F.I.R.E is an acronym for Financially Independent; Retire Early and although it’s been all the rage on social media recently, it’s not a new idea. F.I.R.E originated in 1992, in a book called “Your Money or Your Life”, and introduced a financial mindset defined by frugality, aggressive saving and investing. Let’s dig into this movement, see what it’s about and whether it’s something you can follow.

The core principles

F.I.R.E is a way out of the rat race, an escape from that job you hate and a split from consumerism. It boils down to time being money, and followers of this movement compare expenses to the number of hours they would have to work to cover those expenses.

Financial planners usually recommend saving around 15% to 20% of your income, however, F.I.R.E folks stash away 50% or more of their monthly income. The math and logic behind it is as follows:

If you save 10% of your monthly income, it will take you approximately 9 years to be able to afford 1 year’s expenses. However, if you save 50% of your monthly income, it will take you 1 year to save for that 1 year’s expenses.

The more you save, the sooner you’ll be able to retire. The ultimate goal for some would be to afford 30 years’ worth of expenses, which is approximately R6.5 million, based on the estimated monthly cost for a single person in South Africa.

After retirement, you’d still keep a disciplined eye on expenses, withdrawing around 3% to 4% of your funds annually, depending on your desired lifestyle.

How do you save over half of your salary? 

To be able to afford such a high savings rate, F.I.R.E aspirants focus on reducing expenses and maximising income. There are several financial hacks you could follow to cut expenses while trying to stay mindful that this is a long-term solution, so your cost cutting will need to be viable in the long run. Increasing your income will depend on having a high paying job, having side hustles and exploring passive income avenues.

Is this for you? The pros and cons

Cons:

  • Your quality of life can significantly decrease if you’re saving 50% of an already small salary.
  • Investments might fluctuate drastically, which may create a dip in your savings and delay your plan.
  • Some have also found that retiring early made them lose their sense of worth, while others have no problem spending all their time on the beach. It’s important to keep your personality in mind and set your goal to be able to retire, but not necessarily do so.
  • Using the F.I.R.E method can be difficult on a small income. It would take some time to build your income to be able to live a comfortable, although meagre, lifestyle and save 50%+ of what you earn.

Pros:

  • Once you’ve reached a point where you no longer have to work for money, you have the freedom to become more entrepreneurial, invest time in hobbies or take a job that’s low in salary but high in passion.
  • F.I.R.E focuses your mind on retirement, planning for it and visualising it.
  • It also helps you prioritise investing and saving, which is rarely a bad thing. You’ll just need to make sure that you’re not in debt where a high interest cost could work against your savings.

Variations – Making it your own

There are several ways in which the F.I.R.E movement manifests, namely these 4 branches: Fat F.I.R.E (people who save more than the average amount, but still live a traditional lifestyle), Lean F.I.R.E (extreme savings), Barista F.I.R.E (those who have quit their full-time job but work part-time to cover current expenses that cut into their retirement fund) and lastly, Coast F.I.R.E (those who work part-time but their retirement fund has enough saved up).

Whether you decide to coast, keep it lean, live fat or be a barista, the F.I.R.E movement has something for anyone looking for a fast track retirement plan. This movement might be different for everyone, depending on specific lifestyles, but anyone can draw inspiration from F.I.R.E and tailor it to suit their needs.

Avatar

Written by .

Lisa, a Slice and blog writer for 22seven, believes that financial literacy is one of the most important skills you can have. She aims to keep information about your finances as simple and straightforward as possible to ensure anyone can learn to boss their money. In her spare time, you'll find her on the tennis court, on her mountain bike or spending time watching documentaries.
Email |

The views and opinions expressed on the post are those of the authors and do not necessarily reflect the official policy or position of 22seven. Any content provided by our bloggers or authors are of the their opinion.