FIRE Strategies

Headline strategies for your financial independence campaign.

This is a long read. Get yourself a comfy chair, make yourself a brew and settle in for the long one.

There is more than one way to skin a cat

Despite what you may (and probably will) read, watch or listen to, there isn’t a One True Path to achieving financial independence.

Are out below are strategies as defined by Yours Truly. These are headline strategies (ways and means) and where I’ve stolen them from other sources I’ve given credit where credit is due.

Financial independence labels

The Financial Independence Retire Early community have several labels for variations of what the end goal looks like. The ones I’ve picked up are:

• LeanFIRE – living a life of intentionality and anti-consumerism, cutting your costs down and therefore making it easier to build your income streams.
• CoastFIRE – often a stepping stone, it’s the idea of getting yourself to an asset base whereby you can take your hands off the wheel and let your investments take care of themselves. You will retire, it’s just a matter of waiting.
• BaristaFIRE – CoastFIRE, except that you deliberately pick a job where the perks are worth more to you than the salary. It’s more of an American thing. Starbucks famously provides employee health insurance, hence “barista”. In the UK it’s less relevant.
• FIRE – the basic idea is having assets that provide a return for you that you can live off in perpetuity. Work becomes optional.
• FatFIRE – like FIRE, but you’ve decided that you want to live a lavish lifestyle while you’re there.

All of these can achieved by any combination of strategies, given enough time and effort, but some strategies work better based on which goal you’re looking at.

Enough of this meta-nonsense! Let’s see what we’ve got.

1. Grind and invest

The classic route that anyone can enjoy!

Idea is that you follow the Your Money Or Your Life approach and simply spend less than you earn from your day job, then put that spare money to work.

Other notable works include Quit Like A Millionaire by Kristy Shen and Bryce Leung. Despite the title, the book is basically this strategy executed well.

The playbook

Find a job that gives you a balance of work effort: reward that you can live with. If you enjoy it, so much the better.

Review your expenses and cut out unnecessary crap, but don’t worry too much about trying to find cheaper ways to do stuff.

You want to be able to save or invest 10-20% of your income on top of any employer pension matches. That should give you a savings rate of somewhere between 15-28% depending on where your wage sits in the qualification brackets and whatever your employer match is.

How you generate the FI portfolio

There’s no point chasing exceptional returns, but you’re not looking for that. Your race is a marathon, not a sprint, so mediocre but solid investments work for you. Think index funds and maybe a rental property if it’s convenient and you know what you’re doing.

A real return of 5% would be ideal here. 7% even better. 3% would suck unless you start cutting back further. To start with, optimisation isn’t important, but because this is a long-term play you really need to concentrate on keeping maximum diversification with minimal drag (i.e. low management fees). This is why index funds are so popular in the FIRE community: anyone can sustain buying one index tracker for a long time.

Interestingly, Vicki Robin and Joe Dominguez – who wrote the book Your Money or Your Life – didn’t use index funds. In the version I have, which has two forewords (one by Mr Money Moustache and one by Vicki), Vicki actually counsels against relying on index funds. The book refers to “savings” throughout and Vicki claimed that hers and Joe’s portfolios were mainly US government bonds and a rental property.

Good points

• Very accessible: anyone can do this.
• Tried and tested with a high historical success rate.
• You don’t need to have any imagination or make any major lifestyle changes.
• Socially acceptable: no-one outside your family will notice you doing these things.

Less good

• This really is a marathon. Can you stay focused for 20+ years?
• If you hate your job… my guy, this ain’t for you.
• There are no quick wins here. If you want to see any encouragement, you need to plan milestones. Celebrate the first £1k emergency fund, the first £10k invested, the first £100k total net worth, the first £100k in invested assets, the first £100k outside of pensions and your home (etc).
• Very little effort required after you’ve sorted out your contributions, but you havre very little control over your success other than what you decide to pay in.
• Market downturns may affect morale. Watching a 20 years’ investment portfolio drop 5% and dwarf your contributions because Donald Trump farted or [insert governing UK party] has made another U-turn is demoralising. Consider diversifying across asset classes later on as the portfolio grows.

