Financial Independence. Retire Early. If you’ve spent any time researching personal finance, you may have come across these terms, or the combined term - FIRE. When you first see them, they may seem far-fetched, or even completely unachievable. But today is Independence Day here in the United States, so let’s take a closer look and see how Financial Independence might fit into our lives and our goals.
Let’s start with “Retire Early.” When I first learned about the FIRE movement, I got stuck on the Retire Early part of the equation. How was it possible for people to retire in their 30’s and 40’s!? It seems absolutely preposterous. But if you read Mr. Money Mustache’s article The Shockingly Simple Math Behind Early Retirement you’ll find that the trick is finding ways to increase your savings rate drastically. I won’t rehash the article here. I can’t possibly do it justice, it’s a beautiful article, and you should read it if you are at all interested in FIRE. But here is a simple comparison. If you save the normally recommended 15%, you will need to work 43 years to retire. But if you instead save 50% (Yes! It’s possible!) then it will only take you 17 years to retire! Isn’t that amazing? Again, read the article to understand the theory, but I found it very convincing. And while I have chosen to pause my savings for a while to start up a business, I know how much I have gained in the past by upping my savings rate when I had a full-time job.
But even if you are convinced that retiring early is possible, sometimes there are other objections, often in the form of “I don’t want to stop working!” That’s OK, you don’t have to. There are no rules here, and that is where “Financial Independence” comes in. Financial Independence simply means, “I am able to pay my expenses without having to be employed or dependent on others.” So when you reach FI, you can simply keep on working. If you love what you are doing, and are feeling fulfilled, keep doing what you’re doing! It only means that if things go sour at work, you are fully capable of turning around and doing something else or quitting for a while without worry.
What do you think? Do you think that Financial Independence and Retiring Early is a goal for you? Do you think it is possible in your life? And what would it mean for your life if you could FIRE?