How to Achieve Financial Independence and Retire Early

The F.I.R.E movement has gained a lot of momentum and exposure over the last few years, thanks to social media. However, one thing is for sure; the exposure came with many misconceptions about the movement and people canceling it off as extreme and frugal. In this post, we will be debunking all of these misconceptions and teaching you the absolute truth about the Financial Independence, Retire Early movement.

What is FIRE?

FIRE is an acronym for the term- Financial Independence, Retire Early. It was coined sometime in 1992 from a popular book titled ‘Your Money or Your Life.’ People who embrace the fire movement save about 70% of their income with the goal of hitting at least a million dollars or 25 times their living expenses.
Many things can be done to achieve fire, as it’s not necessarily a one-size-fits-all movement. For example, it’s not all about increasing your income; it’s about increasing the gap between your earnings and savings. The movement’s primary goal is for you to gain financial freedom and know that you can quit your day job anytime you choose to.

How to Achieve FIRE

FIRE can be achieved by different means; it can be by starting a business, taking up a second job, or selling things online. After that, it’s simply just doing whatever you can to increase your income and save it.

The Different Types of FIRE

Lean FIRE Method

This FIRE method focuses on saving as much money as possible by reducing your spending rate or expenses. So, if you’re looking for ways to cut down on bills and grocery spending, you could be cutting your own hair, literally whatever it takes to cut down on personal expenses. Many people do extreme things to try and save money, but it all depends on you and how much you’re willing to cut down. In essence, Lean FIRE focuses on living a minimalist lifestyle so you can save enough money.

Fat FIRE Method

Fat FIRE is the other strategy for achieving FIRE, and it’s not as extreme as Lean FIRE. The Fat FIRE method involves increasing your income as much as possible so that you’ll be able to save as much as possible.

Both FIRE methods have a target number you should be trying to get to; this is how you’ll be able to achieve the Financial Investment and Retiring Early.

How to Calculate your FIRE number

Keeping track of your FIRE number will help you know when you’ve hit your FIRE goal. Once you reach the goal, you can decide to retire or keep working with the satisfaction of knowing that you can stop whenever you like. That, my friends, is true independence.

To calculate your FIRE number, follow the standard FIRE formula, which is

Your Annual Expenses multiplied by 25
FIRE number= Annual Expense X 25

This formula is popularly called the 4% FIRE rule amongst followers of the movement.

For example, if your monthly living expense is $5000, your expense annually will be $60,000, and your FIRE number would be 25 multiplied by $60,000, which is $1.5 million.

It’s that easy! So, you should have your FIRE number somewhere in an account whenever you decide to retire.

Joining the FIRE movement doesn’t have to be rigorous and frugal; it’s best to do what works for you as long as you hit that goal! There are different levels of FIRE, so you can continuously adjust your goals as you reach them. There’s Coast FIRE, Barista FIRE, Lean FIRE, Traditional FIRE, and Fat FIRE; all of these levels have a higher target.

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About Kamilah

My name is Kamilah and I am a native New Yorker of Caribbean descent who is passionate about helping you learn how to invest and build your net worth by sharing easy-to-follow YouTube tutorials that will help you take control of your money and set you up for financial success. But this wasn’t always my story.

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