What Is FIRE, and Is It for You?

Retirement before the age of 65 is a dream for many Americans. But through saving and investing, one financial movement is turning early retirement into a reality. Hello financial independence. Goodbye 9-5 job.

Enter the FIRE movement.

The focus of the FIRE movement is debt elimination and wealth accumulation. Devotees practice discipline, dedication, and patience. Early retirement isn’t a guarantee, but many people praise the movement for influencing their financial life for the better.

Interested? Here’s what the fuss is about.

What is FIRE?

FIRE stands for “financial independence, retire early.” It’s a lifestyle movement that prioritizes saving and investing in order to retire before the age of 65. In fact, many FIRE followers plan to retire in their 30s or 40s. And they follow an aggressive budget to do so.

How do you get started?

Financial independence is at the core of the FIRE movement.

To allocate money to savings and investments, FIRE followers focus on two actions: they keep their expenses low and increase their income.

The idea is that a higher income paired with reduced expenses helps achieve financial independence as quickly as possible. Extra money is allocated to paying off debts. Once debt-free, extra money works to rack up compound interest in savings and investments.

The goal of FIRE is to save anywhere from 50% to 75% of one’s income into a retirement fund. Once a retirement fund reaches about $1 million, followers often quit their 9-5 day job to pursue other interests.

What do you do after retirement?

During retirement, FIRE followers often make modest retirement withdrawals in tandem with working a part-time job or side hustle. “Modest” means 3% to 4% annually.

Frugal living in retirement requires constant monitoring and reallocation of assets. It’s not the right lifestyle for those who want to ignore their finances after achieving financial freedom.

What are the different types of FIRE?

There are different approaches within the FIRE movement. And these variations inform the lifestyle that FIRE followers lead.

Fat FIRE

Fat FIRE is for those who want to enjoy retirement without limiting spending. These followers save up an investment income that covers a generous portion of living expenses — more than the typical investor. Once they retire, they don’t need a job to make ends meet.

Lean FIRE

Individuals who follow Lean FIRE slash their spending and focus on the bare minimum in order to survive. They live a minimalist lifestyle and are extremely frugal.

Barista FIRE

Barista FIRE followers retire early but keep a part-time job for the extra income and benefits. They are able to quit their traditional 9-5 job. And additional work covers their living expenses and draws less from their retirement fund, extending its duration.

Coast FIRE

A Coast FIRE follower also works a part-time job but has a well-funded retirement. They have invested enough money at a young age that they don’t need to contribute any more to their retirement fund. The difference is these people don’t need to work, but choose to work. They pick low-stress jobs that cover expenses while leaving their retirement fund untouched — allowing their investments to grow over the next 35 or so years.

When did FIRE become a movement?

The FIRE movement is trendy, but it’s not new.

In 1992, the FIRE movement drew inspiration from “Your Money or Your Life,” a book written by financial gurus Vicki Robin and Joe Dominguez. The book popularized obtaining financial independence, which means having zero debts and enough savings to live freely.

In fact, the authors asserted that financial freedom wasn’t simply an idea — it was a lifestyle.

Robin and Dominguez spurred a grassroots movement called the New Roots Foundation. Its mission was to free people from the chains of consumerism. Followers were encouraged to think critically about the transaction of exchanging time for money. Rather than waste the best years of their life working a 9-5 job, followers were told to live a simple, frugal lifestyle. Extreme frugality was the key to achieving financial independence as quickly as possible. And then they could start enjoying life freely.

It took another decade before the FIRE movement began.

After the Great Recession in the late 2000s, an entire generation became disillusioned with the current way of life. During this time, the FIRE model gained traction in online finance communities. FIRE became a way to embrace financial choice during a bleak economic period. And millennials eagerly embraced the movement, which called for retirement before the traditional age of 65.

In the last year, the FIRE movement has again resurfaced with countless mentions in books, articles, and podcasts.

How has the FIRE movement shaped your financial life?

Patti Henry, blogger at Our Life On Fire

The FIRE movement has greatly influenced our behavior and the financial decisions that we make on a daily basis. Over the past few years, we have worked on paying off debt, saving money, finding new side hustles to make more money, investing, and maxing out our retirement avenues. We now track all of our expenses, live more frugally, and have become more mindful of our spending.

Having a goal of FIRE has changed our perspective on life. We have wiped out the mindset that we need to go to school, work, then retire at 65. The FIRE movement has shown us that there is a different path we can follow.

Maria Smith, founder of Handful of Thoughts

Learning about the FIRE movement gave a name to some of the habits and behaviors I had already been practicing.

When I first learned about FIRE I went right down the rabbit hole and tried to be as frugal as possible by cutting out every expense I could. Since then I’ve learned that pursuing FIRE isn’t only about how much money you can save or how early you can “quit your day job.”

The movement is more about a mindset shift and aligning your spending [with] your values.

That has been the biggest takeaway for me and the biggest change to my financial behavior. Now instead of just saving to save and be as frugal as possible, I’m spending more in some categories that are important to me while eliminating other budget categories altogether.

I’m much happier now that I’m focusing on my values and not just a number.

R.J. Weiss, founder of The Ways to Wealth

I've gotten a lot of benefit from having an early exposure to FIRE. ... I've always found a way to increase my total percentage of income saved — seeing it almost as a game of how high I can get. While I haven't reached the 50% savings rate like others in the community, the idea alone [to not] stop at 15% or 20% has had a big impact.

Bottom line

Chances are you’ve heard of the FIRE movement. It stands for financial independence, retire early. And it’s more than a trend — it’s a lifestyle.

Patti Henry is an occupational therapist, wife, mother of two, and blogger. Henry, along with her husband, created Our Life On FIRE, which focuses on their family’s journey to financial independence. They hope to inspire others to take the steps to make their money work for them, in order to live a meaningful life on their own terms.

Maria Smith is the founder of Handful of Thoughts, a resource dedicated to helping moms take control of their time and money. At the age of 30, Smith was mortgage-free after paying off a $342,000 mortgage in less than five years. She is working toward achieving financial independence while helping other moms do the same.

R.J. Weiss is the founder and editor of The Ways to Wealth, a Certified Financial Planner, husband and father of three. He's spent the last 10-plus years writing about personal finance and has been featured in the New York Times, CNBC, Bloomberg, and other publications.