Earlier this year, Demir and I recorded an episode of our podcast about the Financial Independence Retire Early (FIRE) movement, and our personal journey to financial independence.
Afterwards, we received many questions about the FIRE movement itself, so in this article we’ve compiled as much useful information about it as possible!
Disclaimer: The Financial Independence Retire Early movement is a significant endeavor, and should be researched thoroughly before attempting. We’ve dropped several resources at the bottom of this article and encourage you to do your own research before embarking on a financial independence journey.
What is FIRE?
Financial Independence is not a new concept. Neither is retiring early! But this particular movement was started by Vicki Robin and Joe Dominguez back in 1992, when they published a book called Your Money Your Life.
Though the book was successful upon publication, it has really started to take off in the last decade on the tail of the Great Recession because of financial podcasts and blogs. And it wasn’t until Mr. Money Mustache started blogging about it that the movement gained a “de facto leader.”
The FIRE movement is defined as “a program of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow… defined by frugality and extreme savings/investment.”
Essentially, you save as MUCH of your income as possible (somewhere between 50% and 75% is the norm). You also cut down on your expenses as much as possible, while also trying to increase your current income.
How much should you be saving, you ask?
You have to figure out your retirement number first. Figure out a number that, once reached, you could retire and live off of your investments. Typically, that number is about 30 times your current annual expenses. (People often aim for ~$1 million.) That money is funneled into an investment portfolio.
Once reaching financial independence, you live off of your invested savings, withdrawing only a small portion of it annually (~3-4%), which is essentially just the interest accrued on your savings.
Meaning, you’d never have to work a day in your life ever again if you don’t want to!
Now, if you’re anything like Demir and me, I know what you’re thinking…
If I retire early, what am I going to DO with my life?
Not everyone who achieves financial independence actually retires early. Demir and I don’t plan to stop working! The luxury of not needing to work means you can do less of it, and only do work that actually inspires you. The stuff you’re passionate about.
Here’s the thing: there is no wrong way to go about financial independence. If you want to save every penny you’ve got and retire before 35, do it! If you want to play a bit longer of a game, indulge in more travel and takeout along the way to retirement at 50… you can do that! It’s your journey, you can customize it for yourself.
Is FIRE for you? What types of people are doing FIRE?
So…how do you figure out if the FIRE movement is for you?
The movement is composed of people who want FREEDOM in their life. People who are sick of the corporate rat race they were taught to idolize as they were growing up. People who don’t want to become an internet marketer and be chained to a desk until their 70s.
Here are a couple awesome examples of real people who’ve achieved FIRE:
Chad is a Canadian landlord and an IT consultant. He left his full-time job just before his 40th birthday. His advice: “One of the keys to happiness is owning your own time.”
A Purple Life decided in 2015 she decided that she needed to ditch the 9-5. She made a plan that would enable her to retire in 2025 at the age of 35. She cut that time in HALF and retired at the end of 2020 at the age of 30.
Is it risky?
One of the main points of concern is “well, what if the stock market crashes and all of your investments tank?”
Put frankly: you MUST build a safety margin into your early retirement plan. This could include diversifying your portfolio, creating side hustles, passive income real estate purchases, etc. The more diverse your streams of income are, the less likely you are to be heavily impacted by a market crash.
Demir and I are de-risking ourselves by doing two things. One is owning our house outright. We don’t carry a mortgage and we like it that way, because we know even in the worst situation we still have a roof over our heads.
The second is by maintaining ourselves as income-producing assets. If for some reason we suffered a huge financial loss, we want to make sure we could get back in the job market quickly and easily. To do this, we network and focus on growing our personal skills in addition to our business.
Demir & Carey’s journey with FIRE
Here’s a rundown of our FIRE story (you can get the full unfiltered story on our podcast, Freedom Decoded):
When we got together as a couple, I had a pretty solid nest egg, and Demir was $100,000 in debt. We had a strong desire to be debt free.
We started researching the best ways to become debt free, and stumbled across some of the major players in the FIRE movement (namely, Mr. Money Mustache and Dave Ramsey).
We started saving as much as we could, cutting expenses, and getting very creative with how we earned money—even renting out part of our apartment in LA as an Airbnb.
Eventually, we realized that we could save even faster and grow our business by becoming location independent. We left the United States and started traveling around the world, mainly to more affordable places where we could maintain a high standard of living for a fraction of the cost in the USA.
Today, we live in Medellin, Colombia. We invest responsibly, live within our means (without being restrictive on ourselves), and don’t check stock prices regularly! Right now we are not completely financially independent, but well on our way.
How to get started with FIRE
So, you’re interested in starting your own financial independence journey? Here’s how to start.
The most obvious first step is to start reading up on it. Find a few blogs or YouTube channels that make it “click” for you, and that motivate you.
- Use a FIRE calculator to estimate when you can achieve financial independence. My two favorites are from Money Under 30 and Playing With FIRE.
- Come up with a savings plan. Figure out what expenses of yours can be cut, and what additional sources of income you can generate.
- Get started. Don’t get caught in the research and planning phase. The sooner you start, the sooner you can reach your FIRE goal. Remember: no amount is too small to start with.
- Stay up to date with research and planning. FIRE is not really a “set it and forget it” decision. It grows and changes alongside you and the economy. Stay informed! (And keep following financial influencers that inspire you.)
- Review your progress on a monthly basis. Make the adjustments you need to.
- Keep it fun. Saving money doesn’t have to mean eating Ramen and staying in. Keep the focus on making it fun, so that it’s sustainable in the long run.
Our favorite influencers in the FIRE space
Mr. Money Mustache (Blog)
The “de facto” leader of the current FIRE movement, Mr. Money Mustache is the perfect place for you to start your research.
Our Rich Journey (YouTube Channel)
They do an excellent job at making the journey to FIRE look fun, attainable, and exciting. They even have a course about achieving FIRE on their website.
Financial Samurai (Blog)
Another one of the OG FIRE influencers. He breaks down concepts that can feel very overwhelming in a very straightforward, easy-to-follow way.
The Money Guy Show (YouTube Channel)
In their words, The Money Guy Show “takes the edge off of finances.” They have a YouTube video for pretty much any question you could possibly have about FIRE.
FIRE podcasts we love:
Embarking on a journey to financial independence can be daunting, but it’s also so exciting!
Let us know in the comments—are you currently saving for financial independence, or would you like to start?
What is the FIRE movement? – Business News Daily
What is FIRE? – Playing With Fire
Financial Independence, Retire Early – Investopedia
How to Retire in Your 30s With $1 Million in the Bank – New York Times
How Do You Acheive FIRE? – Pocketsmith
Early Retirement Safety Margin – EsiMoney
Opinion: What FIRE people do when the market’s on fire – Market Watch