Financial Independence Retire Early (F.I.R.E)

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Financial Independence Retire Early (F.I.R.E)

Written by Corrina Murdoch
Fact-checked by Caitlin Wood

Financial Independence Retire Early (F.I.R.E)


Budgeting Retirement Saving

Anyone who has ever dreamed of financial independence, without having to wait for a pension to kick into, should know about F.I.R.E. What is essentially a method of retiring comfortably decades before reaching your golden years, the concept has taken off in recent years. With the rise of the gig economy and the increase in economic opportunities in the digital sphere, more people are flocking to this philosophy. Whether you’re just trying to get an idea of how the system works or are ready to take the leap, gaining a thorough understanding of the F.I.R.E philosophy and methods is essential. 

What is Financial Independence Retire Early (F.I.R.E)?

The F.I.R.E movement is about reaching financial independence in a timely manner. Not necessarily about going into full retirement and leaning into hobbies and travel, it’s about choice and freedom. As a result, the F.I.R.E process looks different to everyone. It could be working full time, focusing on your dream, writing the next great novel, or seeing the world. The key is that, by taking proper steps and acting early, you can regain control over your financial circumstances. 

How Does Financial Independence Retire Early (F.I.R.E) Work?

The key to F.I.R.E is extreme saving and investing of your income and starting as early as possible. A big reason that people tend to retire in their sixties is that it’s still fairly uncommon to plan for retirement during your twenties — but it is something that everyone should do. It gives you an opportunity to assess the fate of your funds, to find out where you can save, and really focus on crafting a budget. Aggressive savings is key. Those pursuing F.I.R.E save between 50% and 75% of their income. 

Based on the premise of maximizing your income and reducing your expenses as early as possible, F.I.R.E is all about planning ahead. By putting an emphasis on saving and investing, you are taking the first step in the F.I.R.E approach. 

Check out these budgeting apps to help you get started. 

Types of F.I.R.E

There is more than one way to approach the F.I.R.E system, though all plans have the same basic goal: retire early and achieve financial independence. With three main factors to the plan (spending, saving, and investing), the different types of F.I.R.E deal with what level of emphasis you place on the different categories. 

Fat F.I.R.E

This is the approach that has the highest amount of spending. It relies on your saving 25 times the amount of annual spending, though it involves the threshold for spending being substantially higher. It is preferred by those who like to spend, want to focus on experiences, or other costly activities during retirement. It also gives the chance to reduce those expenses in the event of an emergency. 

Learn what you can do if you over contributed to your RRSP.

Lean F.I.R.E

An approach that is based on spending less than average each year, the lean F.I.R.E system is meant for those who are able to drastically reduce expenses. The mark of lean F.I.R.E success is when you have saved 25 times the amount which you spend in a year, without fluctuating from the low amount you spend. While this plan tends to be most plausible to households used to saving, it offers less wiggle room in terms of spending during retirement. 

Try using a robo advisor to help you start investing.

Coast F.I.R.E

The idea behind this method of achieving F.I.R.E is to set a financial goal based on the age at which you want to stop aggressively saving. The idea is that this amount is going to grow by accruing interest, thus letting you coast toward the final retirement fund goal. It’s good for those with savvy investment strategies and high-yield, short-term savings abilities. 

Check out how you can earn income by investing in real estate.

Barista F.I.R.E

This method is meant to enable you to stop working full-time as soon as possible, though still requires you to keep part-time employment. Generally, it is easier to achieve because it doesn’t require savings of seven figures. It encourages freedom and lets you reap some major benefits of the F.I.R.E lifestyle without making too many upfront sacrifices. 

Learn more on how to start preparing for retirement.

Advantages and Disadvantages of F.I.R.E

When assessing a financial plan, it is important to gain a thorough understanding of the benefits and downsides. Especially with a plan as intensive as the F.I.R.E method, you need to figure out, ahead of time, whether it will work for you personally. Based on how important the advantages and disadvantages are to you personally, you can make your choice. 


  • The F.I.R.E system lets you retire early, giving you more time to focus on yourself, your family, and your personal interests. 
  • It helps foster strong savings habits which, even if early retirement isn’t your goal, still helps you generate a healthy nest egg. 
  • Reduced stress results from financial freedom, letting you focus on the road ahead instead of worrying about expenses. 


  • The employment gap in your resume after leaving your full-time job can make it challenging to reenter the workforce if you choose to later on. 
  • A retirement lifestyle may not suit you, since some rely on their occupation for both stimulation and socialization. 
  • Unforeseen expenses can throw a wrench into your plans, whether it is a result of an illness, family emergency, or market crash. 
  • F.I.R.E is hard to achieve because it requires such extreme savings (often 50% of your income) and frugal living.  

Are you super risk-averse? Consider using a high-interest savings account to protect your money from market fluctuations. 

Tips to Achieve F.I.R.E

Whether you are completely invested in making F.I.R.E your future, or if you just want to try it out, there are some things you can do to make the process a bit easier on yourself. The key is to plan ahead so you’re prepared for the road ahead. Some tips include:

A Contingency Fund is a Must

Have an emergency fund before you start saving for your early retirement. This should be separate from the accounts to which you’re contributing with the F.I.R.E savings. It doesn’t contribute to your retirement portfolio, though serves as a safety net in the event of an unforeseen incident. This way, whether you’re facing car repairs, a dental emergency, or something else, the issue won’t derail your savings plans. 

Start Saving Right Away

Whether or not you see the F.I.R.E method through to early retirement, a healthy savings fund is always helpful. F.I.R.E requires intensive saving practices, and it can be jarring to start this type of journey from scratch. If you are new to the world of savings, start smaller. Work your way up to the 50% mark as soon as you can, eventually increasing this amount to 75% of your income. 

Check out this guide to automate your savings

Pay Down Debt

Eliminate debt as soon as possible. Regardless of the type of loan, debt significantly detracts from your ability to succeed with F.I.R.E. Before focusing on the aggressive savings, turn your attention to any debt you have. Pay that off as quickly as possible by allocating a substantial part of your income toward the payments. This way, once you are out of debt, you can start the F.I.R.E process before you can succeed.  

Struggling with your debt? Check out these debt relief options.

Invest Early and Stick to Your Plan

Consult with a financial specialist to discuss your options and begin to build your portfolio as early as possible. Tempting as it may be, avoid withdrawing any gains. Your investments are going to make a massive contribution to your success with F.I.R.E, so be sure to start early and stick with it. 

Live Below Your Means

Find ways to live frugally, whether that is creating shopping for essentials, adjusting your eating habits, or reducing your cost of living by finding a new residence. From vehicles to insurance to monthly spending on things like gum, you might be surprised to find out just how much money you can save by reducing your daily expenses

Final Thoughts on F.I.R.E

Those who start early and stick to the plan can reap the advantages of F.I.R.E as early as their mid-thirties. An investment in the future, though it may moderately detract from your comfort in the short-term, F.I.R.E gives you a chance at real financial freedom. Even if you don’t plan to pursue F.I.R.E over the long-term, there are still a lot of lessons to learn from the practice. From frugal and affordable living to healthy savings practices, F.I.R.E is all about prudence and a focus on the future. The opportunity to control your retirement, live comfortably and get the life you seek is highly sought after, and F.I.R.E is a great way to get there.

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Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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