I’ll take a detour from my origin story to talk about this thing called “Financial Independence Retire Early” or FIRE because not everyone knows what this is.
In fact, it’s a concatenation of two really separate ideas that are not necessarily related, but everyone seems to just lump them together anyway.
And, it has gotten quite controversial lately!
Financial Independence (FI) is when you have enough assets so that you don’t need to trade your time for money (i.e., a job) to live comfortably. These assets create passive income streams regardless of what you do with your time.
It’s often coupled with Retire Early (RE), as in FIRE or FI/RE. Retirement is traditionally defined as a withdrawal from any productive work. Realistically, most people who have the physical and mental capability would almost certainly do something productive, which may or may not generate income.
When I achieve FIRE, I plan to work at things that I enjoy or I believe to be worthwhile. (Alas, not everything that is worthwhile is enjoyable all the time!)
And such things would be productive, even if society may not be able to place an economic value on it. Or even if society places zero economic value on it!
The point is that whether or not (or even how much) I happen to be compensated for my work would be a secondary consideration.
Just Trying to Get Rich
Actually, FIRE is actually a new name and new twist on an old idea.
In the past, as now, people just wanted to make as much money as possible to consume as much as possible and to never have to worry about money again.
Yeah, in other words, most people are just trying to get rich.
But this almost always leads to running on the hamster wheel of work.
And then, your health becomes so depleted because of stress that you don’t have time to actually enjoy your life before it ends.
The twist is that through a purposeful, systematic approach, you can actually calculate how much money you need to live comfortably each month.
Once you achieve the net worth needed to create that stream of money, you can then live your life in the way that gives you the most meaning.
How to Become FIRE
The answer to how to become FIRE is simple, but not easy. In general you just need to do the following:
- Increase your income
- Decrease your expenses
- Save and invest the difference wisely
- Manage risk appropriately
Yeah, a no-brainer, right?
It’s like telling someone that the key to being a successful stock trader is to “buy low and sell high.” Or telling someone that to being a successful businessperson is to “create value.” Much easier said that done!
But here are some ideas:
Increasing your income could mean getting a raise or doing side-hustles.
Decreasing your expenses is not just exercising frugality but also limiting all financial obligations.
Save the difference between your income and expenses for an emergency fund. Then invest as much as possible so it will grow faster than you can earn it through a job.
And finally, manage your risk to avoid catastrophe by either using insurance or simply avoiding certain activities (e.g., no Ultimate Fighting Championship career).
If You Want to Learn More…
My blog is more specialized, focusing on part time jobs, side hustles, and intentional underemployment for the seasoned business professional seeking to downshift.
So I won’t go into things like how to get a raise, index fund investing/the 4% rule, rental real estate, house hacking, or extreme frugality at the grocery store.
Instead, please check out my FIRE Journey Resources page where I give a list of useful blogs, podcasts, and other resources that have helped me.
What do you think?
Do you think pursuing FIRE is a worthwhile goal? Or do you think that it’s just a Millennial/young Gen-X fantasy?