33,597.91
$50,000 → $67,195.82
$100,000 → $134,391.64

The difference between the two investment vehicles is HUGE! So this is why it’s important to make your money work for you. Otherwise, the opportunity cost is simply STAGGERING.

Wrapping Up

I know I could have spent writing another 5,000 words on how to save money or how to make more money or how to invest, but I figure this article should provide you with enough guidance to understand what FIRE is and how to achieve it. I will most likely write more on each individual theme later on, but with two toddlers and limited childcare, this was the best I could do in this sitting.

  1. Amazing info – your blog has become a part of my daily routine.
    Thanks for your financial wisdom Franklin, this is great stuff!

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