No, my house didn’t burn down. I mean F.I.R.E – Financial Independence Retire Early. I only learned about FIRE a few years ago and my overwhelming thought was, why didn’t I hear about this SOONER?! Essentially there is a whole movement of people that have realized they can retire at any change if they get their math right. Yes, you heard me, any age. I know this contradicts what we have all learned about retirement. We picture grandparents with grey hair, finally enjoying their grandkids on the porch at the ripe age of 65. Isn’t 65 retirement age? For some, it’s 55, for others, it’s 67, but you get the picture. You can’t retire in your 30’s or 40’s, that’s impossible! Alas, we have all been bamboozled. The days of ‘go to college, get a degree, get married, buy a house, have 2.5 kids, and retire with a nice pension plus social security’ are LONG GONE. A lot of Gen X and younger generations have missed that boat.
The truth is most people will never retire. Then there’s a whole host of people bucking the system and jumping the line. But how can anyone possibly retire young? There are a few ways. Number one, I do not subscribe to, but its massive minimalism and cutting of expenses down to the bone. Some people are living that tiny house life, in a rural area, with no streaming services, and eating rice and beans. But they are HAPPY. Why? Because they are choosing this lifestyle over working a 9-5 until they collapse. They invested the bare minimum to be able to live on a small return. Some even have the barista FIRE life where they work a part-time job, either to keep busy or close the gap.
Then there are the lucky ducks who learned about FIRE early enough to start investing HEAVILY as soon as they started working. They opened their Roth IRA at 16 and never looked back. Maybe stayed at home after college to invest 50% of their full-time income. Hardcore investing paired with avoiding lifestyle creep, has put them in a position to exist the rat race between 30 and 40 years old. Now, if you started your own successful business, then the limit does not exist. Outside of retirement accounts, you could also invest straight into a brokerage account so that those funds are available at any time.
The basic fire computation is your yearly expenses x 25. If I can live off of $50k/yr then my FIRE number is $1.25M with a 4% withdraw rate. That number goes up or down depending on whether you have passive income, rental income, military benefits, work a PT job/side hustle or you want to live the high life in retirement. All that is up to you. The bottom line is those pursuing FIRE are AGGRESSIVE.
At a time when the average retirement account balance is closer to $100k, those million-dollar balances seem pretty unattainable. I get it. But that is where the miracle of compound interest and time comes into play. They say those who understand compound interest earn it, and those that don’t, pay it and that is pretty on point. For example, almost everyone has a car payment. These days they are close to $700 on average. How much of that are you paying to interest alone? Do you even know? Unfortunately, most have been conditioned that as long we can afford the payment, we can afford the car, and that is simply not true. We have to take into consideration what we are losing by not investing AKA opportunity cost. But what if you paid off your car and just drove it for ten years and invested that $700 instead? Google compound interest calculator and just run the numbers. Then google amortization calculator and run your payments there. It’s enough to make you choke.
Obviously, not everyone can pursue FIRE and a lot of people love what they do. However, if you just make that mental shift from buying to investing it will change your life. Be aware of what you’re giving up when you upgrade your car for funsies or stretch your budget to the max for your home purchase. Both of those things could mean you will not get to retire at all. Now a lot of people will moan, groan, and roll their eyes. What if I die tomorrow? What’s the point of having money when I’m old, I want it now. To those people I say, what if you live until you are 90? How fun will it be to eat cat food in the cheapest retirement home? I know I don’t want to find out.
I encourage you to just get curious. Read Playing with Fire by Scott Rieckens. Check out a few YouTubers who are documenting their FIRE journey. Our Rich Journey are now retired and living in Portugal. Go down the rabbit hole, it can be pretty fun.
Is FIRE something that you find interesting? Are you willing to make the sacrifices to get to financial independence? Sound scary? Tell me what you think in the comments.
