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FIRE (Financial Independence, Retire Early)

Contributor(s): Matthew Haughn

FIRE (Financial Independence, Retire Early) is a lifestyle, also referred to as a movement, aimed at reducing expenditures and increasing investing in order to quickly gain financial independence and the possibility of retirement at an early age.

FIRE offers a method allowing some to retire as early as their forties, thirties or even twenties. However, advocates emphasize that the movement is less about retiring early and more focused on gaining enough financial freedom to have the option of working or not. Some supporters of the movement advise that anyone can do this, saying that it just requires more cutting back for some individuals than others. Realistically, it is recognized that FIRE is more possible for people with higher salaries and the ability to save money, and is less suited for those with low income salaries and those unable to save due to basic expenses.

FIRE‘s formula is very simple: spend less than you save and invest the surplus. Low-fee investment options such as index funds are popular and recommended. In general, it is recommended that people should save twelve times their yearly spending to fund retirement at the standard age of 65. The FIRE movement recommends people save up to 25 times what they would regularly spend in a year – generally more than 50% of their income.

FIRE followers believe that financial independence is attainable and dependent on three factors: income, spending and time. A few suggestions for reducing expenses include:

  • Purchasing used cars instead of new ones
  • Lowering housing costs
  • Using a pre-paid cell phone service
  • Reduce grocery and restaurant spending
  • Eliminating cable TV, also known cord cutting
  • Adding secondary income streams
This was last updated in September 2018

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