The FIRE movement is all about making your money work for you and either becoming financial independent or retiring early or both.

Wouldn’t it be amazing if you never had to worry about making money ever again? For some people, this dream is a reality.

Watch our quick 2-minute video about the FIRE movement and how to retire early.

For others, it’s a reality they’re working towards reaching sooner rather than later. In fact, there is a whole movement called the FIRE movement that revolves around this concept.

What is the FIRE movement?

FIRE stands for Financial Independence / Retire Early and has turned into a full-blown movement with hundreds of thousands of followers, if not more.

People like Vicki Robin, Pete Adeney (better known as Mr. Money Mustache), Brad Barrett and Jonathan Mendonsa are just a few of the personalities that have thrust the movement into the spotlight over the last few years.

While many people associate FI and RE together, it really boils down to two separate concepts. First, financial independence is the ability to no longer need to work for additional money. Second, retiring early is the act of no longer working. But you don’t have to apply both of these concepts.

Here’s what you need to know about each.

Financial independence

You’ll never have to work if you don’t want to

The first part of the FIRE movement is financial independence. This is essentially the concept of never having to work again for money if you don’t want to.

For many, this idea seems insane and impossible to make happen. Thankfully, it’s totally possible to achieve. Sometimes, you can even achieve financial independence quickly!

You’ll need 25 times your annual expenses in investments

So how exactly do you get to be financially independent? While the answer will vary from person to person, financial independence is commonly cited as having 25 times your annual expenses in investments. This also works out to 300 times your monthly expenses.

But why this number?

The 4% rule

Having 25 times your annual expenses in investments is a benchmark that comes from the 4% rule. The Trinity study showed that you could withdraw 4% of your assets in the first year of retirement. Then, in each subsequent year, you could increase your withdrawal by inflation. If you do this, you have good odds of not running out of money before the end of a typical 30-year retirement.

Unfortunately, reaching financial independence early means you may need the money to last more than 30 years. Due to this fact, some people use a smaller initial withdrawal rate, such as 3%, to calculate their financial independence number. This requires a person to have 33.3 times their annual expenses to reach financial independence.

Retire early

When you talk about retirement, you likely think of never working again. You probably imagine grabbing a beach chair, sipping  your favorite beverage and watching the waves roll onto the beach. Others may dream of RVing across the country or traveling the world.

Traditionally, people associate reaching Social Security age to be a normal retirement. If you can retire in your 50s, 40s, or even earlier, that’s considered retiring early. The second part of the FIRE movement focuses on the act of actually retiring from your career early.

While these concepts of retirement or even early retirement sound great initially, they aren’t long term plans. Many people that achieve financial independence quickly realize this.

Thankfully, reaching financial independence doesn’t mean you have to stop working and retire. Many people continue building businesses or switch to another more fulfilling career after they reach financial independence.

Steps to take now to achieve FIRE

If achieving financial independence, early retirement or both sounds appealing to you, the concept of how to get there is easier than you’d imagine. Ultimately achieving FIRE boils down to three simple steps: cutting your expenses, growing your income, and invest.

Here’s what you need to know about each step in the process.

Cut expenses

This can help you reach FI sooner

Cutting expenses is an extremely powerful move when you’re first getting started on your FIRE journey. Cutting out $100 a month of expenses lowers the amount you’ll need to reach financial independence by $30,000.

If you permanently cut your expenses, you can live on less both today and in the future. This reduces the amount of money you’ll need in investments to generate the income you need to be financially independent. If you can end up cutting $1,000 in monthly expenses, that decreases your financial independence number by $300,000. Talk about huge progress.

Plus, you’ll have more to invest

The other great benefit of cutting your expenses means you’ll have more money available to invest each month. This helps you speed up the accumulation of your investments which helps you reach financial independence even faster.

Don’t get too extreme, though

You shouldn’t be cutting expenses to an extreme unless you love living that extreme lifestyle. Instead, consider cutting expenses you don’t value and keep the expenses that make your life easier or more fun.

At some point, you’ll reach a number for your monthly expenses where cutting any other expense doesn’t make sense. It would make your life miserable.

Increase your income

While reducing your expenses is a quick win, there’s a better way to reach financial independence faster, and that’s by increasing your income.

You could start a business that generates income beyond your wildest dreams. I personally know people that have ended up earning $1,000,000 or more per year.

You could also start a small side hustle to make an extra $1,000 per month doing something you love. Here are some articles to help you get started with a side hustle:


Whether you’ve decided to cut expenses, increase your income or both, you’ll end up with more money to put toward your goal of financial independence.

2% return

You could put that money in a savings account and earn 2% interest if you pick the right online savings account. We recommend Discover’s Online Saving Account or the Capital One 360 Savings.

However, there’s a more powerful way to use your money that, over the long run, usually outperforms the 2% in interest you’d get from a savings account each year.

8% return

If you invest your money in a broad market index fund, it isn’t unheard of to get an 8% annual return over a long period, such as 20 years or more.

betterment Logo

If you aren’t comfortable managing your own investments, a robo-advisor like Betterment can help you get started. If you prefer to pick your own stocks individually, a brokerage like Ally Invest may work better for you.

Here are three quick charts showing you how much you’d end up with at the end of various time periods by earning 2% and 8% annual returns. The first chart assumes a 10-year time frame, the second a 20-year time frame and the third a 30-year time frame. The difference is shocking.

10-year time frame

Amount investedAssuming 2% annual return over 10 yearsAssuming 8% annual return over 10 yearsDifference

20-year time frame

Amount investedAssuming 2% annual return over 10 yearsAssuming 8% annual return over 10 yearsDifference

30-year time frame

Amount investedAssuming 2% annual return over 10 yearsAssuming 8% annual return over 10 yearsDifference

Calculate your FIRE Factor

Take action now

You don’t have to commit to a major lifestyle change to get started on your path to financial independence. While a major lifestyle change may get you there faster, small changes over time that are sustainable will likely end in a better long-term result.

When you get started, it’s helpful to start tracking your net worth, your income, and your expenses so you can get an idea of how you’re progressing toward financial independence.

Online tools like the ones Personal Capital offers are a great way to do this without taking up a ton of your time.

Once you’re tracking your progress and making changes to reach financial independence faster, it’s amazing to see how quickly you can make serious progress. Eventually, you may even be able to retire early if that’s what you desire.

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About the author

Total Articles: 74
Lance Cothern is the founder of a href="">Money Manifesto, a personal finance blog that helps people to master their money so they can live their ideal life. In addition to blogging, he enjoys spending time at the beach with his family. You can connect with Lance on Twitter, Facebook, and LinkedIn.