What is FI/RE

Financial Independence/Retire Early

Understanding Financial Independence and the FIRE Movement


When your hear fire what comes to mind is actually predictable. If you have a bit of a scientific mind, you would think towards the chemical reaction that takes place when oxygen combines with carbon or any other fuel to produce heat and if you are a career person, you would think about someone being relieved of their position or military, of course it has to be aiming and using your armoury and that’s correct. In this case however, the FIRE here aims at your finances and provides an avenue to enjoy some freedom. The FIRE movement gained prominence within the century and is targeted at helping people achieve financial independence while retiring early. There are lots of blogs, podcasts, platforms and discussion forums that have written about the movement but a lot of people still don’t understand why they should hop on the train.

Achieving financial independence is considered as a huge success for anyone especially in an era where a lot of people are struggling to cope with numerous debts. There are several routes to financial independence and for someone who has a lot of receipts and credit card expenses, debt consolidation may be said to be a way out. In the case of an individual that has a job, the FIRE movement is actually all shades of lit.


What does FIRE exactly mean?


Most retirement plans advise retirees to ride into their retirement sunset in their late 50s, 60s or later but what will it take to retire in your 30s or 40s? This is the core of the FIRE movement. The idea is that expenses can be reduced and investment increased in order to facilitate an early retirement and financial independence. What is FIRE? FIRE stands for the acronym of Financial Independence, Retire Early. The scope of FIRE focusses more on gaining financial independence that is does about retiring early. The concept is more of empowering people to decide if they will like to keep working or not and of course, the decision is made easy thanks to their financial status.

Some of the protagonists of the movement have said that anyone can achieve financial independence by simply cutting down their expenditure and investing more. But the truth is that the cutting down process is easier for those with bigger salaries and for low income earners it is less suited based on their basic expenses. The fact is that in America for instance, 40% of people can’t offset a 400 dollars emergency with cash at hand. Also, only a few have three months in emergency savings and over half are battling credit card debt on a monthly basis. The FIRE movement is experiencing an increased growth in popularity especially in younger adults who are eager to attain financial independence. This has explained why when the new generation is asked about “What is financial independence”? They are likely to answer with side hustles, extreme savings and investment which in reality is a FIRE formula.


The focus of FIRE


FIRE is more of a philosophy and a financial independence strategy although we have to admit that it is the early retirement that catches the attention of people. The movement was birthed from the dissatisfaction of people especially Americans who are trying to question the rationale behind working till your 60s and 70s. Financial independence sounds great and this explains why FIRE has much appeal. The traditional retirement age is easily achievable and it’s a norm. The social security administration permits you to start enjoying benefits from the age of 62 i.e. you can start making withdrawals from your individual retirement account without the fear of being penalized once the age of 59+ has been attained.

The movement is contrary to our traditional view of retirement, it doesn’t mean you need to quit your job and sit in your yard on a daily basis. It’s about leading a flexible life that is premised on the non-traditional meaning of what retirement truly means. In this case, it’s about having more freedom to do what you like and pursue your dreams. The movement understands that most people do sacrifice job satisfaction to secure anything that caters for their immediate expenses. The concept of FIRE gives you more liberty and carves a clear path to financial freedom without having to work under the consciousness of rigidity. It’s really about the freedom of choosing to work or choosing not to.


Who Should Embark on FIRE?


There’s a reality check that makes sense and it states that your net worth should be 25 times your annual expenses if you are to be classified as financially independent so if you are not in this category, you can get “FIRE’ed” up. A true financial independence also means that your job needs you more than you need them. Those who have jobs with high salaries but suffer from the stress and the rigidity that comes with it can embrace the concept. The movement is positive and it challenges the notion of the working tradition but it is important to have a proper understanding of how it works. Although it encourages a more deliberate approach to financial freedom, you need to consider if the concept is suitable for you. Retiring early because you don’t like your job or using FIRE as an escapism from being bored as well as lacking inspiration each time you resume your desk isn’t enough. The whole concept is also not for someone who wants to get rich real quick or one who dislikes their job. If that’s the case, it’s better to find a new job or something you love to do.

FIRE takes a lot of focus and determination. You can love your job and still fancy early retirement as well as financial freedom. The concept is highly beneficial because it provides people with an opportunity to chase an alternative vision in life at an age where vigour and enthusiasm is still much intact. For FIRE to be attained, expenses need to be cut down. The basic FIRE formula is to spend less than you earn and then invest what you save in things that yield.