2. Extreme frugality and alternative living

I’m being a bit mean with “extreme”, which is probably an overly emotive term. This is the style popularised by the blog (and later book) Early Retirement Extreme by Jacob Lund Fisker, so I’m sticking with it.

The idea is that you look at yourself, question the way you live, then determine the most financially efficient way to live the life you want.

Think minimalism, homesteading, van life, living on a boat, becoming a digital nomad, geo-arbitraging a remote job and so on.

People who do this generally value their time exponentially more than money.

The playbook

Look at what you’re doing now and work out what your financial independence lifestyle looks like.

Make big changes today to get there.

Avoid consumerism. Learn to separate yourself from social and fashion trends. Prioritise quality over quantity and learn to live with less stuff.

Learn skills, develop fitness (physical and mental). Living an alternative lifestyle will require you to be adaptable and at least a bit handy. You will need at least one skill that lets you live in a different way: maybe it’s becoming food self-sufficient, doing your own vehicle or home repairs, making your own clothes, or something else altogether.

Doing these things will let you dramatically reduce your costs or at least prevent you from spending money on a lifestyle to support your interim solution of earning money while you build the life you want.

How you generate the portfolio

You will probably need to work (or be self-employed) and do a bit of the grind and invest thing, but ideally it’s a lot less.

This strategy lends itself to unconventional investments. No, I’m not talking about cryptocurrencies and carbon credit trading.

Think about things like planting fruit trees, fitting solar panels and water butts, obtaining qualifications that allow you to do things like service your own vehicle or wire your own house.

Good points

• If you don’t like living in late-stage capitalism, this one gets you outside of it… ish.
• Generally more resilient than other strategies to market downturns and recessions.
• Promotes independence, not just financial independence.
• Of all the strategies, this one is probably a net good for the world. People who consume less tend to have a smaller environmental impact.
• Depending on where you’re starting from and where you want to get to, this can be actioned very quickly.

Less good

• Massive inconvenience: the Western world of the 21st century is really designed for the commuter-worker. Earning money in a way that fits an alternative lifestyle can be a challenge.
• Socially difficult: people often think that someone living an alternative lifestyle is by extension calling their lifestyle choices into question. Expect lots of “I could never do that” and “It’s alright for you…” .This strategy will change your social network… but maybe for the better?
• Independence is a reward, but it’s also a burden. I can confirm that if the power goes out on my boat it’s up to me to get it working again. No such thing as an emergency hours marine electrician. If you’re homesteading, the pain of a bad harvest is felt only by you and your family.

3. Career climber

The strategy for people who think saving is for chumps and the best way to get to financial independence is to up those rookie numbers, bro!

I’ve called this career climbing, but there’s no reason that it wouldn’t work for self-employment and commission-only employees. Salespeople working with a juicy commission base can execute this strategy without getting any promotions or role changes at all.

The idea is that basically you go hard on earning, keep lifestyle costs reasonable yet without accepting any discomfort that would add friction to your income-chasing strategy. It’s all about hitting the ground hard and sprinting.

Maybe this looks like a variation on the “grind and invest” strategy at first but I assure you that the philosophy is very different.

The playbook

Prioritise a job or career field that is high earning and either gives you the opportunity for rapid promotion or to earn bigger (uncapped) commissions.

Ideally, you want to be looking at £100k+ income within 3-5 years of starting this. You can make it work at £40k+ if you’re single and living in a low cost area, but definitely go for the moon on this one.

Commit. I mean, really commit. Don’t waste your time on being the best employee for your work;s culture (no-one cares if you attended all five charity bake sales that month) but if there’s a chance to upskill yourself, apply for a promotion or chase down client leads to generate more money then you seize that bad boy with both hands.

