Financial Independence Retire Early, also known as FIRE, has become a huge movement in the last 10 years. Much of the FIRE movement is driven by many people choosing to take control of their finances so that they can enjoy life and reach their goals without having to be completely dependent on a job. But what is FIRE really, and how can one achieve it? In this blog I’ll be talking about why I’m on a journey to achieve FIRE and what FIRE is.

What is FIRE?

Investopedia’s definition says, “FIRE is a movement dedicated to a program of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow.” Individuals usually save as much of 70% of their annual income and withdraw about 4% each year over time. Depending on when you start on your FIRE journey, and the method you choose to achieve it with, it can take you between 5-10 years to achieve FIRE. For example, if you start your journey at 30, you could retire as early as 35.

Now FIRE for many is a way to not be completely dependent on a 9-5 job. However, there are many that enjoy their career, and have no plans on giving up on it completely, but they still want to achieve financial freedom. There are different types of FIRE that cover both ends of the scale, and everything in between.

Types of FIRE

Traditional FIRE: calculated by multiplying your annual expenses by 25 – 30, which usually adds up to be between $1M -$3M. This results in a Work Optional lifestyle.

COAST FIRE: Investing enough money that you will not have to add anymore past a certain point. The annual interest and compound interest will do the rest until you are ready to retire at 65. This will only be enough money to cover one’s annual expenses.

BARISTA FIRE: Saving/Investing money so that you can give up your 9-5 job, but continue working part-time to cover expenses or to work in a lesser paying dream job.

LEAN FIRE: Living a minimalist lifestyle, which allows for the ability to increase one’s saving rate to as much as 70%. Usually covers annual expenses up to$40k once retired. 

FAT FIRE: Is a mix of Traditional and Lean FIRE, where you save more than 50% of your income by living a minimalist lifestyle, but save/invest enough to allow for a Work Optional lifestyle, without living a minimalist life. This is done by someone that makes more than $40K annually

Which FIRE am I pursuing and Why?

I’m currently pursuing Barista FIRE. I love being a Teacher, but I want work to be an option and not have to be dependent on my job as my sole source of income. I want to be able to spend time with my family and friends when I want to and when they need me. I don’t want to have to worry about how my bills will be paid if I have to be a caregiver for a loved one. You can always make more money, you won’t get back more time.

Steps to achieve FIRE

1. Track spending/spend less: Budgeting and tracking your spending is really important regardless of this financial journey. You should know where your money is going. That’s the only way you can break bad habits and start new good ones.
2. Pay off High Interest Debt: Paying off debt is SOO important. The debt that you need to pay most attention to is consumer debt (e.g. credits cards, LOC, payday loans, and student loans). Mortgages can be focused on once those other debts are paid off.
3. Save and invest 50% and up of your income: It’s important to have an Emergency Fund and to invest the money you want to use to retire with. The earlier you start investing the better! Nothing beats the magic of compound interest!
4. Create new streams of income/start a side hustle: Starting a side hustle is optional! I repeat it is OPTIONAL! You can achieve financial freedom without taking on a second job, BUT your savings/investing rate would have to be very high in order to compensate for that. Some side hustles are: starting a business, direct sales and marketing, or investing in Real Estate; the options are endless!

Whichever version of FIRE you choose, make sure it is right for you. You should still be able to enjoy the journey on your way to FIRE. One thing you can’t get back is time; remember that!

It’s time to #levelupyourwealth!!