The term FIRE (Financial Independence, Retire Early) encompasses a lifestyle movement to achieve financial independence and an early retirement from traditional work. The movement encourages individuals to live frugally, save aggressively, and invest wisely to accumulate enough assets that generate passive income to cover living expenses, thus enabling early retirement. The core philosophy behind FIRE is to maximize one’s savings rate, often by finding ways to increase income or decrease expenses and through aggressive investments to grow wealth or income . Here’s a more detailed breakdown:
Historical Roots:
- The movement traces its roots back to the 1992 bestseller “Your Money Or Your Life” by Joe Dominguez and Vicki Robin, which provided a foundational model for combining a lifestyle of simple living with income from investments to achieve financial independence.
- Further momentum was gained with the 2010 book “Early Retirement Extreme” by Jacob Lund Fisker, which elaborated on the relationship between savings rate and time to retirement1.
- The popularization of the FIRE movement to a broader audience began around 2007 and 2009 with the emergence of personal finance sites like Early Retirement Extreme and Financial Samurai. During this period, more individuals started sharing and discussing FIRE principles on online platforms, blogs, and forums.
- Influential voices like the Mr. Money Mustache blog started in 2011, played a significant role in popularizing the idea of achieving early retirement through frugality and have helped the FIRE movement gain traction.
Core Principles:
- Savings Rate: Individuals are encouraged to save a substantial portion of their income, with some aiming to save 50% or more. The objective is to accumulate assets until the passive income covers living expenses throughout retirement.
- Investing: Aggressive investing in assets that generate passive income is a cornerstone of the FIRE movement.
- Expenditure Reduction: Living frugally and cutting down on expenses to maximize the savings rate is a typical practice among FIRE adherents.
Variants of FIRE:
- Lean FIRE: Retiring early on a smaller retirement income accumulation requires a frugal lifestyle during retirement.
- Fat FIRE: Achieving early retirement with a large amount of accumulated wealth and passive income, allowing for a more comfortable or even luxurious lifestyle post-retirement.
- Barista FIRE: A semi-retired lifestyle where individuals may work part-time for supplemental income, or one partner continues to work while the other retires.
Methodologies:
- A common guideline many FIRE enthusiasts follow is the 4% rule, which suggests having savings of at least 25 times one’s estimated annual living expenses. Work becomes optional upon reaching this financial milestone, enabling retirement decades earlier than the standard retirement age. Some prefer a more conservative measure, like a 3% withdrawal rate, which would require saving 33 times the annual expenses.
Community and Online Resources:
The community has grown substantially, especially among millennials, through online communities, blogs, podcasts, and discussion forums. The availability of online resources and sharing financial freedom journeys on social media have significantly contributed to the movement’s expansion. In recent years, the movement has even seen the emergence of dating sites and blogs dedicated to connecting individuals who share the FIRE lifestyle ethos.
Impact and Recognition:
The FIRE movement started receiving significant coverage by traditional mainstream media outlets in 2018, with a survey conducted in the same year revealing that 11% of wealthier Americans aged 45 and older had heard of the FIRE movement by name, while another 26% were aware of the concept.
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