Take the mindset that “corporate social responsibility” is a PR stunt that people who are happy to grind can take on. You know what’s actually hard for a business to deny? The employee who’s bringing the money in.

Negotiate hard at every pay review. If you’re bringing the cash in, your leverage is powerful. Your boss is not your friend and may even begin to resent you, so be remorseless in your dealings.

Switching jobs every 2-3 years is an ideal employment path if you’re on this strategy. Give yourself a raise by negotiating a new deal with a new employer. You need to think of yourself as a business and position yourself in the market accordingly.

How you generate the portfolio

Honestly? If your earning are growing fast enough, you could invest in anything remotely sensible and the strategy would work.

Yes, you could just use savings accounts.

The reason for this is that the income generation is going to be so fast that compounding over time is less effective. If you’re putting away £40k a year then you can afford to just do something basic for now then optimise it later when it’s time to call it a day.

Best to pick the least cognitive effort investments. Robo-investors work here, albeit they are expensive on fees, because all of your effort should be going towards income growth and shouldn’t be wasted on things like planning to get a 0.5% efficiency on management fees. Index funds also work, as do (somewhat counter-intuitively) high-yield savings accounts.

Avoid owning real estate though: you don’t have time to manage it.

Any risk of additional stress is to be avoided. Nothing should add friction to your climb.

Investing in your social network is a big thing here, too. Attending networking events and raising your personal brand (eurgh…) will help you climb the greasy pole quicker.

Good points

• If you enjoy this kind of thing: it really is a rush. Working at pace and winning can be addictive.
• Conceptually simple. Not everyone can be a lawyer or finance professional, sure, but everyone can job hop and most people can find something that works.
• Society actively rewards you for doing this. Mental.

Less good

• High risk of burnout. This is a sprint and if you should treat your brain like an athlete treats their body. I found that I could only maintain this kind of pace if my hobbies were the pub, Netflix and PlayStation. “Zombie time” was an essential part of my week.
• You will become the most boring version of yourself. Almost guaranteed.
• Vulnerable to recessions. Income opportunities tend to dry up when markets are afraid.
• Control is limited to who you work for and how many additional hours you can put in.
• If you a family, they need to be onboard for this and fully committed to making sure you, the earner, has a near-frictionless experience outside of work during the week.
• LinkedIn. I hate it, you hate it, but you’ll want it for this.

4. The Entrepreneur

This one goes alongside strategy 2 as one of the more interesting FIRE strategies available.

Famously, authors like Robert Kiyosaki (Rich Dad, Poor Dad), Tim Ferriss (Four Hour Work Week) and MJ DeMarco (Millionaire Fast Lane) popularised this approach. I understand this has now been copied and pasted across TikTok and other social media, but apart from Reddit I don’t really use social media much and I’ve never been on TikTok, so what do I know?

Businesses are cool because you can control your income, can use various forms of leverage (like people power and debt) to grow that income, and it’s usually possible to sell a business when you’re sick of it for 3-5x its earnings, depending on the market.

The more ambitious and regulated your business is, the more money you stand to make on the sale (if not necessarily the income) – but obviously you’ll need more skills to get off the start line, a bigger initial investment and your risk of failure is a lot higher because there’s less room to make mistakes and learn from them on the job.

The playbook

You need to start a business: and it could be any business. Seriously. There are window cleaners cutting around on much higher incomes than anyone realises.

The investor in our business generated his first millions from importing kids’ toys.

If you have skills? The safest way to start is by freelancing those. If you don’t? Consider the classic of buying and selling. Knowledge, skills, and knowledge products generally require the least amount of start-up capital to kick off with, but be advised that no business is cost free.

Whether this is your “forever” business or not, at some point you need a company with a business that could operate without you doing the daily operations. Either that company can hold intellectual property that it licences, such as a website, or it can employ people that can start doing the day-to-day stuff for you.

