What is FIRE?
FIRE stands for Financial Independence Retire Early. It is a community of people who believe in saving a percentage of their income for the future. These people also try to avoid debt, and many start the FIRE journey by climbing their way out of debt.
Saving a percentage of your income allows you to become Financially Free. You are buying your life back one dollar at a time.
When someone spends 100% of their income, or even worse more than 100% of their income they are racking up debt. They are living life on the edge. One car repair bill, washing machine breaking, or leaky roof can push them over the edge. They are likely working long hours, feeling exhausted, and feeling like they have nothing to show for all their hard work. This leads them to purchase more items to make them happy, ultimately putting them further into debt. It is a dangerous cycle that I have also found myself in, FIRE was my way out.
FIRE involves changing your mindset, from a consumer’s mindset to a saver’s mindset. Most of the world thinks what can I buy with this dollar. The FIRE community looks at the same dollar and thinks if I invest this dollar how much freedom can it buy me? How much less stress will I have?
FIRE members believe in saving money first, and spending what’s left over. They get their paycheck and a large percentage automatically goes directly to saving and investing. Then they figure out how to manage with the money that is left over.
If I had to put FIRE into a series of steps it would go something like this, but keep in mind everyone’s FIRE journey is different and unique.
Begin saving first. Most people spend first and save what’s left. Change your mindset to save money first and spend what’s left over.
Read or listen to The Simple Path to Wealth by JL Collins. It will teach you all of the basics about investing and how you should go about it.
Create a plan to eliminate high interest debt. Credit card debt, student loans, car loans, mortgage if it’s high interest.
Save an emergency fund, this can be 1-6 months of expenses. Everyone’s tolerance level is different.
Start contributing to your workplace 401K retirement plan. If you’re already contributing bump up the percentage that you are contributing. Also make sure your 401K is invested in low fee index funds.
Open a Traditional or Roth IRA and save additional money here. This is also a great option if you do not have a workplace 401K.
If you have a High Deductible Health Plan, start saving in your HSA (Health Savings Account)
Commit to saving a percentage of your income every year 15%, 20%, 40%, 50%. Some FIRE members can even save 80% of their income. But decide on a number that works for you, write it down, stick to it and you will be on your way to living comfortably and retiring early!
