Save and invest enough money to become financially independent and leave the 9-to-5 workforce while you're still (relatively) young: Sounds exciting, maybe, but also daunting. The challenges haven't stopped a small but growing group of supersavers — along with some more famous devotees — from becoming part of the "FIRE" movement.
And they want you to know that you can do it, too.
"FIRE" stands for "financial independence, retire early." The gist of the concept, and the movement it spawned, is that you save as much of your income as you possibly can, typically at least 50%. The goal is to reach a state of financial independence — wherein you would have enough money to sustain yourself without any additional income — and then quit your job to do something you like more.
Many FIRE proponents plan to exit the workforce in their 30s or 40s. Even if that isn't a goal that resonates with or seems possible for you, there's a lot you can learn from these supersavers about how to get better at money and feel more in control of your own financial situation.
Video by Stephen Parkhurst
The FIRE movement generally requires some sacrifices. You may need to pick up another job or side hustle, eliminate vacations and social spending, and refuse to give into lifestyle creep.
"The biggest challenge on the financial independence path was to choose to live my life differently than the other people in my life," says Grant Sabatier, a FIRE advocate and the author of the book "Financial Freedom." "My friends were all going out, spending a ton of money — I lived in a crappy apartment and drove a crappy car."
FIRE can also mean different things to different people. While some find it a useful framework for getting ahead in their retirement planning, prioritizing financial independence allows others to quit a job they hate and instead pursue less lucrative work they enjoy.
Although author Ramit Sethi, who wrote the book "I Will Teach You To Be Rich," is supportive of the FIRE movement in general, and of other frameworks that help people save more money, he says it's also important to keep your end goal in mind. It may not necessarily be a good idea to retire at 35 only to sit in your house and watch TV for the rest of your life, for example. Instead, he suggests, you could strive to free yourself up from a career you may not enjoy and focus on what you want to do.
"You can find a different job," he says. "You can become an entrepreneur."
How easy it is to try to make FIRE work will depend on your personal financial situation. If you're a high earner living in a low-cost area, for example, and you don't have a lot of debt, you may be able to maximize your saving and investing if you make a few smart money moves.
The average American has to contend with stagnant wages and rising expenses for essentials like health care and housing costs, though, making it a struggle to put money away at all. The typical adult also has nearly $30,000 in debt to pay off, not counting mortgages.
Even if you're not looking to retire early, there are some lessons you can learn from FIRE to make progress on your goals.
1. Create a retirement target. It's hard to know just how much money you'll need to retire, whether you're aiming to escape the workforce early or not. Use a retirement calculator to see how much money you should be putting away.
2. Track your progress. Keep track of your net worth and understand how your wealth changes over time, especially as you pay off debt and up your earnings. Net worth is a calculation that many FIRE adherents pay close attention to, and keeping tabs on it will help you stay more aligned with your goals.
3. Take advantage of automatic increases. Even if you're not putting aside 50% of what you make, it's smart to try to boost your savings rate. An easy way to do so is to schedule automatic increases. For example, you can sign up to have your 401(k) contributions increase by 1% automatically every year, meaning that you're saving more without even thinking about it. Just a 1% increase every year can have a five-figure impact over the course of your career.
4. Prioritize paying off debt. Putting an extra $25 a week towards your debt can save you thousands of dollars and help you become debt-free years sooner.
5. Diversify your income. Many FIRE devotees diversify their income streams, picking up a side hustle or starting a business in order to earn more — and, in turn, save more. This can also be a smart way to increase your financial security in the event of a layoff or economic downturn.
6. Stick to a long-term strategy. If you aim for FIRE and miss, you'll still likely end up in a better financial position than you were in before. Experts recommend you save and invest for the future, developing good financial habits and sticking to them over the long term to see the best results.
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