Why a company? It’s easy to sell shares, it’s hard to sell a business that’s basically a bunch of sole traders (not impossible, just hard and usually valued lower).

There’s no reason to stop at one business. Diversification is completely possible within a business by having different product or service lines, and there’s no reason not to have a couple of different businesses on the go at the same time. The usual rule is to build one, get it to steady-state, then build the next, but there’s no reason not to have a primary project business and then a side hustle business on top.

How you generate the portfolio

The business is the portfolio.

Better yet, multiple businesses are the portfolio.

Reinvestment into those businesses are going to get you better returns than any stock market investment would. It’s entirely possible to make an internal rate of return of 20% by automating procedures or negotiating supplier discounts, but a 20% return from the stock market is a big deal and unlikely to be sustained in the long run.

Money that you take out of the business (such as by dividends) can be invested normally, sure. This give you, the entrepreneur, diversification. Investing specifically for dividends makes sense here because income investing is smart when the businesses you build need to be reinvested in or left alone wherever possible.

Good points

• If you nail it on the first try, this will get you to financial independence faster than pretty much any method. 5 years is totally doable.
• Alongside strategy 2, this strategy gives you the most control. You are the owner, you call the shots… subject to market forces and customer demands.
• Successful business ventures generate outsize returns in the long run. If your FIRE lifestyle is expensive, this is one of the best ways to get there.
• Who cares about movements in the stock market? That’s someone else’s problem when you can pivot your business to deal with general market sentiment.

Less good

• Most businesses fail within 2 years. No joke. Expect to have to attempt this several times and accept that you will fail often.
• The most successful entrepreneurs seem to be the ones who can grizz out living on rice and beans the longest to grow the business in the early days. As the owner, your dividends and any salary payments you make are a liability of the business. Early on, it’s best if that liability is small.
• Early on, you are the business. You need to be everywhere, doing everything, unless you can throw serious investment capital into it and pay for outsourced services. Roll up those sleeves and write off “holidays” as a concept for at least the first year.

5. Buy – Refurbish – Refinance/Sell

This is a pure property play and more of a side hustle than anything else but I think it warrants its own strategy section.

The playbook

Buy properties that are in rag order. Ideally, buy them to live in so that you reduce tax burdens, but you could do this with rental properties too. Use a mortgage or development loan valued at ideally 50% of the LTV if you can, but depending on the prevailing interest rate and the cost of the property you could go to 80% LTV and be fairly confident of pulling this off.

Invest money, time or effort (usually a mixture of all three) into turning these semi-derelict properties into liveable homes or usable business units.

Get the property revalued and either replace the development loan with a mortgage or get the mortgage revalued to a lower LTV. The difference between what you’ve paid (including interest payments) plus what you owe on the mortgage and the new value of the property is your equity.

It’s not uncommon for people to then sell the finished property and repeat this.

Depending on how much work you do yourself and what property markets are doing, it’s not unknown for people to make a lot of money doing this 2-3 times. Houses are expensive, so spending £30k to renovate a £100k derelict into a £200k home gives you a pre-tax profit of a good £70k. That’s not bad.

How you generate the portfolio

Take the proceeds of the sale and invest that.

People who are good at this tend to reinvest it into repeating the cycle. As you reinvest profits, you can either go for bigger project or simply speed up the turnaround time by paying for more of the work to be done by contractors.

The trap people usually fall into is to then use this profit to do one final renovation for their “dream home”. Reader: do not dream about homes. Dreams are often temporary but financial independence is for life.

At the end of this run, the ideal situation is to then switch to a different strategy that’s more passive.

Good points

• Simple business model, likely to work in Britain because demand for houses in most built-up areas remains huge and we aren’t very good at building more homes.
• Very traditional, easy to explain to people.
• Generates usable homes from run-down properties, which is actually a net benefit to society. This is arguably the most ethical way to play residential real estate.
• Numbers get big really quickly, which is good and bad.
• While interest rates and local housing markets impact this, recession doesn’t necessarily and you do not need to learn anything about stock markets.
• This can be run alongside other strategies to a degree, if you have the money to do that.

