Want to Light Your FIRE? (Financial Independence, Retire Early)

There’s a new movement, inspired by millennials, to supercharge one’s efforts to acquire enough money to retire early. And when I say early, I mean in their late 30’s and 40’s. This starts with a foundation with which we’re familiar: live beneath your means; save money; invest in a diversified portfolio of growth and income funds, etc. But, FIRE takes this a step further – actually an Evil Knievel jump further – and adds super saving through extreme steps to achieve an extraordinary goal. That goal is not to just retire early, like by age 55, but WAY early, when most of our careers are only just beginning. Here is how some are living their life. Is it for you?

The FIRE Approach

While the national average savings rate is a dismal 2.7%, those adhering to the FIRE principles attempt to save upwards of 50% of their income. And, they achieve that by radically changing their lifestyles to save money. In fact, FIRE is probably as much a lifestyle movement as much as it is a retirement strategy. The FIRE principle is to “simplify and redesign your lifestyle to reduce spending.”

The ultimate goal for them is to accumulate 25 times their annual spending. This allows them to live on just 4% of their nest egg each year - a rate generally considered safe enough to protect your savings over the long haul.

Now, some take what I consider to be extreme measures to accomplish their goal. One 28-year old blogger accumulated $2.25 Million by age 28 by living in a 325 square foot apartment – with her husband. A Google engineer saves 90% of his income by living in his truck. I don’t know about you but my idea of roughing it is staying at a hotel that doesn’t offer a free breakfast. 

What Would I Do If I Didn’t Have to Work For Money?

I have long subscribed to the tenets of the Millionaire Next Door: accumulate wealth over time by living beneath your means, save as much as you can, invest wisely, enjoy the benefits of compound investment earnings, and employ a plan to achieve financial independence that will provide choices. While FIRE is not for us - no way, no how - the FIRE movement, they say, isn’t so much about not working, but finding what truly makes us happy. And that principle I agree with wholeheartedly.

Is your happiness directly connected with money and the things it can buy? Then, by all means, focus on that and develop a financial plan that incorporates your desires and builds toward your future.

Or, are you still trying to find what truly makes you happy? Let’s face it, for many of us our professional lives take virtually all our energy and our time off is spent recovering so we can hit the salt mine with vigor again on Monday. If you’re on that kind of treadmill, you better darn well love what you do for a living. 

Personally, that was me for many, many years. I truly did enjoy what I did but yearned for a slightly slower pace, one that would afford me a chance to think creatively, engage my brain in a different way and have the flexibility to share my kids’ lives before they move on and don’t have time for me. There never was a time that I wanted to completely stop working because I know myself well enough to know I need the purpose in my life that a meaningful profession provides. That’s why Lisa and I developed a financial plan many years ago to shoot for financial flexibility. Not quite the independence in FIRE and certainly not the Retire in FIRE, either. But a goal that would provide us with choices and options.

So, until it really is time for you to retire, a financial plan to reach financial flexibility can provide you with an invigorating goal. And, trust me, having an achievable goal with a timeline will make that salt mine much sweeter.

Steve Byars