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  • Writer's pictureTyson Jonas

Financial Independence Retire Early - FIRE

The FIRE movement is one that has been rapidly gaining immense popularity amongst the millennial generation. For those who are not familiar with the acronym FIRE stands for Financial Independence Retire Early.

Those who are active followers of the FIRE movement often go to extremes to save and invest as much of their income as possible from a young age to ensure that they are in a financial position that will enable them to live comfortably and retire at an age where most other people are only starting the think about their future retirement plans.

Followers of this movement often aim to save incredible portions of their income, with some followers aiming to save/invest 70% of their income! There even blogs where people claim to be able to save 90% of their income...

Generally, Firee’s will look to live a very minimal lifestyle in order to build their savings to approximately 30x their annual expenses. In a simple example if you have expenses of $50,000 a year then your FIRE goal would be to have $1,500,000 before you can retire early.

There are a couple of different versions of this including “Fat Fire” (a more luxurious lifestyle), “Lean Fire” (a bare bones styled lifestyle), “Barista Fire” (having enough funds for retirement but working in a part time capacity to cover current living expenses) and “Coast Fire” (having enough funds to retire but choosing to work part time to keep active).

While the FIRE movement does regularly involve taking things to an extreme, there are some fantastic lessons that can be learnt from proponents of the method.

Lesson 1 – Your Expenses Are More Income Than Your Income At Retirement

Most traditional retirement models are based around providing a replace of your income over time, while the FIRE model is all about replacing your expenses and doing everything that you can to minimize your expenses. As I regularly say understanding your cash flow and expenses is the key to building wealth over the long term.

Lesson 2 – Retirement Is Different For Everyone

As mentioned above there are a range of different retirement types available within the FIRE movement. In the past 2 weeks I have had conversations ranging from the individual wanting to retire with $4,000,000 and a jet setting lifestyle, to the couple that wants to spend their retirement fishing and enjoying the simple life. At the end of the day, how much you need to retire with will mostly depend on how much you spend not on how much you have.

Lesson 3 – Saving And Investing Should Be Fun

Often followers of the FIRE movement go to extremes to reduce their expenses by as much as humanly possible. This leads to some pretty incredible competitions where people actively do everything they can to reduce their expenses. Adding competition is a great way to add fun into growing your wealth. The best way for your to improve your ability to save and invest for the long term is to find ways to derive immense amounts of pleasure from hitting your short term goals!

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