What is the Financial Independence, Retire Early (FIRE) Movement & Is It a Good Idea?

By Myles Leva


Last Updated: February 8, 2022


Are you among the many people who dream about early retirement? 

It sounds wonderful, doesn't it? Not having to go to work at all, or choosing what your work week looks like for yourself. 

Many people are looking to the FIRE movement - or - the Financial Independence, Retire Early plan that gets people to retirement much sooner than usual. It's not easy, and it's relatively new, but we've scoped out the details for you. 


 What Does the FIRE Movement Stand For?

The FIRE movement is fairly fragmented but it is united by a few key concepts and beliefs.

The Financial Independence, Retire Early movement stands for frugality and independence. It also stands for gaining financial independence as early as possible so you can enjoy free time at a younger age. These ends unite the FIRE movement, and the means to those ends include:

  • Extreme frugality
  • The absence of any luxuries or comforts except the most necessary
  • Aggressive savings strategies
  • Dedicating more disposable income towards investments
  • Taking full advantage of tax-advantaged and retirement accounts

Within the FIRE movement, there are 3 methods, each of which varies greatly when it comes to the current and future standard of living.


1. Fat FIRE

This is the method for those who want to retire early, but without sacrificing living standards at all.

To live that well for such a long retirement, this strategy requires the most extreme austerity, savings, and investment strategies. The payoff is a more comfortable retirement. Practitioners are willing to sacrifice a lot now in exchange for a comfortable early retirement.

2. Lean FIRE

This method implies an overall frugal lifestyle, before and after early retirement.

Practitioners practice frugality now, setting aside plentiful money to live off in their early retirement. They thus don’t need to grind quite as hard now and must save less for early retirement. They don’t mind living off amounts as low as $25,000 to $35,000 for the rest of their lives after retiring early.

3. Barista FIRE

This is essentially just the exact middle ground between fat and lean FIRE. It requires a lot of hard work in the short term, but not quite as much as someone practicing fat FIRE. The payoff is a moderately comfortable early retirement.


Variation in the FIRE Movement

There is diversity of thought and financial habits in the FIRE community.

Not everyone will stop working forever after their early retirement. In fact, many critics (more on that later) point out the realities of rising costs of living and that if you truly want to retire at 30, 40, or even 50, you likely have a lot of years ahead of you.

Many people in the FIRE movement simply want to remove the obligation to hold a full-time job for their entire adult lives. That means perhaps taking jobs or gigs as needed while maintaining a better work-life balance and having the opportunity to pursue other interests.


How does the FIRE movement work?

Now you know what the methods are. But exactly what steps go into making FIRE a practical strategy?

The FIRE movement was formed from several popular financial books. The earliest mention of the term was in “Your Money Your Life” by Vicki Robin and Joe Dominguez, in 1992. Updated versions were later re-released, first in 2008. The entire theme of the book was saving more now for a greater future, but not necessarily just for early retirement.

Other works, such as “The 4-Hour Work Week”, “Financial Freedom”, and “Early Retirement Extreme” added to the broader movement. There is no single FIRE movement website, but people share their ideas and experiences on online forums as well.

If you look at the entire collection of FIRE and FIRE-themed books and browse all community forums, you will invariably find the same basic themes.


1. Extreme Frugality/Maximum Income

Like most financial goals, FIRE requires budgeting. In fact, it requires a much stricter budgeting regimen than other financial strategies. This is one of the fundamental aspects of the FIRE movement and may be the most difficult part for many people. To meet FIRE goals, people are recommended to take steps such as:

  • Forgoing air conditioning except when it is a health risk to do so
  • Likewise, only using heating when it’s needed for survival
  • Not buying any coffee out
  • Eating only healthy, less expensive foods (rice and vegetables, etc.)
  • Not spending on furniture
  • Not going out for food, drinks, or anything else
  • Living in a small studio apartment far from pricier urban centers
  • Taking public transportation and bicycling instead of owning a car

FIRE strategies require austerity measures, so it all starts with learning how to live minimally. You are encouraged to stay as healthy as possible, but to not spend money on anything beyond what’s necessary.

Of course, the other side of austerity is increased income. FIRE practitioners seek to maximize income while spending less by:

  • Moving to better jobs wherever possible
  • Getting a second (or even third) job
  • Sideline gigs
  • Renting out any extra space you own

As you can likely see, it’s a life of hard work and little enjoyment, for a time. But to complete the picture, saving and investing are necessary.


2. Investing

In general, all FIRE practitioners are encouraged to set aside more money for investments than the average person would. They are also encouraged to start seriously saving and investing far earlier than others would be encouraged to.

There is no universal diagnosis for FIRE investing. This is where there are many variations in strategies. The only constant is that you will have to make at least some general assumptions about your investment returns.

In this way, a key part of retire early, financial independence, is taking a lot of time to understand the world of investing.

Some FIRE proponents who truly want to double down on the movement’s themes suggest employing especially aggressive investment strategies to maximize returns over a shorter time. After all, the faster you save, the earlier you reach financial independence.



FIRE Movement Tips

Knowledge is key to any kind of financial success. The more you understand the investment world, financial accounts, and finance more broadly, the faster you will achieve FIRE. So, general financial knowledge is the first step.

FIRE is a difficult goal that requires discipline. To get in the right headspace to succeed, you can delve deep into the FIRE world by going through all relevant literature. After that, it’s recommended that you get involved with FIRE communities and their resources.

FIRE is a difficult movement to follow, so exchanging advice and asking questions can make a big difference.

There are now plenty of online resources for FIRE. You can use a FIRE movement calculator to get started with your FIRE budget, for example.



FIRE Movement Criticism

The biggest criticism of FIRE is that it is financially unrealistic to meet some of the goals floating around in the FIRE space. These range from criticisms that it’s just a movement for the rich, or that it’s not a possibility for most millennials.

Of course, for people already struggling with a low income and the rising costs of living, FIRE is little more than a pipe dream. To retire at 40 (a common FIRE benchmark), assuming you would live to 85, you would need $1,125,000 to live off just $25,000 for the rest of your life.

Even if you work extra jobs before and after “retiring”, both the goal itself and its long-term viability are very questionable to anyone making below the US median wage (Bureau of Labor Statistics, 2020) of $41,950 per year.

Some simple number crunching can quickly paint a picture of how difficult FIRE really is to achieve. Beyond that, there’s still the question of mental willpower. Living such a frugal life can be difficult.

So, it’s important to question whether the FIRE lifestyle will have a net effect of making you happier. The answer will vary from person to person, and it can certainly be said that FIRE isn’t for everyone.




FIRE is a relatively young movement.

However, there are plenty of FIRE success stories that can motivate others to try it. However, it’s important to remain realistic about your goals and what exactly you’re willing to do to achieve them.

FIRE may suit your lifestyle and mentality, and you may very well have the income and work ethic to make it work. However, it is a demanding path, and there’s no shame in rejecting it for less severe financial strategies.

Photo by Vincent Gerbouin from Pexels


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