If you’ve been hearing FIRE AKA financial independence, retire early floating around but you aren’t quite sure what it all means, you aren’t alone. The FIRE movement has gained traction in previous years and if it’s something you’ve been considering adopting but you’re not sure how, this guide is for you.
FIRE is a movement of people that are committed to a life of extreme saving in the hopes to retire far earlier than other individuals may be able too. It’s not known exactly where FIRE originated, but a core premise of the movement is that you should be evaluating every single expense in terms of the number of hours you had to work to pay for those expenses.
The FIRE movement aims to get individuals to retire early, instead of the regular retirement age of 65, the FIRE movement encourages people to dedicate a majority of their incomes to savings so that they can retire and live off their savings years before they reach the traditional retirement age.
FIRE is an extreme saving lifestyle that encourages people to save up to 70% of their yearly income. When their savings reach 30 times their yearly expenses, they are able to leave their jobs or retire all together.
The movement also encourages people to make small withdrawals from their savings after they retire early, roughly 3-4% of the overall balance a year. This requires diligence and extensive budgeting to ensure the success of their efforts.
You wouldn’t be alone in thinking that FIRE is designed for individuals who get a substantial income and can afford to save a majority of their salary and if you’re trying to retire by your 30s or 40s, that’s probably true. BUT there is also a lot to be learnt from the movement that can help people save for their retirement and achieve an early one, even if it isn’t quite as early as retiring in your 30s.
There are three variations of the FIRE movement, Fat Fire is a more laid-back approach that encourages people to save more while giving up less. Lean FIRE will require individuals to be devoted to a very minimalist lifestyle and Barista FIRE which is for people wanting to quit their 9-to-5 and are willing to cut back on their spending and only work part time.
At Allied Wealth we are committed to providing you with a financial plan that best suits your needs, goals and expenses. If you’ve been considering undertaking the FIRE movement as part of your retirement planning, contact us today to find out how we can help you achieve your goals and plan for your future.