Maybe online you have seen the term FIRE used without knowing what it means, then this article is for you. FIRE stands for Financial Independence Retire Early. And over the past few years had become a fairly major online community based on this very goal. The typical way to be financially independent according to fire is to work hard (maximize income) and live below your means (maximize saving).

Types of FIRE lifestyles

  • Fat FIRE. Being able to retire without altering your current standard of living. This requires the most aggressive saving and investment strategies
  • Lean FIRE. Being willing to live a minimalist lifestyle to cut expenses to bone in retirement. Lean FIRE individuals aim to survive on say, $25,000 annually.
  • Barista FIRE. This is between the two extremes of Fat and Lean FIRE. Maintain more than a minimalist lifestyle in retirement through a combination of savings and part-time or gig work.

-Credit Forbes

4% Rule

Even if the FIRE lifestyle or ideas don’t seem to match you the one takeaway you should keep from this article is the 4% rule. It states that you can take away 4% from your portfolio yearly and keep it from running out. For example, if your nest egg is $1,000,000 you should be able to comfortably take away $40,000 per year. Using the 4% rule to find your FIRE. If you want to find what your FIRE would be take your current income and 25X it to find your point of financial stability. On a salary of $80,000; the point of Financial Independence would be $2,000,000. Doing this can help you keep track of and reevaluate retirement contributions; to better track your financial goals.