Financial Independence, Retire Early: What Is the FIRE Movement?

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Financial independence. Retire early. Your savings rate. The rule of 25. Extreme cost-cutting. It’s all part of something called the FIRE movement, which followers say is the path to retiring early.

But just what is the FIRE movement?

What Is the FIRE Movement?

For those that don’t know, it stands for: Financial independence, retire early.

You might be wondering how that’s possible. It comes down to math. But don’t worry, it’s pretty simple math called the rule of 25. Essentially, take whatever yearly amount of money you want to or plan to live on in retirement, and multiple that number by 25. It gives you a rough estimate of a retirement target.

This number is also known as your financial independence number, because, in theory, you won’t ever have to do anything you don’t want to for money ever again once obtaining this number.

For a quick example, say you want to live off of $40,000 a year in retirement. Take $40,000 and multiply it by 25. You get $1,000,000, which makes your financial independence number $1 million.

The Simplicity of the FIRE Movement

To get on the path to achieve financial independence and retire early, you may have to change a few things about your mindset. That’s because the greater FIRE movement has a couple of core characteristics. But there is one that is the single most important above all else. This characteristic doesn’t just refer to money, and the best FIREwalkers don’t think about money every hour of the waking and sleeping day.

That characteristic is simplicity.

The single most defining characteristic of FIRE is simplicity.

It rears its head in the manifestos of numerous FIREwalkers. And it’s clearly what’s valued by just about every FIREwalker.

People want to make their lives easier. People want to save time. People don’t want to work forever doing something that they loathe.

And in the world of ever-increasing entropy and complexities, most of us want to simplify it.

So how does this work with money? Simplify it.

Cut out all the noise, all the unnecessary expenses. That is your defense. Defend your finances from creep and lifestyle inflation. Simplify what you are spending money on.

Look at your budget and ask yourself: “Where can I make cuts?”

Your three biggest areas you are likely spending money on will be housing, transportation and food. These are the best places to begin trimming the financial fat, because a little bit of saved money there will go much further than the $10 you are spending on Netflix.

Some ideas? Save money on housing by getting a roommate. Save money on transportation by buying a more fuel-efficient car, carpooling or using public transportation. Save money on food by eating out less, shopping at inexpensive grocery stores and meal prepping.

After the big three expenses, look for areas where you are probably spending too much money. There is a marginal utility, and therefore marginal uselessness to some things. Is another piece of clothing going to bring you closer to your overall goals? Are you swapping it out with an old or unwanted piece?

Or is that $20 T-shirt, $50 jeans, or $100 pair of shoes going to drag you from FIRE, even if a little?

We all collect things. I am no different. I am a sucker for video games, trading cards, LEGOs and books. But I have a pile of books that reach my height that I haven’t read. I have to ask myself: Is another book for $50 at Barnes and Noble going to make my life more complicated… or simpler? As much as I’d love to build the Roman Colosseum or a Republic AT-TE, where am I going to even put it? Will my $150, $200, even $500 be better spent on those items?

In order to FIRE, specifically to reach financial independence, you have to make sacrifices somewhere.

The Savings Rate

So you’ve got your financial independence number. Now you’re wondering how long it will take you to reach it.

Enter the savings rate.

The savings rate is directly related to how long you have to work until you retire early. It’s calculated by dividing your monthly savings by your monthly gross income. In other words: Your take home pay, divided by how much you can live on.

So, say you save 100% of your income — a 100% savings rate — you can retire right now, in theory. If you save 50% of your gross income, then it will take you 17 years.

How? Investing, essentially. As soon as you start saving money, it starts earning money for you. So if you can squirrel away a percentage of your take-home salary, that money can sustain you for the rest of your life, no matter how much you make. Because it will grow.

There is a rather complicated way of figuring this out mathematically, but Mr. Money Mustache (who we will discuss below) did the confusing math to provide us with simplified correlations between the savings rate and how long it takes to reach financial independence.

