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FIRE, which stands for Financial Independence, Retire Early, is a simple idea to grasp. If you save enough money while you're younger, you can enjoy more freedom in the future. This could mean leaving your job to start a business or selling your home to explore the world. With savings, you have the power to design a future on your own terms, without waiting for the day you can start taking money from your retirement funds or Social Security.
However, like with any goal, some take it to an extreme. Imagine someone with a six-figure income, yet spends only $15 a week to feed their family of four. Or consider the couple who builds a small house on a relative’s property just to avoid paying for housing.
These extreme cases may draw attention because they go above and beyond in their efforts to reach their goal. After all, we all love hearing a success story, don’t we?
Achieving FIRE doesn’t necessarily mean taking drastic steps, as some members of the community suggest.
Why crafting your own FIRE strategy is essential
In its simplest form, FIRE encourages you to live below your means and invest the difference in low-fee assets. ChooseFI advocates for saving 25 times your yearly expenses to achieve financial independence. To make this happen, you should aim to save between 40% and 50% of your income annually.
That saving rate may seem unachievable to some. But before you get discouraged, the New York Times interviewed several women who are embracing FIRE principles while customizing them to fit their lifestyles.
Take Kiersten Saunders from Atlanta, who runs the blog Rich & Regular, for example:
Many FIRE blogs, despite good intentions, often miss the mark....They promote minimalist plans like, ‘We live on Soylent and frozen burritos, which is how we manage to save 50% of our income.’ And it’s like, ‘Sure, but what about the other life expenses? What about the budget for caring for your mother-in-law?’
Saunders admits that there’s no one-size-fits-all path to financial success. The key elements of FIRE, such as reducing housing costs, driving second-hand cars, boosting your income, and trimming your grocery bills, don’t need to be approached in any particular sequence. Achieving FIRE doesn’t demand a completely frugal lifestyle either.
Here’s another thought from Saunders, as mentioned in the Times:
“Maintaining my hair has a cost,” she explains. “Taking care of my skin has a cost. You don’t have to give those up to pursue FIRE — it might take a bit longer, but it’s not a race.”
Some of the people mentioned in the New York Times have certainly gone to extreme lengths in their quest for financial independence. But what truly resonates in Saunders’ quotes is what is often overlooked in personal finance: it’s not about hitting a specific financial target set by someone else; it’s about aligning with your own values.
Options for aspiring FIRE participants
Some FIRE enthusiasts have even broken down their approach into different versions, much like a Choose Your Own Adventure story, rather than sticking to a one-size-fits-all plan.
There’s leanFIRE: the one where you cut back as much as possible. Then there’s FatFIRE, for those who want to maintain their current lifestyle while saving. And semiFIRE, which focuses on planning for early “semi-retirement” with part-time work. Each version of FIRE reflects the kind of lifestyle you’re aiming for in early retirement.
Take Fritz Gilbert from The Retirement Manifesto blog as an example. He and his wife chose to use their vacation time early on to explore the world, rather than waiting until retirement. “We could have saved more aggressively and retired earlier, but we felt the “sacrifice” we made in saving for retirement at the pace we did was fitting for our life,” he writes.
Ultimately, the goal is to be able to withdraw 4% of your savings each year while ensuring your money lasts for many years. But what if you’re far from saving half your income to make those withdrawals possible in the future?
ChooseFi advises you to focus on taking it one step at a time. “You don’t have to tackle everything today, or even this year. Simply focus on what you can do this week to move 1% closer to your ultimate goal,” its guide for beginners suggests. This could involve increasing your 401(k) contributions, or perhaps packing lunch for work instead of eating out. It might mean negotiating your phone bill or considering a side job that excites you. Small savings, even just 1% at a time, can build up significantly over the long run.
