FIRE (Financial Independence & Retire Early) movement was borne from a 1992 best-selling book “Your Money or Your Life” authored by two financial gurus, Vicki Robin and Joe Dominguez. 

FIRE is a life style of extreme savings and investment that allows the proponents of this thought process to retire far earlier from their job, than a traditional saving style and retirement plan would allow. People generally retire in their late 50s or early 60s, but people who opt for FIRE retire much earlier, usually in their 30s or 40s. By saving up to 70% of their income, followers of FIRE movement may eventually be able to quit their jobs and live- off solely on small withdrawals from their savings. 

Proponents of the FIRE lifestyle often begin by remaining in the traditional jobs for several years, in order to save the required amount. Once their savings reach approximately 30 times of their yearly expenses, they may quit the regular job or even completely retire from any form of employment altogether. Ensuring passive income streams is a big component for achieving financial independence or FIRE.

In order to meet the living expenses after retiring at an early age, FIRE proponents make small withdrawals, say, 3 to 4% yearly from their savings. Depending on the quantum of savings amount and the desired lifestyle, it requires constant watch in order to ensure that the value of the investment portfolio does not erode fast. If the yearly withdrawals far exceed the yearly returns, then the value of investment portfolio can erode, putting the person to financial risks. When stock markets fall and/or interest rates are low, the FIRE plan may fall short for a comfortable living.

Within the FIRE movement, there are several variations that dictate the lifestyle of its followers. Two important FIRE styles are described below.

• ”Barista FIRE” style – refers to those who have quit their traditional 9-to-5 jobs, but still engage in some form of part-time work or gig jobs in order to partly cover their current expenses and partly depend on their retirement savings.
• “Lean FIRE” – style refers to strict adherence to a frugal and minimalist living, necessitating a far more restricted lifestyle.

FIRE will be meaningful only if you want to shape your life as per your dreams and ambitions, without money coming in the way. “FIRE is less about retiring early and more about having the freedom to pursue your dreams and ambitions,” says Deacon Hayes, the author of book ‘You Can Retire Early!’ .

If you have a high-paying but soul-sucking job, FIRE probably sounds pretty good. But FIRE should not be for a mere escape from your job, but rather for an all-around upgrade of your lifestyle. “A good reason to retire early is that you have an alternate vision for your life that you are eager to pursue, but which you can’t pursue while employed full time,” says Tanja Hester author of Work Optional: Retire the Non- Penny – Pinching Way. 

Those who wish to opt for FIRE should read the short story “The Lotus Eater”  written by the famous British author Somerset Maugham, to understand the perils of living a long idyllic life depending on passive income streams or pensions:

The story begins in 1913. Thomas Wilson, a  a bank manager working in London, falls in love with the island of Capri in Italy. Wilson had given up his job in London, to live a life of enjoyment in a small cottage on Capri. He decided to forgo working for another thirteen years to be eligible for his pension. Instead he takes his accumulated savings and purchases an annuity plan that would allow him to live simply on Capri for twenty-five years. Wilson outlives. His annuity pay-outs had exhausted. He first sold all that he owned, he then borrowed small sums from the islanders, but after a year he could no longer even borrow. He ultimately lives out the remainder of his life in the woodshed of a farmer landlord, carrying water and feeding the animals.