🎓 What Does FIRE Mean?

And How to Achieve it

May 06, 2024

What Does FIRE Mean?

FIRE is an acronym for Financial Independence and Retire Early. FIRE is a financial state where your investments are producing enough income that you can retire early without help from anyone else. Regular people just like you and me achieve fire all the time by living below their means and investing wisely.

FIRE is mainly accredited to being thought up by someone named JL Collins who wrote “The Simple Path to Wealth” and many other popular personal finance books. Over time the idea of FIRE became more and more popular and as its popularity grew so did its meaning.

Now FIRE is considered a very broad term and is divided up into a bunch of other mini definitions, here are some of the most recognized forms of FIRE…

  • Fat FIRE: This form of FIRE is when you retire early but with a lot of money. This is more often for people who make much more money and are willing to wait a couple extra years to retire. Its most common traits are people with big houses, fancy cars, and constant vacations.

  • Lean FIRE: If Fat FIRE sounds way out of reach people will often opt in for Lean FIRE, this approach is best for minimalists and those who have less money to put towards retirement. The main idea is to just lower expenses so you do not need as much saved for retirement.

  • Coast FIRE: If you like the idea of retiring early but aren’t quite ready to leave your job, Coast Fire might be good for you. The idea of Coast FIRE is to save up enough that you can stop making contributions to your retirement but it will still grow through your investments. This way you can Coast into retirement when you are ready.

  • Barista FIRE: Kind of like lean fire this is for those who maybe can’t save as much as they want but want to live less minimally than lean fire. With this approach, you would retire from a 9-5 but instead work a part-time job to fill the gap in your savings. The most common part-time job for this is a barista, that’s where it gets its name.

These are just some of the most common forms of FIRE but there are plenty more out there. I personally want to aim for a type of FIRE called Cash Flow FI or Cash Flow Financial Independence where I will aim to have alternative income sources such as dividends or real estate cover my expenses so I can work on what I really want to work on.

So How do You Achieve FIRE?

Achieving fire is not just for the rich, wealthy, or lucky. It is for everyone who wants it, but it is still not easy. The basis of the FIRE movement is to live well below your means and efficiently invest as much as possible. This might mean living in a smaller-than-ideal house, driving a 6+ year-old car, or rarely ever eating out. In order to achieve FIRE there are 4 main things you need to take into consideration…

  1. Plan: You need to make sure you have a solid plan with well thought out financial goals and targets so you can stay on track and be as efficient as possible with your money.

  2. Save: You need to be saving a large chunk of your income. For the average individual not trying to retire early it is recommended to be 10%-15% but if you are shooting for FIRE your savings should be more like 50%-70% or ideally even more.

  3. Investing: Saving alone is not enough, you also need to invest that money in a wise way. For most people trying to achieve FIRE, this means dividend-yielding stocks and ETFs such as SCHD. Some FIRE individuals will also invest in rental properties though that takes more work and is not truly passive.

  4. Income: Often times it is easier to save more money but sometimes it is necessary to make more. If you find you can not possibly invest 50-70 percent of your income, then you need to make more money. The best way is to get better qualifications in fields that matter, or by switching your company every 2-3 years.

Achieving FIRE is a difficult process that requires dedication and hard work. FIRE is also not for everyone. If you think fire might be for you, do some more research online and create a game plan for how to achieve FIRE in your life.

Brokers I use

  • Webull Best for more active investing (get up to 75 free shares by depositing over $100)

  • M1 Finance Best for more passive investing above $10,000 (get $75 if you invest more than $10,000)

  • Charles Schwab Best for custodial accounts (get $100 by investing over $25,000)

  • Fundrise Best for buying alternative investments ($25 for signing up and making a $10 deposit)

Other tools

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