FIRE stands for “Financial Independence, Retire Early.” It’s a movement or lifestyle choice that aims at achieving financial independence and retiring earlier than the conventional retirement age. People who follow the FIRE movement often save and invest aggressively, sometimes saving up to 50% or more of their income, with the goal of retiring in their 40s, 30s, or even earlier.
The FIRE movement can be broken down into several subcategories, including:
- Lean FIRE: People who practice Lean FIRE maintain a frugal lifestyle both before and after retirement. They minimize expenses and may need less money to retire early.
- Fat FIRE: Those who follow Fat FIRE wish to retire with a more traditional or even luxurious lifestyle, so they aim to accumulate a larger nest egg.
- Barista FIRE: This approach involves semi-retirement. Individuals might leave their traditional 9-5 job but continue some form of part-time work, like being a barista, to cover living expenses.
- Coast FIRE: In this approach, individuals save and invest enough early in life that they no longer need to save for retirement. They still work, but they only need to cover their current living expenses.
FIRE followers often use various investment strategies, such as investing in low-cost index funds, real estate, or other income-generating assets, to achieve their goals. They also typically focus on optimizing their spending, increasing their income, and avoiding debt.
While the FIRE movement can offer more freedom and flexibility, it’s not without challenges and risks. Health insurance, inflation, unexpected expenses, and market volatility are some of the considerations and potential drawbacks that need to be addressed when planning for early retirement. Additionally, achieving FIRE may not be feasible for everyone, depending on individual financial situations, income levels, and financial responsibilities.