FIRE stands for Financial Independence, Retire Early. The core idea: save and invest aggressively so you can live off investment returns without needing a traditional job. But FIRE isn't one-size-fits-all—there are different approaches depending on your lifestyle and goals.
The Three Types of FIRE
- • Lean FIRE: $500K–$1M, minimal expenses, frugal lifestyle
- • Regular FIRE: $1M–$2.5M, moderate lifestyle, balanced approach
- • Fat FIRE: $2.5M+, comfortable lifestyle, higher expenses
The 4% Rule: Your FIRE Number
The foundation of FIRE is the 4% withdrawal rule. If you can live on 4% of your investment portfolio annually, you're financially independent. Here's the math:
Calculate Your FIRE Number
Annual Expenses × 25 = Your FIRE Number
- • Spend $40K/year? Need $1M ($40K × 25)
- • Spend $60K/year? Need $1.5M ($60K × 25)
- • Spend $80K/year? Need $2M ($80K × 25)
The FIRE Strategy: Save Aggressively
Traditional retirement advice suggests saving 10%–15% of income. FIRE followers typically save50%–70% by maximizing income and minimizing expenses.
Step 1: Track Your Spending
- Use apps like Mint, YNAB, or simple spreadsheets to track every dollar
- Identify your true annual expenses (not just monthly estimates)
Step 2: Optimize Your Budget
- Housing: Consider house hacking, roommates, or geographic arbitrage
- Transportation: Buy used cars, bike, or use public transit
- Food: Cook at home, meal prep, shop strategically
Step 3: Increase Your Income
- Negotiate salary increases and promotions
- Develop high-value skills in your field
- Start side hustles or freelance work
- Consider career changes to higher-paying fields
Step 4: Invest Wisely
- Max out 401(k), IRA, and HSA contributions
- Invest in low-cost index funds
- Use taxable accounts for additional savings
- Consider real estate investment
Timeline Reality Check
- • Save 50% of income → FIRE in ~17 years
- • Save 60% of income → FIRE in ~12 years
- • Save 70% of income → FIRE in ~8 years
Is FIRE Right for You?
FIRE requires significant lifestyle changes and isn't for everyone. Consider these factors:
FIRE Might Work If You:
- Value time freedom over material possessions
- Can live comfortably on a reduced budget
- Have a high savings rate potential
- Want to pursue passion projects or entrepreneurship
FIRE Might Not Work If You:
- Love your career and want to work long-term
- Have high fixed expenses (family, health, etc.)
- Prefer lifestyle inflation with income growth
- Need the structure and social aspects of work
Coast FIRE Alternative
Can't save 50%+ but want financial security? Try Coast FIRE: save aggressively in your 30s, then coast with minimal additional savings. Your early investments compound to fund traditional retirement.
Getting Started
- 1. Calculate your current FIRE number based on expenses
- 2. Track spending for 3 months to find optimization opportunities
- 3. Set a realistic savings rate goal (start with 25%–30%)
- 4. Automate investments in tax-advantaged accounts first
- 5. Reassess annually and adjust your plan