When my husband and I declared financial independence, he being age 42 and I nearing age 44 at the time, we’d never even heard of FIRE. That is, the movement birthed by an online personal finance guru encourage millenials and Gen-Zers to retire super-early. All we knew was, three years before making that oh-so-controversial declaration, my husband had had enough of his job and didn’t want to wait until his mid- to late-fifties to retire. I had already quit my job to be a stay-at-home mom, but I’d been ready to leave my career for years, so I completely understood where he was coming from.
So we took a long, hard look at our finances, and began to work toward building a nest egg big enough so that our investments would provide us with a decent living. Only after we left the suburbs to move out into our dream home of a rural property in the woods did we learn that other people were doing what we’d done, only beginning at a much younger age, with the intention of leaving the work force before age forty.
“FIRE” in this context stands for “Financial Independence, Retire Early.” In essence, it’s about working to build up a large nest egg much earlier than is conventional so that you have the freedom to walk away from your job or career in your thirties or forties, instead of having to wait until age sixty or older.
However, the meaning of the phrase “financial independence” can be interpreted differently than that. Yes, it typically means that a person has enough money saved and invested so that their money produces enough interest to cover their annual living expenses.
However, you can also define “financial independence” as the state of not needing any money, or needing very little of it. Some people prefer to live off the land in a tiny house, bartering for what they can’t produce themselves rather than paying money for items in a store. Such people need very little money in order to live their preferred lifestyle.
But that’s not most of us. Most of us consider a million dollars the minimum needed to to declare financial independence, a little less for single people, somewhat more for married couples with more than two children, the number varying depending on where you live and that standard of living you want to maintain.
Those who are part of the FIRE movement are endeavoring to grow their nest egg to that number before the age of forty-five. Which leads us to the second part of the anacronym, “retire early.”
Save up a million dollars between the ages of twenty-two and forty? That sounds next to impossible! And what about inflation? What about paying for higher education for your children?
In future posts about the FIRE movement, I’ll be addressing those issues. Right now, I’ll just tell you that no, it’s not impossible, or even next to impossible, for most people with middle-class incomes to achieve early financial independence.
And there you have it: the nuts and bolts of the FIRE movement. Interested in knowing the exact steps it takes to build a large nest egg relatively early in life? Check out my book, Hatching The Nest Egg.