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How Does the FIRE Movement Work?

Have you ever asked the question, “How does the FIRE Movement work?” If so, you’re in the right place!

The FIRE movement, or Financial Independence, Retire Early, is a financial movement that encourages people to save and invest as much of their income as possible. The idea, of course, is to retire early and/or achieve financial freedom.

Now that doesn’t mean you need to live off of beans and rice for eternity, but it is an aggressive approach to saving and investing.

At its apex, FIRE helps you save and invest enough money so that your investments eventually generate enough income to cover your living expenses. This would allow you to stop working and retire early if you so choose.

Whether you’re all in on FIRE, interested but not sold on the idea, or simply curious, the pursuit of FIRE alone can set you up for financial success.

In this article, I’ll give you an answer to the question: “How does the FIRE movement work?” so that you can decide whether or not FIRE is worth it for you. 

Even better, if you decide that FIRE IS right for you, I’ll give you some handy tips to help you get started on your journey to financial freedom.

By the way, if you’re new to FIRE, you might want to check out some of these intro articles:

What Is the FIRE Movement?

Does the FIRE Movement Work?

So How DOES the FIRE Movement Work?

There are a number of different ways to achieve FIRE, but some of the most common strategies include:

Living below your means

One of the best ways to save money is to live below your means. This means spending less money than you earn. The bigger the gap between what you earn and what you spend, the more you can save.

It can be hard, especially as prices have been skyrocketing with inflation, but take a careful look at your budget and decide what must stay and what you can stand to cut.

Keep the things that are serving you, but trim the rest. For instance, consider cooking at home for two more meals a week instead of eating out, shopping around for the best deals, and avoiding impulse purchases.

In truth, there are many ways to save money, but if you’re determined to achieve FIRE, it’s an absolute necessity to learn how to live below your means.

Paying off debt 

Debt can be a major obstacle to financial freedom. It is a wealth destroyer, after all. It’s amazing how quickly money can disappear when you’re paying interest. It’s even worse if you carry high-interest rate debt like credit cards.

Have you ever done the math to determine how much goes to your interest?

Admittedly, I was quite ashamed when I realized how much of my money was being wasted on student loan interest. It was enough to pay for a yearly cruise!

I decided I wanted the cruise more and made a plan to pay my debt off pronto. You’ll be better served to do the same.

If you do have debt, it’s important to pay it off as quickly as possible. This can be done by making extra payments on your debt or by consolidating your debt into a lower-interest-rate loan.

Investing your money

Once you have a solid savings cushion, you can start investing your money. This will help your money grow over time so you can reach your FIRE goals even faster. 

There are a variety of investment options available, so do your research and choose investments that are right for you.

The Different Ways to Achieve FIRE

We’re not quite finished answering the question, “How does the FIRE Movement work?” Next, we’ll talk about the ways you might choose to pursue FIRE.

There are a lot of ways to achieve FIRE, but remember that FIRE at its apex means that you can live off of your investments without having to work.

Perhaps that’s right for you, or maybe you prefer a smaller-scale version of FIRE, in which case you might consider the following alternates:

“Safety Cushion” FIRE

If all-out FIRE isn’t right for you, then perhaps you prefer to follow FIRE principles to build a solid safety net instead. You can use your safety net to pay for unexpected expenses like a medical bill or an accident.

If you plan on working to a traditional retirement age, then following “mild FIRE” until you reach this goal may be a better fit for you.

“Pay off some Debt” FIRE

If you’re tired of dealing with high-interest debt (like credit cards), but don’t mind maintaining low-interest debt (like a mortgage), then you might prefer to pay off some of your debt as you follow some FIRE principles.

“Pay off all Debt” FIRE

If you’re tired of debt entirely and want to annihilate it, then you might prefer to follow FIRE until you pay off your debt. Maybe from there, you’ll lighten up your tight spending habits and enjoy the excess money you’ll get to enjoy instead.

“Savings” FIRE

Does the thought of investing keep you up at night? If so, you might prefer to follow FIRE principles to save a more substantial amount of money, even beyond a traditional safety net. Just keep in mind that the FDIC typically only insures bank account balances up to $250K.

“Mindful Spending” FIRE

Ready to kick some poor spending habits with FIRE? Then you might want to use FIRE principles to better manage your money.

“Traditional Investing” FIRE

Your employer might have a generous retirement plan. In this case, you might be more than happy to focus your investments on a traditional retirement account.

“Traditional + Stock Investing” FIRE

Are you a big fan of investing? Then you might want a traditional retirement account plus an investing portfolio outside of this account.

Your version of FIRE might look like a combination of these styles, or something else entirely. Which style feels right for you?

7 Tools to Optimize Your Progress Toward Your FIRE Goals 

Now you know how to answer the question “How does the FIRE Movement work?” Are you ready to kick-start your financial goals into high gear?

Here are 10 tools that you can use to optimize your progress toward your FIRE goals:

1. ClickUp

ClickUp is a project management tool that can help you track your spending, savings, and investments. It can also help you create and manage your budgets and financial goals, and track your progress towards those goals.

2. Strengths Finder

Strengths Finder is a book that helps you identify your strengths and weaknesses. This information can be used to help you make better financial decisions. 

For example, if you’re strong at achievement, you may want to focus on tracking the accomplishments towards your goals, such as increasing your savings. If you’re weak at focus, you may want to use a budgeting tool to help you.

3. Mint

Mint is a free financial tracking tool. It offers features, such as the ability to create budgets and track your spending by category.

4. YNAB

You Need a Budget (YNAB) is a budgeting tool that helps you track your spending and make sure that your money is going toward the things that are most important to you. It’s not free, but it offers a free trial.

5. FIRECalc

FIRECalc is a retirement calculator that helps you estimate how much money you’ll need to save for retirement. It takes into account your age, life expectancy, spending habits, and investment returns.

6. Bogleheads

Bogleheads is a website and forum for people who are interested in index fund investing. It’s a great resource for learning about investing and finding the best index funds for your needs.

7. Reddit/r/FIRE

Reddit’s r/FIRE subreddit is a great place to connect with other people who are interested in the FIRE movement. You can ask questions, get advice, and share your own experiences.

How Does the FIRE Movement Work? 5 Books to Inspire You

Here are 5 books to fuel your understanding of FIRE and related topics (like investing):

1. You Are a Badass at Making Money by Jen Sincero
2. The Bogleheads’ Guide to Investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf
3. Rich Dad Poor Dad by Robert Kiyosaki
4. 4-Hour Workweek by Tim Ferriss
5. Unshakeable by Tony Robbins

Looking for more recommendations? Check out more of my favorites here: 16 Books I Recommend to FIRE Your Career.

Conclusion

The FIRE movement is a great way to achieve financial freedom. You might prefer all-out FIRE or a more mild version. Either way, following FIRE is sure to help you achieve your financial goals.

What FIRE style is right for you? Let me know in the comments below! Best of luck to you on your journey to financial success.

Now that you’ve answered the question, “How does the FIRE movement work?” you might be wondering what other methods you can use to 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:

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

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

Mint (free financial tracking tool)

You Need a Budget (YNAB) (budgeting tool)

FIRECalc (retirement calculator)

Bogleheads (website/forum about index fund investing)

Reddit’s r/FIRE (connect with others about the FIRE movement)

Books:

You Are a Badass at Making Money

The Bogleheads’ Guide to Investing 

Rich Dad Poor Dad 

4-Hour Workweek 

Unshakeable 

Others: 16 Books I Recommend to FIRE Your Career