Retirement is something that many 20 and 30 somethings probably aren’t thinking about. 

 

Many approach retirement as something that isn’t important to think about now due to the length of time until it’s a reality.

 

I understand that. As a recent member of the 30’s club, statistics would tell you that I have somewhere between 30 to 35 years until I can retire.

 

And sure, there are some ways to mitigate that.

 

Maybe I’ll get a great inheritance and I’ll retire in my late 50’s. Who knows?

 

Realistically however, I’ll have to wait until I’m 60 to hang up the work keys, and call relaxing my new career.

 

Waiting until 60 to retire doesn’t sit well with some people though. And while I can argue that it probably doesn’t sit well with most people, there are a group of people who are doing something about it.

 

Enter the FIRE Movement.

 

FIRE stands for Financially Independent Retire Early.

 

Today I want to look at this movement and maybe help you to see the merits it holds for your situation and how it can possibly change your long-term goals.

 

The History of FIRE

It is 1992 and a book titled “Your Money or Your Life” was written by Vicki Robin and Joe Dominquez.

 

In this book, the movement of Financial Independence Retire Early, which is referred to as FIRE, really began.

 

The authors demonstrated in this book that retiring early was not only for the rich and famous but could be achieved by ordinary people. 

 

Fast forward about 19 years to 2011 and the age of the blog really had a massive impact on this movement.

 

One blog in particular, Mr. Money Mustache, really helped to push this forward.

 

More and more bloggers started to address this concept and make it more understandable and attainable for the average person.

 

Now, in 2022, hundreds of thousands of people are following this very popular movement.

 

But what is FIRE really? It’s one thing to say I want to retire early and be financially independent but what does that look like?

 

How Does FIRE Work?

FIRE tells people to save a high percentage of their income while living modestly so they can achieve an earlier retirement.

 

Essentially, there are three tenants of FIRE to be aware of.

 

1. High savings rate

2. Living Frugally

3. Strong focus on investing

High Savings rate

Many followers of the FIRE movement are major supporters of saving a high percentage of their income. It is not unheard of for these people to save upwards of 50% or more of their take-home pay.

 

Living Frugally

A second tenant most people in the FIRE movement adhere to is frugal living.

 

When you understand the point above of a high savings rate, this point makes sense.

 

If you are saving half of your income, you are going to naturally be living modestly. The remaining portion you are not saving still needs to be allocated to daily needs such as mortgage, food, and utilities.

 

While minimalistic living does not always equate to the FIRE lifestyle, it certainly has a huge impact on how quickly you can achieve FIRE.

 

Strong Focus on Investing

Truly, anyone who is focused on retirement should have a focus on investments.

 

We at the Financial Feast Pod are huge supporters of investing, especially in dividend producing funds and lower cost index funds.

 

We also really embrace the power of compound interest and encourage everyone to start investing as soon as possible.

 

Another extremely beneficial investment for those who are seeking to life the FIRE movement is rental homes. Done wisely, rental homes can massively increase your passive income and help early retirement come much sooner.

 

Different Flavors of FIRE

The FIRE movement is a bit like ice cream. Someone could say that they like ice cream, but that’s a very broad statement. Do you like Strawberry? How about cookie dough? Maybe you are a Rocky Road fan.

 

The FIRE movement also has a few different flavors to it that you can follow depending on your lifestyle goals, income potential, and retirement plans.

 

Lean FIRE

This brand of FIRE is what everyone things about. You save a bunch, live a modest life and retire at an early age.

 

Fat FIRE

Fat FIRE is a bit different than lean FIRE as it focuses on still saving a bunch but living a more conventional lifestyle.

 

Those who have higher incomes would be able to fall into this category as their level of take-home pay would allow them to life a less frugal life while still saving a large amount of money.

 

Barista FIRE

Barista FIRE is a newer iteration of this popular movement.

 

In this flavor of FIRE, the followers can retire earlier on a more modest income level because when they retire, they still have some part-time income.

 

This part time work helps them not only with their bills, but often with their health care.

 

Starbucks, an obvious source for the namesake, is one of the larger companies that provides their part time workers health care.

 

Steps to begin FIRE

Want to retire early? Of course you do! FIRE sure does look great for some people.

 

If you are one of those people and you want to start pursuing this movement, what steps should you take?

 

Know your money situation

The first step to any well-established goal is to know where you are starting.

 

What is your income? How much are your expenses? What do you want to spend in retirement annually and how does that correlate to how much you need in your retirement accounts?

 

Take your time. Sit down with a professional like a financial coach or a financial advisor and really start to map out a solid, all-encompassing idea of where you are currently and where you want to go.

 

For more information on the importance of creating a budget, or spending plan, see our other blog post on how budgeting helps you achieve your financial goals quickly and effectively.

 

Cut expenses

A real key to FIRE for most people is to cut their expenses. We all have luxuries that we truly could live without. Dropping some of those unnecessary costs each month could really add up.

 

Increase income

An unnecessary but helpful step to achieving FIRE is to increase your income.

 

This step may be as simple as talking to your company about getting that well deserved pay raise. It could also look like starting a side hustle.

 

Be creative. Find something you like to do and figure out a way to monetize it.

 

Much like the above situation, this increase of income does not have to be life changing.

 

Making an extra $100 dollars a month adds up fast and if you can allocate all of that to retirement savings, you are making a much faster change.

 

Try your hand at some sources of passive income as well.

 

Maybe you have something really helpful or interesting and you can write a book. Maybe you should consider looking into rental properties. Perhaps you can create a blog and focus on affiliate marketing.

 

What skills and interests do you already have that you can monetize? 

 

Focus on saving – specifically investing

This step cannot be undersold in how important it is.

 

You can have a plan, cut expenses, and increase your pay all you want, but if the money is going to poor savings choices, then it is all in vain.

 

Saving for retirement should be in the stock market, not in your bank account.

 

We at the Financial Feast Pod are huge advocates of maximizing your income in a correctly managed retirement account.

 

In fact, we have another post on how to Maximize Your Money.

 

Make sure you are speaking to a financial coach or advisor about where you should be investing your hard earned and saved money. 

 

Do you own research as well.

 

No one is more interested in your financial well being than you are. Do not fully trust someone else without doing your own work on your finances.

 

What did you learn? Do you have any more questions? Let us know either on social media or by email!