If you’re interested in personal finances, chances are good that you’ve come across the FIRE movement. FIRE stands for “Financial Independence, Retire Early.” This movement, which is popular among younger professionals, is focused on living frugally and saving aggressively — all with the end goal of retiring much earlier than usual. 

Basics of the FIRE Movement

While there are no official rules for the FIRE movement, the idea is simple. Some people come to the movement because they don’t want to work for the majority of their lives; others simply don’t want to be beholden to employers or financial institutions. Still others want to retire early and enjoy adventures, philanthropy, or even entrepreneurial pursuits. 

In decades past, “retiring early” meant that you might get out of the workforce at age 50 instead of in your 60s. FIRE followers are setting their sights even lower — many want to retire in their 30s or 40s. Naturally, the target age varies based on the age of the person, their income, and how much money they need to retire. 

The principles of FIRE are simple. First, you need to cut your expenses, often dramatically. Second, you must start saving and investing aggressively. Of course, that looks different for every participant. People who hate to scrimp and live frugally might cut their costs, but not quite to the bare bones. 

It’s important to note that FIRE followers are not all planning to retire at 30 and spend the rest of their lives on the golf course. Many simply want to build up savings and investments so they’re less dependent on work. That way, they can stop fighting for promotions and focus on building their own companies, for example, or pursue a gig-based career with breaks for travel. 

What Do You Need to Start FIRE?

If you want to start following the FIRE movement, you’ll need to get informed. To start, you can gather your financial documents. How much do you spend each month? Each year? Then, it’s a good idea to look at your earning power. 

The third component is the most important: what kind of lifestyle do you want to live after you retire early? This information will tell you how much money you need to have coming in to sustain that lifestyle. If you want to own your own home in a gated community, your costs will be different than if you plan to move to a developing country. 

As you’re figuring out your potential future costs, it’s important to be both honest and conservative. You may want to travel now, but will you want the same thing in 20 years? Some things to consider include: 

• Healthcare and insurance costs into old age
• Childcare, raising kids, and college tuition
• Housing upgrades and maintenance
• Travel costs
• Future plans to work or run a business

If you’re not sure how to estimate your costs accurately, it’s a good idea to get help from a professional. Financial experts can help you understand the true amount of money you’ll need to retire early. That way, you can figure out how much you’ll need to save, invest, and work down the road. It’s also helpful to work with a company like Dutchess Partners to consolidate your debt and find out if you can save money on interest payments and other fees. 

Drawbacks to the FIRE Movement

Like any financial strategy, FIRE is not without its drawbacks. According to some experts, followers may be underestimating how much money it takes to retire at 30 or 40. Others may not be planning for the costs that will arise later in life. 

For some people, the extreme FIRE lifestyle might not be a sustainable option. After all, some followers take things to the extreme, opting to live on a fraction of their salary. In the process, however, they miss out on valuable life experiences and time with family and friends. 

In the goal to retire early, FIRE followers might decide to undertake riskier investment strategies than they would otherwise. A bit of risk is fine, of course, but when taken too far, it can wipe out your entire savings. In many cases, financial experts say that a slow and steady approach to saving and investing can be more responsible. 

Are you thinking about applying the FIRE method principles to our own life? Whether you’re planning to go all-in by living frugally, or you want to take a more moderate approach, one of the first steps is to tackle your debt. Instead of managing multiple payments and interest fees, consider debt consolidation. At Dutchess Partners, lenders can make use of consolidation loans — that way, you have just one payment each month. With the money you save, you could start investing, building a savings, and getting on the path to retiring early.