What Does FIRE Stand For?
FIRE = Financial Independence, Retire Early
It's a movement focused on one goal: accumulate enough money so that working becomes optional.
"Retire early" doesn't necessarily mean sitting on a beach. It means having the freedom to choose what you do with your time—whether that's traveling, volunteering, pursuing passion projects, or yes, traditional retirement.
The Core Math
FIRE is built on one principle: the 4% rule.
If you can live on 4% of your investments per year, you can theoretically live off that portfolio forever (historically, it survives 30+ year periods).
The FIRE Formula:
Annual Expenses × 25 = Your FIRE Number
Examples
- $30,000/year spending → $750,000 FIRE number
- $40,000/year spending → $1,000,000 FIRE number
- $50,000/year spending → $1,250,000 FIRE number
- $60,000/year spending → $1,500,000 FIRE number
- $80,000/year spending → $2,000,000 FIRE number
That's it. The math is simple. The execution is hard.
Why Savings Rate Matters More Than Income
Here's the insight that changes everything: your savings rate determines how fast you reach FIRE, not your income.
- 10% savings rate: 51 years to FIRE
- 25% savings rate: 32 years to FIRE
- 50% savings rate: 17 years to FIRE
- 75% savings rate: 7 years to FIRE
Someone earning $50,000 saving 50% reaches FIRE before someone earning $200,000 saving 10%.
This is why FIRE focuses on expenses as much as income. Cutting $500/month from spending does two things:
- Adds $500/month to savings
- Reduces your FIRE number by $150,000 (because $500 × 12 × 25 = $150,000)
Types of FIRE
The movement has evolved into several flavors:
Lean FIRE
- Target: $25,000-40,000/year spending
- FIRE Number: $625,000-1,000,000
- Lifestyle: Frugal, minimalist, often outside expensive cities
- Best for: Natural minimalists, those who hate consumerism
Fat FIRE
- Target: $80,000-150,000+/year spending
- FIRE Number: $2,000,000-3,750,000+
- Lifestyle: Comfortable, no major sacrifices
- Best for: High earners who don't want to change their lifestyle
Coast FIRE
- Concept: Save aggressively young, then "coast" to traditional retirement
- Example: Save $200,000 by 30, let it compound to $1.5M+ by 60
- After hitting your number, you only need to cover current expenses
- Best for: Those who want reduced stress without full early retirement
Barista FIRE
- Concept: Accumulate enough that part-time work covers expenses
- Your investments grow while you work 20 hours/week
- Often includes working for benefits (healthcare in the US)
- Best for: Those who want to quit high-stress careers but still work
The FIRE Journey
Phase 1: Calculate Your Number
- Track every expense for 3 months
- Determine your annual needs
- Multiply by 25
Phase 2: Increase Your Savings Rate
- Audit spending ruthlessly
- Optimize the big three: housing, transportation, food
- Increase income through side hustles or career moves
Phase 3: Invest Consistently
- Max out tax-advantaged accounts (401k, IRA, ISA, etc.)
- Invest in low-cost index funds
- Reinvest all dividends
- Don't try to time the market
Phase 4: Track and Adjust
- Monitor progress monthly or quarterly
- Adjust spending/saving as life changes
- Stay the course during market downturns
Common Criticisms (And Responses)
"It's only for high earners"
Response: Savings rate matters more than income. Many FIRE success stories are from middle-income earners who aggressively cut expenses.
"You'll run out of money"
Response: The 4% rule has survived every historical 30-year period, including the Great Depression. Many FIRE retirees also maintain some income.
"What will you do all day?"
Response: FIRE isn't about doing nothing—it's about having options. Most FIRE retirees are busier than ever with projects they actually care about.
"What about healthcare?"
Response: This is a real challenge in the US. Solutions include: ACA marketplace plans, Barista FIRE (working for benefits), retiring abroad where healthcare is affordable.
Is FIRE Realistic for You?
FIRE is achievable if you:
- Can maintain a 30%+ savings rate
- Are willing to question every expense
- Have 10-20+ years of earning ahead
- Can invest consistently regardless of market conditions
FIRE is harder if you:
- Live in a very high cost-of-living area with no flexibility
- Have major ongoing expenses (sick family members, etc.)
- Are starting with significant debt
- Can't control lifestyle inflation
The Geographic Arbitrage Shortcut
Here's the FIRE hack that changes everything: location independence.
If you can work remotely or don't need to work at all:
- Move to a lower-cost country
- Cut your FIRE number by 40-60%
- Retire 10-15 years earlier
$1.5M in San Francisco = $878,400 in Portugal = $684,000 in Thailand
Same lifestyle. Different price tag.
Curious about retiring abroad? See our guide to the cheapest countries to retire abroad in 2026.
Ready to calculate your timeline? Use our simple When Can I Retire Calculator.
Getting Started
- Track your spending for 3 months
- Calculate your FIRE number (annual expenses × 25)
- Calculate your savings rate (what % of income do you save?)
- See how long it will take at your current rate
- Make a plan to increase savings rate
Want to see your personalized FIRE timeline? Take our free 2-minute quiz and find out when you could reach financial independence.