What if you could retire in your 30s? The FIRE movement is helping Aussies save, invest, and design a life they love... long before 67.
If you didn’t have to work, how would you spend your time instead? Would you travel the world? Spend more time with family? Or finally try that hobby you’ve been talking about for ages?
For many, this is a question that gets asked as retirement aproaches… in your 60s and 70s.
But for people who subscribe to the FIRE movement, this is a question being asked much much earlier…sometimes in their 30s and 40s!
While you might be thinking of the red hot flame you cook your eggs with, FIRE actually stands for Financial Independence, Retire Early.
It’s a movement of financially motivated people, who save and invest a significant portion of their income with the goal of reaching financial independence and retirement much earlier than the traditional retirement age.
A 2024 study by MLC revealed the most common life aspiration for Australians is to have financial independence (54%).
This means not stressing about bills or debt, being financially prepared for emergencies, having freedom of time, and making choices out of joy rather than necessity.
FIRE followers typically calculate their FIRE number by multiplying their average annual expenses by 25, and then assuming a ‘safe’ 3-4% withdrawal rate once they retire.
Let’s look at an example.
Bailey is currently 25, and lives a minimalist lifestyle (thanks to her frugal spending habits) that requires $40,000 p.a.
Her FIRE number would be $40,000 x 25 = $1,000,000
So she would need to have $1 million invested in order to reach financial independence and retire early.
Once she retires early, she can withdraw 3-4% per annum ($30,000-$40,000 p.a.) to cover her living expenses, while her remaining investments will continue compounding to keep funding her retirement.
Depending on her income and investment strategy, Bailey could reach her FIRE number earlier than Australia’s pension age of 67. Which means she can potentially quit her job and spend her time how she wishes, as long as she keeps her annual expenses under $40,000.
You might be thinking, ‘woah, that's a lot of money to save!’ and your FIRE number could be much more if your annual expenses are higher than Bailey’s. But that doesn’t mean you have to give up on FIRE altogether…
People in the FIRE community have adapted multiple approaches to suit various lifestyles, all while working towards financial independence.
Fat FIRE is made for the 9 to 5 worker who doesn’t want to reduce their current standard of living. This usually means they'll need a very high salary with a lot of disposable income that can facilitate an aggressive investment strategy, even without cutting down on too many expenses.
Lean FIRE is for those willing to compromise and dedicate themselves to an extremely frugal and minimalist lifestyle to maximise their investments. Typically, those taking the Lean FIRE path live on $25,000 or less each year.
Barista FIRE is the middle ground between Fat FIRE and Lean FIRE. It’s about reaching a point where you can quit the traditional 9 to 5 hustle, but will still require income from a part-time job (like working at a cafe) to supplement your early retirement funds.
Lastly, Coast FIRE is more about financial independence, and less about retiring early. It’s where you have enough investments in your retirement account where compound growth will work its magic. Over time, your net worth will grow to your desired retirement amount, even if you don’t contribute any more money to the fund.
People on the Coast Fire path still need to work to fund their day to day expenses but they won’t need to worry about their retirement income. This gives people more flexibility with work and enables people to shift to lower-paying roles that could be less demanding than their usual jobs.
At its core, the FIRE movement isn’t just about retiring early, it’s about getting off auto-pilot and designing a life you love. You don’t need to commit to an ultra-frugal lifestyle or save half your income overnight, but making small steps in the right direction can help get you to financial independence sooner than you think. 😉
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