Less good

• You need to know a bit about property markets, property finance and building trades if you want to be profitable.
• Easy to get emotionally attached to a property and turn this from a financial independence strategy into a slightly cheaper home purchase.
• Big capital commitment into a single expensive (and illiquid) asset.
• If things go wrong or your planning fails once… back to the drawing board.

“Strategies” that are not actually strategies

To be clear: I do buy assets that are not index funds. I famously buy Bitcoin, and I don’t think that a sensible portfolio cannot include concentrations of single company shares, provided that this risk is managed.

However, there are some “strategies” that rely on huffing pure hopium and I have completely discounted.

Trading equities/ commodities/ bonds/ ForEx/ crypto

I’ve tried it, you’ve tried it, and it does work… ish. As a side hustle. If the market conditions are right and your understanding of the markets is accurate.

This fails the vast majority of the time.

Is it better than gambling? Yes. But it isn’t much better than gambling. You’re market buying and selling which is hard to get right if you don’t stay on top of it all day.

I’m not saying don’t do this. I’m saying don’t rely on this. Have a main strategy, treat this as a fun diversion, don’t cry if you get burned.

YOLO on one stock/ Bitcoin/ gold etc

Index fund investing has downsides. There’s a case for diversifying across assets and picking individual equities, or picking Bitcoin, or having physical gold.

What you should never do though is fail to have a hedge or some other mitigation of that concentration risk.

Gold is interesting. It’s generally inversely correlated to real estate. This means that a prepper portfolio holding both gold and real estate actually does work. However, that’s a diversification of 2 x asset classes and you should think real hard about having something else to mitigate the chance of one of those falling 50% in value when you need to sell some.

Some companies are amazing. I really like National Grid, for example, because electricity infrastructure probably is at the point of being too vital to be allowed to fail. I have a heavy concentration in this company. BUT going all-in would be relying on someone else’s business decisions, and that doesn’t make sense for financial independence.

Expecting the state pension

My dude, don’t. It’s only a matter of time before that thing gets pulled out from beneath us, means tested, or massively reduced. It’s one of the biggest expenses of every country that offers one in a time when every country in the world is looking for cost cutting or revenue growth.

Hybrid theory

An album that defined a generation… and also an important point.

There’s no reason that you need to stick to any one strategy forever.

Here’s how my financial independence campaign has gone so far:

Start: career climb & build/refurbish

I lived in a house in the UK, then career changed from the military into law. The plan was to earn a good income and keep lifestyle costs comfortable but the same. I was aiming for CoastFIRE in 9 years.

Lady SierraWhiskyMike and I also renovated the house we had bought that was formerly an HMO. We didn’t expect to sell it, but we eventually Lady SierraWhiskyMike wanted to go back home to the Channel Islands. That brought us to…

Second phase: alternative living & grind and invest

We moved to the Channel Islands and bought a boat.

This brought our FIRE number down to something like £500k, on an island where we can both earn £70-80k a year.

We realised that at age 38 we had no debt and £180k of investments, give or take. With 30 years until retirement and a top-up from public sector pensions waiting at age 68, this got us to CoastFIRE.

Current phase: Entrepreneurship

CoastFIRE achieved, we are now comfortable in taking risks and seizing new opportunities.

Lady SierraWhiskyMike is still on the grind and invest train, albeit she now works 4 days per week.

I’m now trying entrepreneurship, with a consultancy services company that I operate through and a start-up business that I’m helping to build as the primary project.

If the entrepreneurship phase works, I’ll expect to hit FIRE in about 5 years. If it doesn’t work, there’s no reason I can switch back to something else, with my investments doing their thing in the background and still having a 20-year time horizon to recover and get back to a target FIRE age of 60.

My financial independence campaign continues….