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If you’re familiar with FIRE (financial independence, retire early), you might wonder how to find your FIRE number.

The FIRE movement has inspired many to achieve financial freedom, but do you know why? While everyone’s “why” is different, the ultimate goal is to gain the freedom to choose how to live your life.

You might choose to remain in your career if it fulfills you (focusing only on “FI”), but maybe you prefer to take advantage of “RE” and retire early. Perhaps it’s a matter of gaining more balance in your life and being able to invest your efforts where you find more meaning and purpose.

Regardless of your “why,” or how you choose to spend your time, you’ll need to understand the “how.” In other words, your “how much,” or FIRE number.

Your FIRE number will give you a finish line or a guiding post. The best part? It’s entirely reliant on your lifestyle. Your FIRE number might be low, or it can be high, depending on your yearly expenses.

So if you’re ready to outline your individualized path to FIRE and uncover your personalized FIRE number, keep reading on, and you’ll learn a simple way to calculate it by the time you’re done reading.

What is a FIRE Number and Why Does it Matter?

Your FIRE number is this seemingly elusive amount of money that grants you financial freedom. 

Put simply (albeit oversimplified), it’s the amount of money you need invested so that the returns from those investments can comfortably cover your yearly expenses, indefinitely.

This number is based on the historical performance of investments. Bear with me as I explain the math.

Historical returns have shown (with a 95% confidence rate) that you can safely withdraw 4% of your investments each year and expect your overall investment amount to approximately stay the same, thanks to year-over-year growth.

From here, you can estimate your FIRE number based on your yearly expenses. You have to understand how much you spend each year to calculate this figure, but first, let’s go over the different ways FIRE can be achieved.

Two Primary Paths to FIRE: Lean vs. Fat

The FI community often describes two primary paths to FIRE: Lean vs. Fat. Let’s dive into each of these concepts. Take note, however, that there are other subtle levels of FIRE in addition to these.

• Lean FIRE: This approach focuses on drastically reducing your expenses to reach your FIRE number faster. Living frugally allows you to accumulate wealth quicker and potentially retire earlier.
• Fat FIRE: This approach prioritizes maintaining your current lifestyle (or even living a more luxurious one) after reaching financial independence. Your FIRE number will be higher and may take longer to reach, but you’ll have more financial freedom to splurge on experiences and travel.

Beyond Full FIRE: Exploring Mini-Retirements

Reaching full FIRE isn’t for everyone. There are also “mini-FIRE” options to consider. You might take a sabbatical, pursue a side hustle, or negotiate a flexible work arrangement, among other alternatives.

Each of these options can provide a taste of financial freedom without the commitment of full-scale FIRE.

You might achieve these mini-FIRE retirements by paying off your debt, or building a savings cushion so that you can take extended time off work.

These smaller achievements may bring you closer to a life on your terms, without committing to a goal as intense as FIRE. 

Ultimately, a more fulfilling life where you can spend more time doing the things you love is the goal, so don’t be afraid to make adjustments that suit you (mini-FIRE or otherwise).

The Formula for Freedom: Your FIRE Number

Let’s break down the basic formula for calculating your FIRE number. There’s a general rule of thumb: multiply your yearly expenses by 25. 

Here’s the formula:

My FIRE Number = Yearly Expenses x 25

So, if your expenses are $50,000 per year, your FIRE number would be $1.25 million. You may want to consider adding a buffer to reflect potential life changes, but it’s a good guideline to get you started.

As discussed above, this number is based on the historical performance of investments, which have shown that you can safely withdraw 4% of your investments each year.

Ready to Calculate Your FIRE Number?

Here are 5 steps to get you started:

1. Track Your Expenses: For at least a month, meticulously track everything you spend. Alternatively, backtrack your expenses from the last year. (Psst… you can download my free Budget Tracking Tool for this purpose!)
2. Estimate Future Expenses: Consider how your expenses might change in retirement, if at all. Will you travel more, or otherwise adjust your spending habits?
3. Choose Your FIRE Lifestyle: Lean, Fat, Mini, something in between, or something else entirely? Consider your lifestyle goals.
4. Factor in Inflation: Use an inflation calculator to estimate future expenses.
5. Do the Math: Multiply your yearly expenses by 25 (or adjust based on your desired withdrawal rate).

Taking Action Today: Charting Your FIRE Journey

This simple formula is a starting point, but your ideal lifestyle is unique. Your FIRE number should accurately reflect you and your goals.

Here are 5 additional things you can do today to begin crafting your dream life:

1. Explore FIRE Resources: Get your free copy of my ebook “7 Ways to FIRE Your Career” and research other resources like Investopedia, Mr. Money Mustache, or I will teach you to be rich for valuable insights.
2. Research Investment Strategies: Educate yourself about different investment options to grow your wealth. (Psst… the Start Here page has some fantastic resources to help you do just that!)
3. Factor in Additional Income Streams: Consider side hustles, rental properties, or other income sources that might contribute to your financial security.
4. Start Saving and Investing: The sooner you begin, the more time your money has to grow!
5. Refine and Revisit: Your FIRE number is not set in stone. As your life goals evolve, revisit your calculations and adjust accordingly.

Uncover Your FIRE Number, FIRE Your Career and Embrace Freedom

Your FIRE number is the roadmap to your dream life. It empowers you to break free from limitations and pursue what truly matters. This journey is yours to define.

Remember, your FIRE number is a guidepost, not a rigid rule. The most important thing is to craft a life that brings you joy and fulfillment. 

By taking control of your finances and working towards your financial goals (FIRE, mini-FIRE, or otherwise), you can unlock the freedom to pursue the life you’ve always dreamed of.

Let your FIRE number be a tool toward freedom, not a destination in itself. Take control of your finances, pursue your passions, and design a life you love!

Have a question or want to learn more? Leave a comment below!

Now that you’ve learned how to calculate your FIRE number you might be wondering how else you can FIRE Your Career. Check out the posts page for more ways you can FIRE Your Career and achieve financial freedom.

FIRE Your Career: Achieve Financial Freedom Through Your Career & Spend MORE Time Doing What You Love.

Resources I Recommend in This Article:

7 Ways to FIRE Your Career (a free ebook to help you build a foundation to financial freedom)

Budget Tracking Tool (a free tool to help you create and track your budget)

Resources I Frequently Recommend:

Strengths Finder (book to help you uncover your innate strengths, includes a free personality quiz)

ClickUp (my recommended goal-tracking and project-management tool)

Rich Dad, Poor Dad (a great intro to financial freedom book)

The Bogleheads’ Guide to Investing (a great intro to investing book)

Others: 16 Books I Recommend to FIRE Your Career