Personal Finance and Online Security

Financial Independence, Retire Early – What Is It?


The Financial Independence, Retire Early (FIRE) lifestyle movement has gained a lot of popularity in recent years. Originating among millennials in the 2010s, but what does it involve and should you consider it?

FIRE consolidates the ideas of extreme saving, frugality, and generating a passive income to fund an early retirement. Read on to learn more about this movement and there may be some takeaways that you can start implementing around your budget.

What is F.I.R.E?

For generations, society has steered people towards the classic working culture of 9 am – 5 pm to fund their lifestyle. The FIRE movement thinks otherwise and aims to help individuals achieve financial freedom and gain more control over their lives.

‘Financial independence (FI)’ can simply be defined as when you free from the worry of money. This may be once you are officially out of debt or when you no longer need to work for money through passive incomes. 

For some, the term ‘Retire Early (RE)’ is the moment you never have to work another day of your life. But, for others, it could mean you have saved enough that you no longer need to work your current job, but you can switch careers or start a business in something that excites you.

FIRE involves a shift in perspective towards money and work. It teaches you what is more important for you and your current situation. J. L. Collins wrote an incredible book titled The Simple Path to Wealth: Your road map to financial independence and a rich, free life. This book opened my eyes to how I looked at my money and was one of the first inspiration to organising my finances. 

Types of FIRE

More and more variations of the FIRE movement have emerged over the years, including:

  • Lean: This is the most extreme version. Here, you would live on the bare minimum and save the maximum amount from your monthly budget. With this movement, you save the absolute minimum required to retire early, however, most likely results in a more frugal lifestyle during retirement.
  • Fat: This approach favours a less frugal lifestyle. This is generally the method used if your working salary is larger and therefore, you can save larger amounts each month.
  • Barista: This is a semi-retired lifestyle where you can retire early but continue working part-time for supplemental income.

How to implement the FIRE movement?

Okay, so we’ve learned the FIRE movement is a lifestyle choice rather than an investment idea. It could involve living extremely frugally and saving the majority of your money each month and sacrificing the small things to be able to retire early.

Anyone can start saving at any age, but the earlier you begin, the more you will save through compound interest. The only way you can see if the FIRE movement is possible for you is to conduct a precise review of your finances.

Decide your plan

Therefore, before doing anything, you must define your goals. You need to ask yourself ‘what does a fulfilled life mean to you?’. Decide when or if you want to retire and then you can begin to draw up a plan of achieving your goals. 

Firstly, you will need to calculate your income and your current expenses to create your budget. If you are new to budgeting, I recommend reading my article before continuing. 

Photo: Kelly Sikkema on unsplash

You have now created your monthly budget, so how much do you need to save? Do you need to increase your income? Will you have any income during your retirement from your pension or other savings?

As you start to save, you should continually monitor your progress and make any changes to your plan if necessary.

How much money will I need to become financially independent?

We defined financial independence as having enough money to live on without needed to work. But, how much will you need?

A general guideline given in the movement is you should aim to save roughly 25 times your annual expenses, which you would then invest to provide you with sufficient income in your retirement.

Of course, the exact amount varies from person to person, and it will depend on your initial retirement plan. You will also need to consider the reliability of your investments and understand the possible taxes you may pay, as these all change your final income.

Reduce your spending

Saving money is allowing your future self to live the life you love. If you’re not used to saving, it can seem pointless or difficult to stick to. However, start small and regularly save and your mindset towards money will change and saving becomes a habit. 

Using your newly created monthly budget, you can now easily view all your incoming money and your monthly spending, including bills, food shopping, etc. This budget will now show you areas that could be cut down. Do you need the latest iPhone on a £35 per month contract? Could I cook more and reduce the number of takeaways? 

Doing this means that you have more money to save toward FIRE, and the amount of money you need to amass to become financially independent reduces because the lifestyle expenses you need to cover are lower.

Get on the right side of debt

The first thought when people hear the word ‘debt’ is bad. And yes, some debts are very bad and will cause you financial harm, but other debt could make you money.

Therefore, you should immediately work towards paying off the bad debt (i.e. credit cards). And, whenever you’re paying off a debt you want to pay down your highest interest rate debt because it’s like getting that percentage return on your money. Although, I highly recommend creating and saving an emergency fund, preventing you from having to rely on credit if anything unexpected occurs.

Photo: Avery Evans on unsplash

Now, there are some good debts. For example, taking out a mortgage as you are paying to own some real estate or student loan debt if it helps you achieve that higher paying job role. 

Increase your income

Unless your salary is particularly high or you are happy to live incredibly frugally, then you most likely will need to increase your income to retire earlier. This could be either advancing in your career or from a second job or a side business. Through compound interest, even the smallest pay-rise would result in thousands of extra pounds over the next twenty or thirty years of investing!

Additional income will help you achieve financial independence earlier, just remember – try to keep your spending low, so don’t increase your spending just because your income is higher!

Having said this, the idea of FIRE is to work less so I would recommend finding ways to save more of your current income. Most additional income sources require work, which defeats the object of the movement unless of course, your additional income brings you more happiness!


If you have made it this far, then thank you for reading. We have talked about the FIRE movement, originating from the 2010s and gaining more popularity. It is a lifestyle choice where you focus on saving as much of your monthly income to allow you to retire early. 

There are various forms of the movement: Lean, Fat, Barista, where each one changes depending on your financial goals and current circumstances. We learned that general recommendations are to save 25 times your annual expenditure, however, the FIRE movement teaches us some tools that you can implement into your lifestyle.

Before implementing the movement, you must decide your plan for the future, create a budget and then begin to cut down on expenses. Work on paying off any bad debt and move towards investing in good debt (mortgages, etc.). 

If you wish to learn more about this movement, then please watch my SkillShare course here where I provide more helpful ideas on how to look after your finances.


Featured image: James Hose Jr on unsplash

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