What is F.I.R.E?

Financial Independence / Retired Early.

Are you tired of your job? Would you prefer to spend each day pursuing your hobbies and personal interests? Have you taken the time to plan your future so you know when the day will come when you will be FIRE?

Too many people seem to plod along, working each day to keep up with the dollars that they are spending. Retirement? That is too far away to worry about now, or so they think. Unfortunately, when one is caught up in the consumerism of society and living above their means, the time for retirement will be at their doorstep and they will be ill prepared.

If I were to ask you how much money you will need to last you through your retirement years, would you have an answer? More and more people are under the impression that as long as you work diligently and put aside a little bit of money (hopefully!), that everything will be fine and retirement will take care of itself. Wouldn’t it be much more comforting to at least have an idea of how much you will need to provide for your desired retirement? As an added bonus, you may even determine that you will be able to Retire Early and complete the FIRE equation.

As the definition of FIRE explains, the first step is to reach the point of Financial Independence. This may have slightly different definitions to different people. However, the essential idea is that financial independence is the point where one has enough money to sustain their lifestyle without the assistance of others. This point will vary from person to person, primarily because everyone has a different lifestyle that they are looking to maintain

Many people find that once they reach true financial independence, they do not have the burning desire to retire early. However, the appeal of financial independence is that one now has the option to continue working or pursue their dream of early retirement. For those that want to take the step into early retirement, it is essential to have an understanding of how much money one will need to last for the duration of their expected retirement.

Were you able to answer the earlier question about how much you would need for retirement? Assuming that you haven’t really come up with an answer yet, you can use the following as a general guideline to get you in the ballpark of your goal. Calculate the annual “salary�? that you would like to collect in retirement and multiply that number by 25. As an example, assume that your calculations indicate that you will need an income of $30,000 in retirement. As a ballpark estimate of the required funds to provide for that retirement, you will have $30,000 x 25, or $750,000. Likewise, a desired income of $80,000 would require a retirement goal of $2,000,000.

Often times people are in one of two camps when they calculate this number. The first group of people have a nice smile on their face and realize that they are on-track for their target number and things are looking good. The second group of people have a stunned look on their face and feel that they will never reach their goals.

If you find yourself in the first group, keep up with the good work and you will be FIRE before you know it. If you find yourself in a state of shock, don’t despair. Assuming that you would like to find yourself in the first group of people, there are steps that you can take today to begin working towards the goal of FIRE.

Homework Assignment

  • Have you calculated your initial figures to determine a ballpark-idea of how much money you will need to provide for your retirement? See The Retire Early Home Page for an abundance of information to help with this assignment.
  • Based on your calculations, will you be able to retire early? If so, what age do you expect to reach retirement?
  • Share your new findings with friends and family, as too many people are not focusing on their future and are living in the dark. Help spread the word, share the idea of FIRE!

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1 Response

  1. February 15, 2007

    […] After reading through the tips in the article, there are a few that I think have been instrumental to my success with eliminating debt and getting myself on the path to F.I.R.E.. […]

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