All about how to retire early, and the FIRE acronym.
If like me, you have embarked on a personal quest to educate yourself on how to be financially aware, then you can’t avoid coming across the FIRE movement, aka Financial Independence Retire Early. Wtf does the FIRE acronym stand for, you ask? Well, let me tell you.
As you may know from a previous post, my husband and I radically changed our spending habits since deciding to buy a motorhome. A motorhome will allow us to gain geographic freedom, live more sustainably, and at a slower pace than what a big city like London allows. Having a savings goal has led me down a rabbit hole of personal finance content, and for months I have been reading articles, watching videos, and reading books about how to live a financially sustainable life, without having to sell your soul to a high-paying yet spirit-killing, time-stealing job.
This is where the FIRE movement popped up for me. Essentially, those seeking to achieve FIRE save as much of their income as possible, investing aggressively and living frugally, so that once they achieve their savings goal they will be able to retire earlier than the traditional retiring age.
It became particularly popular in the 2010s among online communities of American millennials, and it is slowly becoming more and more mainstream all over the world. Apparently, it is more achievable than we thought, to not work for 50 years 40 hours a week before calling it quits.
Financial freedom vs financial independence
Sometimes these two terms are used interchangeably, however, they don’t mean the same thing.
If you are interested in this movement, you should know that financial independence is the ability to afford not to work if you don’t want to. This is different from financial security, which means being able to pay all of your bills on time and without going into debt, and financial freedom, which means earning enough to live the lifestyle of your choice without worrying about your bank account.
How does Financial Independence Retire Early work?
Before learning about FIRE, the idea of retiring early never even crossed my mind. It was something for Hollywood stars to do if they wanted to leave the industry before staying in it long enough for their career to plummet. Surely not for normal folks like us!
Millennials have lived through so many economic recessions, political crises, and environmental disasters, that working until we can barely hold ourselves straight is pretty much engrained in our expectations of the future. If our parents bought a house, grew three kids, and managed an entire division by the time they were 30, we rent until well into our 30s, fight for a living wage so we can pay off our crushing debt, and consider ourselves highly functional if we have more than three houseplants we haven’t killed yet.
However, there is evidence that you don’t need to be the child of a millionaire to become a millionaire, on the condition that you follow a very specific strategy, in the following steps:
1. Understand what your FIRE number is.
The first thing to do is figure out how much money you need to live the lifestyle that you want, and then multiply it by 25: this is your Financial Independence Retire Early goal.
For example, if my monthly expenses are £2,000 and I am happy to live the rest of my life the way that I currently am, my fire number is:
£24,000 per year x 25 = £600,000.
2. Pay off all of your debt.
This is important: before you even consider starting to save for your FIRE, you need to get rid of any debt that you may have. An exception might be your mortgage, which takes notoriously a lot of time to extinguish, but you do need to clear all other debt: credit card, personal loans, car loans, student loans (if you have the kind that accrues interest) and any other liability that is reducing your net worth.
3. Save, save save.
Living a frugal lifestyle and saving as much as possible is crucial to FIRE, especially if your salary is average (anywhere between £25k and £35k per year before tax). If you want to achieve your FIRE goal as early as possible, a careful exercise of budgeting and financial planning is key: keeping your eyes on the prize will make you think twice about how you want your money to be spent.
Many people from the movement recommend saving 50% of your income, and some go so far as to say they have managed to save 70%. For my household, this would impossible with the salaries my husband and I currently have and how much London costs, which is a good segway to the next point.
4. Earn more.
Unless you have a very high paying job, you will need to diversify your income stream to get to your target in a shorter amount of time, because there is only so much that you can save before it starts getting in the way of your quality of life. Again, I’m talking about normal folks like you and me earning normal wages, I am not talking about people in the higher tax bracket (earning over £50k per year)
This can be done by picking up a side hustle: I have a post lined up where I will share accessible ways to pick up extra income, so stay tuned!
5. Invest aggressively.
Everything that you save, you should put into an investment fund immediately, and let it accrue interest. The passive income generated by compound interest is practically free money.
Compound interest is the interest you earn on the interest. For example, if you invest £1,000 over a year and the interest rate of the fund is 8%, you will have an extra £80 at the end of the year. The year after, the interest will be calculated on £1,080, so you will have £86 more, and so on.
The above may look like very little money, but wanna know how much you will have after 10 years of investing £100 every month? You will have £18,137 in your portfolio, of which £6,137 is interest. With just £100 per month! That’s what the average person spends on eating out!
The more you can invest, the more free income you will accrue, and the earlier you can retire.
I recommend reading “this post I wrote about the best book you can read if you are a total investing beginner! “The Simple Path to Wealth” Summary I wrote:

6. Retire.
If you stay steady on the road of paying debt, saving, and investing, all that is left for you to do is quit your job whenever you get to your goal. From then onwards, you can live an idle life by just withdrawing 4% of your investments every year to cover your expenses (which will be that £24,000 we mentioned in the example above) and you will be able to live off your assets forever.
Types of Financial Independence Retire Early
There are a few ways you can decide to set your Financial Independence goal, according to your personal preference, circumstance, and ideal lifestyle.
- Lean FIRE. According to this model, you will agree to live a quite frugal lifestyle and receive a relatively small amount of income – just enough for you to cover your basic needs. This allows you to reach your FIRE number sooner, but it also limits you in how much you are able to spend every year before running out of cash, or having to pick up active income again.
- Fat FIRE. This sees you accumulating enough wealth to be able to withdraw an above-average amount of money from your investments, with no big concern about living expenses when you retire. It is more difficult to achieve on an average income.
- Barista FIRE. This is something in between the first two: you accumulate enough wealth to be able to semi-retire. Maybe you will start working part-time, or taking a lower-paying job that you love, or you just pursue the side hustle you’re passionate about, or maybe your partner is still working.
- Coast FIRE. With this model, you set aside enough wealth by a certain age so that it will accrue enough income to allow you to retire a more traditional age (around 65 years old). You don’t withdraw anything from your portfolio until then. In the meantime, you can use your active income to enjoy your life without having to save anymore.
Does the FIRE movement work?
Given the plenty of testimonies online (just look it up on youtube!) it is evident that it’s possible to achieve FIRE if you follow the plan and are able to stick to it over the years.
I think that it can be very empowering to set up a strategy that may allow you to work less, and only on what makes you happy.
Personally, I love my job, I’ve worked hard to get where I am today, and I’m not too attracted to the idea of not working at all. I think I’d get bored, unmotivated, and honestly quite depressed. Although it might sound enticing to some, cruising idly by for the next 50 years would end up being more of a burden than a dream for me.
On the other hand, the pandemic has certainly forced me to re-evaluate how much time I spend working, instead of with my family and friends, or anywhere other than in front of a screen. So, it would be nice to be an employee for only 16 hours instead of 40, for example, and dedicate the rest of my time to the other interests that I have, such as this stupid blog, or taking a road trip with my husband, or playing with my niece.
I don’t know whether, after we get our motorhome, my husband and I will seriously consider setting aside for Financial Independence, however, its learnings around living frugally and spending less have certainly opened up a world of opportunities for us to make conscious, informed choices about what will come next.
Related articles:
- “The Simple Path To Wealth” by JC Collins Summary
- How my husband and I saved £10,000 in 8 months
- How ti set up a budget planner notebook to track your expenditure
This article was all about the FIRE acronym (Financial Independence Retire Early)

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Greetings! Very useful advice within this article! It is the little changes that will make the greatest changes. Many thanks for sharing!