What is Financial Independence, Retire Early ?
1128 reads · Last updated: December 5, 2024
Financial Independence, Retire Early (FIRE) is a movement of people devoted to a program of extreme savings and investment that aims to allow them to retire far earlier than traditional budgets and retirement plans would permit.The 1992 best-selling book by Vicki Robin and Joe Dominguez popularized many of the concepts used by people who are part of this movement. The origins of the term and acronym FIRE are unknown, but the term came to embody a core premise of the book: People should evaluate every expense in terms of the number of working hours it took to pay for it.
Definition
Financial Independence, Retire Early (FIRE) is a movement of people dedicated to extreme savings and investment plans aimed at allowing them to retire earlier than traditional budgets and retirement plans would allow.
Origin
In 1992, Vicki Robin and Joe Dominguez's bestselling book 'Your Money or Your Life' popularized many of the concepts used by people in this movement. The origin and acronym of the term FIRE are unknown, but it became a core premise of the book: people should evaluate every expense in terms of the hours of work required to pay for it.
Categories and Features
The FIRE movement can be divided into several strategies, including Lean FIRE, Traditional FIRE, and Fat FIRE. Lean FIRE emphasizes extreme frugality and low spending, suitable for those willing to significantly lower their living standards. Traditional FIRE involves achieving financial independence through reasonable savings and investments, suitable for most people. Fat FIRE is for those who wish to maintain a higher standard of living in retirement, requiring higher savings and investment returns.
Case Studies
A typical case is Mr. Money Mustache, who achieved financial independence in his 30s through extreme frugality and smart investments. His blog shares how to achieve FIRE goals by cutting unnecessary expenses and increasing savings. Another example is Tanja Hester, who retired at 40 through careful planning and investing, and has written books on FIRE, sharing her experiences and strategies.
Common Issues
Investors pursuing FIRE may encounter issues such as underestimating post-retirement expenses, overly optimistic investment return expectations, and ignoring the impact of inflation. A common misconception is that FIRE is only for high earners, but with proper planning and frugality, it is achievable for average earners as well.
