Early retirement is the dream of most people. Achieving this dream is not an easy task, because a significant amount of money is needed in order not to lose purchasing power.
The FIRE movement is a set of ideas and actions, oriented toward those who want to retire early.
In recent years, the FIRE movement has been part of the growing trend of savings linked to other concepts such as financial independence. More than a movement for early retirement, we could define FIRE as a way to achieve financial freedom.
What is the FIRE movement for retirement?
Retirement is a complex point in people’s lives. The loss of earning power that comes with stopping work has to be balanced by supplementary income. This means that throughout our professional career we must maintain a certain amount of savings in order to be able to raise that additional amount of money that will allow us to live comfortably in retirement.
The FIRE movement proposes to accelerate all processes so that we can retire professionally before the legal retirement age. FIRE stands for Financial Independence, Retire Early. The name itself indicates that the aim is to achieve financial independence first, which will allow us to retire early.
What is financial independence?
Financial independence means that the person has managed to achieve sufficient financial resources so that he or she does not have to rely on a salary. This can be achieved in different ways but is generally associated with spending management, extreme savings, and investment.
A basic idea of a procedure for achieving financial independence would be as follows:
- A detailed analysis of expenses and income is made.
- Extreme savings measures are implemented that allow saving more than 50% of gross income.
- The money obtained from savings is invested, trying to multiply it over time, thanks to compound interest.
How to apply the FIRE movement to your retirement?
First of all, it is important to realize that this is not a simple matter. It takes an effort that not everyone is willing to make.
Accordingly, for many followers of the FIRE movement, achieving maximum savings means giving up many other things that we take for granted. For example, spending on leisure activities is reduced to almost zero. This does not mean giving up entertainment activities, but rather looking for free activities.
This example can be applied to all areas of waste:
- Not eating out
- Cut down on consumer spending
- Reduce spending on bills such as cable TV, telephone, audiovisual platforms, etc.
- Food expenses need to be adjusted, applying concepts of frugality and healthy eating.
In some more advanced versions, the idea is even to move to a smaller home to reduce costs and obtain capital growth from the move. In conclusion, early retirement with the FIRE movement aims to achieve financial independence as soon as possible, in order to have at one’s disposal a valuable asset that is often forgotten: time.