Financial Independence Retire Early (FIRE) is the idea that you can save, invest or create enough assets to live on (forever), before the normal state pension age.
That’s it in a nutshell.
I think the “retire early” bit is just to make it a cool acronym. FIRE sounds cooler than FI. Honestly, I have no intention of fully retiring in my thirties, but it would be nice to have the option.
Does that mean living like a monk and never seeing daylight?!
No!
I mean, some people achieve FIRE by living frugally, like some kind of medieval monk that self-flagellates to purify the soul… but to each their own. I hear people pay good money for that sort of thing in Amsterdam.
For me, it just means spending intentionally, investing what I can, and expecting that at least some of my investments make a profit so that choosing to work a job or be self-employed is optional.
That’s not what I heard about FIRE…
In general terms, you might hear the following expressions used by the FIRE “community”:
Lean FIRE
This really is those monastic types, who live on a pittance and therefore don’t need to invest much. If you only spend £10,000 a year to live, you don’t need much in the way of savings to maintain your lifestyle, right? About £250,000 would probably do it.
The obvious downside is that you have to be happy on £10,000 a year. In all honesty, I’m not that extreme a minimalist!
Coast FIRE / Barista FIRE / Coasting FI
Pretty much what my Campaign objective is.
The idea is that your basic outgoings are covered by profits, interest, dividends or whatever from your investments.
This means that you could have any kind of job – i.e. become a barista – for extra money, if you want it. It wouldn’t matter if you didn’t, because if it came to the worst-case scenario you could convert to lean FIRE for a bit.
I’d be quite happy working part-time in my fifties. I could live with that.
Fat FIRE
Smash as much into investments as possible, then live it up like a millionaire forever.
Cool? Undoubtedly. Achievable? Probably. How hard do you need to work to pull this off? Extremely.
If you can pull this off you never have to consider money again. Ever. It won’t even exist in your universe as a concept.
Where can I go to learn more about Financial Independence?
Don’t take my word for it – I’m some random on the internet! At least corroborate with other Internet Randoms!
If you’re already sold on the idea, check out the recommended FIRE links page.
Check out:
1. The Humble Penny – a well-run blog for UK FIRE. Ken and Mary do a pretty good YouTube channel, too. They use the term “Financial Joy” instead of FIRE, which makes sense as they offer branded courses. The blog and the channel are part of their income, so the branding is kind of key to their strategy.
2. Here’s a great article by one of the early web bloggers on FI, Mr Money Moustache. I’d recommend using Google to find some interviews with Mr Money Moustache, he’s a pretty down-to-earth Canadian fella.
3. The US has the biggest (well, loudest) FIRE community. There’s a free – but US-focused – course on FI at the Choose FI website. I warn you, though: the principles are sound but the implementation won’t necessarily apply to the UK. We have different account types here (actually, most of them are better…) and the details in the planning phase might be different.