FIRE: Personal finance is a broad concept and there are several new methods of managing finances. FIRE is a new personal finance movement defined by frugality, extreme saving and investing.
Under the FIRE movement, several people have started working towards a single goal. The goal is to save enough money during your 30s, 40s, or even 50s, and then retire several decades before your usual retirement age.
The FIRE movement gained credibility once in Vicki Robin’s 1992 book Your Money or Your Life, and Joe Dominguez became a bestseller and inspired thousands.
How it works?
‘FIRE’ follows an aggressive saving and investing pattern. People stay in the workforce for several years and save up to 70% of their annual income. When their savings reach about 30 times their annual expenses, or about $1 million, they can quit their day job or retire from work.
To cover their living expenses at an early age, FIRE devotees make small withdrawals from their savings, approximately 3% to 4% of their annual balance, depending on the size of their savings and their desired lifestyle .
FIRE requires a smart investment plan that secures your retirement. The movement adheres to investing larger portions of their income than the average person. But the principle of setting aside a certain percentage of your income each month for investing—and starting to do so as soon as possible—will allow retirement savings to grow to a point where there is a guarantee of financial stability in later years. .
Who can be part of the FIRE movement?
It does not depend on salary and anyone who earns can practice this move. The main reason should be to save more and more.
What if the plan doesn’t work?
The first part of FIRE represents financial independence, something that, if achieved, can allow you, rather than retirement, to work at something you love rather than something you have to do. ‘FIRE’ is not just about retiring early; rather, it teaches you to consume less while living better.