Financial Independence, Retire Early (FIRE)

What is FIRE?

FIRE stands for "Financial Independence, Retire Early." It is a movement focused on achieving financial independence at an early age, usually by saving and investing aggressively. The goal is to accumulate enough wealth to cover your living expenses, so you can choose to retire early or work on your own terms.

The basic concept behind FIRE is to save a large percentage of your income, typically 50-70%, and invest it in assets that generate passive income. The most common rule to determine your FIRE number is to save 25 times your annual expenses. Once you reach this target, you can retire because the returns from your investments are assumed to be enough to cover your living expenses.

The FIRE Number

The "FIRE Number" is the amount of money you need to have saved in order to retire early and live off the returns from your investments. It is calculated by multiplying your annual expenses by 25.

For example, if your annual expenses are $40,000, your FIRE number would be 25 x $40,000 = $1,000,000. Once you reach this amount, you can retire because the returns from your investments are assumed to be enough to cover your living expenses.