Financial Independence…sounds pretty good hey! How about Retiring Early…Even better. We’re not talking dreams here. We’re talking about the FIRE movement…and it’s taking off!
FIRE stands for Financial Independence Retire Early. You reach FIRE when you have enough personal wealth to live your life without having to work. Generally, you’ll have enough income-producing assets that you can live out the rest of your days without needing another paycheque.
Getting Started with FIRE
There are two major principles to get you on your path to FIRE.
Spend less than you earn – The best way to start building a snowball of assets is by increasing your savings rate. It’s popular in the FIRE community to reduce spending on excessive lifestyle expenses to increase your savings rate. Devoted FIRE fans often talk of saving 50-70% of their income.
Investing the surplus – Now, once you’ve captured more of your income, you can’t just leave it in a bank (Have you seen term deposit rates?). People chasing FIRE often chose to invest in property and shares. Both come with their benefits and downsides and you will have to do what’s right for you.
FIRE has gained massive popularity worldwide. Some of the larger FIRE communities have a large and loyal following. You can learn a lot through these communities and ask questions of experienced FIRE followers.
The Australian FIRE Forum
Chatting FIRE is the dedicated Australian Financial Independence Retire Early Forum. Although relatively new, the forum is growing fast.
These are strong and helpful communities for those interested in FIRE. However, they do havean American vibe to the conversations. Thankfully, there is a subreddit for Australians:
r/fiaustralia is a place for Australians to discuss financial Independence and retiring early and has 49,322 members. According to subreddit stats on average there are 7 post per day and 111 comments per day.
If you’re looking to learn more, there’s a wealth of knowledge available from people on their path to FIRE or have reached FIRE. Here are some good places to start:
Here are some more podcasts to check out if you are interested in FIRE.
The masses are generally sceptical when people say they are trying to reach “Financial Independence” or they want to “Retire Early”. It’s often met with an air of judgment that causes many FIRE followers to keep their journey to themselves.
There are some common misconceptions about the FIRE community:
“It’s just a fancy term for being cheap”. FIRE followers are often called cheap when they watch their budgets or try and make their dollar go a little bit further. This is generally incorrect. Although they might hunt for deals and not spend $8 on a coffee each day, it doesn’t mean their “cheap”. The FIRE community knows that if they can increase and invest their surplus cash, it is going to pay off in the long run.
” You have to be on a huge income to reach FIRE”. While being on a large income would be helpful, it isn’t a necessity. What’s more important is how much you can save and how much your lifestyle cost. The bigger the income, the more you have to invest to replace it.
Aussie FIRE bug recently surveyed 654 members of his FIRE community. The survey showed the most common household incomes were:
- $195,000 +
- $75,000 – $95,000
- $135,000 – $155,000
- $115,000 – $135,000
- $55,000 – $75,000
“You have to sacrifice your lifestyle to reach FIRE”. The public seems to think that people trying to reach FIRE are sitting at home with all the lights out and eating baked beans. For the most part, this is wrong (although some people do take things to the extreme). Reaching FIRE is more about not spending excess cash on materialistic things.
Do you really need a new $50,000 car every three years on finance? Do you have to get Uber eat’s 5 nights a week? Most FIRE chasers aren’t very materialistic anyway, they would rather spend their money on investments. They would also argue that everyone else is sacrificing their lifestyle by working in a job they don’t like 5 days a week for 40 years.
“You must be lazy if you want to retire early”. FIRE isn’t about being lazy and sitting on the couch all day. Most people that I’ve spoken to that have retired early haven’t just stopped being productive. Instead, they work on projects they are passionate about.
They might start a new business, do some charity work or even start a self-sufficient farm. The truth is, it’s not about being lazy, it’s about spending your time on things that bring you joy.
So, are you hooked on the FIRE movement yet?