To explain the actual equation is to explain a spreadsheet of formulas in words, so we will just show you how long it takes to hit your financial independence number for your savings rates. This formula does take into account some variables: Your savings rate, an average market return of 5% after inflation, absolutely zero savings to start with and a safe withdrawal rate of 4%.

The one variable you can change? Your savings rate.

The amount of time it takes for you to reach your financial independence number is solely influenced by your savings rate. You can be a millionaire with a 5% savings rate and a broke writer with a 70% savings rate and, as long as that stays the same for 8.5 years, the writer will reach financial independence while the millionaire does not.

Here is how long it will take for you to hit your financial independence number with different savings rates per all those constants above:

Years to Reach Your Financial Independence Number Based on Your Savings Rate

Savings Rate Years Until Hitting Your FI Number




































Less than 3


Less than 2



So you might be wondering a few things. Firstly, what is a safe withdrawal rate? Basically, it is simply the inverse of the rule of 25: 1/25 equals 4%.

So, by using the rule of 25, this means you are using a safe withdrawal rate of 4%. The safe withdrawal rate is basically the amount of money you can withdraw from your savings and investments annually for them to never run out. Mathematically, that makes sense if your savings and investments are always growing by 5% per year, and you’re taking out only 4% per year. That means your money will infinitely grow, even if by 1% per year.

The last main thing you may be wondering is that maybe you do somehow save 100% of your money. Say, for example, you make $500 a month and can live off that and even invest it. In theory, you have hit your financial independence number, because you don’t need to make more money to live forever. But that’s highly unlikely and very improbable.

The most likely case where maybe you have a 100% savings rate is that you have some kind of somewhat passive investment. Say a rental property makes you that $500 a month and that’s all you need. Technically you are FIREing. You don’t have to work and your money is making money, But if you only have $2,000 to your name, an investment that’s still under mortgage, and can be mauled by something like a water heater breaking, you are also not FIREing. Because you suddenly need the extra thousands of dollars to fix it that you do not have liquid. And sure, maybe you sell that real estate investment to recuperate your cost, but you still only have $2,000, now you are not FIREing, though you technically were.

It’s also extremely difficult to reach a 100% savings rate, if not impossible. Lots of FIREwalkers mention the highest they ever had their savings rate was around 80%.

The Anti-Budget

So, once your expenses are in order, it’s time to take a look at your budget. One prolific FIREwalker, Paula Pant, pioneered a very simple one that she calls the anti-budget. It’s the best budget for simplifying your life, keeping yourself on track for your financial independence goals, and freedom to act with any leftover money each month.

Here’s a look at an example of the anti-budget:

Your income is $2,500 a month after taxes, all for yourself.

Your expenses are $1,700 a month. That includes every expense you can think of: Housing, transportation, food, insurances, entertainment, clothing, etc.

Now, decide how much you want to save. Say it’s $500 per month. (That would be a 20% Savings Rate.)

You then take that $500 when you get paid and sock it away into savings or investments or toward your debt.

And that works because $2,500 minus $500, minus $1,700 leaves you with $300 left over. So now, every month you ought to have $300 left over and your engine of money saving is on its way. It’s the simplest way to budget your money.

And the best part is, if you keep this money saving engine going exactly as is for years, you can figure out how long it will take you to FIRE. So, for a 20% Savings Rate, it will be 37 years.

If you started at the age of 25, that would mean you could retire at 62. So, as you can see with the simplest budget in the world, if you want to retire earlier, you have to figure out how to increase your Savings Rate.

Staying consistent and disciplined with your budget, Savings Rate and expenses will be the way you achieve financial independence. It will take years, but it will work.

Retire Early? 

So when people retire early they don’t exactly retire early. They realize that you still have to do something with your life after you retire. If you retire super early, you could be looking at 30-40 years of retirement.

If there is any other core characteristic of the FIRE movement, it is about living your life in the present and with intent. 

It just happens that in the world and time we live in, money is the most useful tool in your entire arsenal to live your life.

There is one, very, very important thing we must touch upon when discussing FIRE, living your life, and work. And that is hating your job or your work.

