The Financial Independence, Retire Early (FIRE) movement was born from the 1992 book “Your Money or Your Life,” written by social innovator Vicki Robin, financial analyst Joe Dominguez, and sustainability champion Monique Tilford. FIRE adherents are commonly referred to by critics as penny-pinchers, but closely tracking expenditures in terms of opportunity costs allows adherents to earn enough passive income to provide enough money for living expenses throughout their retirement years. The ultimate goal for FIRE members is to reach financial independence so that paid work becomes an optional pursuit in one’s life.

The FIRE movement is fixated on savings and the rate at which those savings are accrued annually. Many individuals, depending on lifestyle circumstances, will fall into four variating categories: 1) FatFIRE, 2) LeanFIRE, 3) BaristaFIRE, 4) CoastFIRE. These categories encompass the lifestyles devotees are able and willing to abide by, it is not an exhaustive list by any means. Other variations include EuropeFIRE, FIREyFemmes, YachtFIRE, FIREIndia, and the untested, relatively nascent DeFIRE. These communities are fast-growing, especially among millennials. The top 4 variations listed above bolster a combined 370,000 subscribers. The r/fianancialindependence subreddit has over 800,000 subscribers. Many of the discussions are success stories, personal tips, and conversations about separating the needs from the wants and finding joy with less. The individuals looking to accumulate wealth for the sole purpose of excessive consumption are in the wrong area, that’s for sure.

Why are so many people following these ideologies?

That’s a common question, and it’s simple: there is a focus on striving to stop working for others sooner than later. The intention is on living their best lives for less, and as the book promotes, that begins with rethinking the relationship one has with one’s money in order to achieve that precious financial independence. Community acceptance among the like-minded is core to the members, as many issues arise with the movement from a familial and philosophical perspective, among others. Many members have struggled to find partners with a similar set of personal finance values, and receive criticism from family members who conflate the idea of not wanting to work until a ‘traditional’ retirement date as lazy. The movement’s ethos is as follows: “Let’s blow up the idea that we should work for 40 to 45 years of our life before having fun and getting to do what we want. Why spend the bulk of our healthy years working for someone else?” If your goal is to retire at a young age, or if your current job situation does not afford you the opportunity of a high savings rate, there are many practical tips to take from the FIRE movement that will assist you with your personal finances.

What does getting to financial independence look like?

According to the r/financialindependence FAQ, there are three knobs that control your ability to hit that FIRE goal. The first is the reduction of expenses and being content with significantly lower expenses. The second is increasing income, normally characterized as improving your education, asking for that raise, or creating a side business. Lastly, investing is the hallmark of any FIRE plans: with an emphasis on long-term sustainable investment returns, otherwise known as passive index fund investing. It’s no coincidence that the FIRE movement philosophy coincides with the Boglehead investment philosophy, they are the standard for retirement planning. Although, it’s important to realize that the basic FIRE plan is heavily reliant on the stock market. A new idea championed by Robin Schmidt of The Defiant is the DeFIRE movement. A more detailed explanation is available here on YouTube, but in summary: the idea relies on using the Anchor Protocol to generate reliable cryptocurrency ‘dividends’, and APY, allowing an adherent to get to their retirement age faster than the traditional avenues.

How do I follow the FIRE guidelines?

It can be assumed that as the savings rate rises, the time to retirement decreases dramatically. As a result, those embracing FIRE make an effort to save 50% or more of their income. It will take less than ten years of work at a 75 percent savings rate to accumulate 25 times the average annual living expenses indicated by the 4% safe withdrawal rule. With that being said, referencing the variations of FIRE listed above, there are two sides of the spectrum with the movement. Lean FIRE applies to the opportunity to retire early with a reduced retirement income and lower living costs, which necessitates a frugal lifestyle in retirement. Fat FIRE, on the other hand, applies to the ability to retire early because of a large amount of accumulated capital and passive income, with no worries about living expenses after retirement. Barista FIRE is a combination of the two, referring to a semi-retired lifestyle that includes working part-time for supplementary income or retiring completely but with a partner who continues to work.

FIRE ultimately comes down to behavior. There are three basic elements to any financial goals: time, income, and expenses. The goal is to put space between expenses and income. Like any other financial goal, the math is easy and everything else requires resourcefulness, diligence, and patience. You can start your goal at any point and then move forward. The ultimate test for any FIRE adherent is their ability to set boundaries and continue that behavior throughout their life. To start your journey, I recommend the r/personalfinance subreddit sidebar.

To conclude, FIRE is the culmination of “spend[ing] what is left after saving” — Warren Buffet.