Most people will exasperatedly search how to retire early or become financially independent if they’re working a job they loathe.

And maybe they realize they can FIRE. So they do it: They reach financial independence and retire early. They may hate their life while they make it to their goal, sacrificing their time for their dream. But they do it. Say they do it by age 45, which is still incredibly early.

Then, they realize they have to do something with the rest of their lives. They didn’t notice the whole time they were racing away from work. But then they do notice when they’re on the other side of it.

So, the simple question is: Why don’t you just do work you like?

As long as you make enough doing work you like, you don’t even have to escape. You likely won’t even want to FIRE. Yes, financial independence is absolutely a goal that everyone should strive for in whatever capacity they can. But the retire early part? That’s completely optional.

What the FIRE Movement Isn’t 

While some misconceptions about the FIRE Movement should be dispelled by now, there are still dragons to slay.

The biggest dragon in question is the stereotype of what followers of the FIRE movement want with financial independence.

First of all, most do not want to be drinking piña coladas on a beach in the Bahamas for the rest of their life as they’re “retired.”

Most of those who FIRE’d and retired have found out that there is a good component of work. Additionally, if you FIRE with no plans, you end up like the fish at the end of Finding Nemo, sitting there wondering, “What now?”

So, say you did FIRE at the age of 30, congratulations! You are expected to live until 80, but many live longer. You have to do something for those 50-plus years. That’s more life than you lived up until now.

And that’s the thing, the FIRE movement isn’t about sacrificing everything until you can live the easy life. It’s simply about spending your most finite and ever-reducing resource, your time, doing more of what you want in life.

The Ghost of the Lentil-Eating, High-Earner

There is often an instant reaction of someone hearing of FIRE for the first time, thinking that FIRE is only accessible to someone who eats lentils every day and earns a quarter million dollars a year. Usually, this goes along with a stereotype of working in tech.

But, that is honestly just a caricature. There is some genuine evidence of this exact kind of person pioneering FIRE early in its embers, and most likely stems from three important people of the early FIRE Movement. They are Early Retirement Extreme, Mr. Money Mustache and the MadFIentist.

Jacob Fisker from Early Retirement Extreme

Jacob was a nuclear astrophysicist. His approach to life, and FIRE, is that of a true engineer — get the most from the least. We have a word for this — optimization. Jacob’s manifesto shrieks of two ideals — simplicity and enough. In this post from 2013 about how Jacob lived (presumably still lives) on $7,000 a year, he mentions how his one post about eating lentils “because it was quick and easy” in graduate school took on a different form.

Now, someone masterful at media somewhere along the line created the misconception that you must be a lentil-eating monster to FIRE. But as you can see, that’s not what FIRE is, even if Jacob admits his way of doing things is literally extreme.

Pete Adeney from Mr. Money Mustache

Pete from Mr. Money Mustache worked in the tech industry throughout the late ’90s and early 2000s. He has a degree in computer science and engineering. He and his former wife retired in 2005 before there was even a whiff of a downturn in the 2008 Global Recession.

So yes, Pete probably made an exorbitant amount of money as he and his wife both worked tech jobs. But he lived simply and spent as much as 50% less than all of his colleagues. He then started the FIRE blog he is well-known for in 2011, creating more of a character that’s him, but a bit sillier. This resulted in a larger outreach than what might have happened if he was not as silly.

Brandon from the MadFIentist

Brandon is also an early adopter of FIRE, and he started a podcast way back in 2012 discussing financial Independence with other FIREwalkers. He, too, however, was a developer and coder. But when you listen to him, he is a very humble, calm and reasonable guy.

Honestly, Brandon is probably the most “regular” out of these three early FIRE practitioners. And Brandon, don’t take this the wrong way if you read this, but it just means that the average person has a better likelihood of identifying with Brandon than the extremity of Jacob’s approach and the over-the-topness of Pete’s. In fact, Brandon is so human and unrobotic, he made the silly mistake of not investing because he was waiting for the price to match his hockey jersey number.

Financial Independence, Retire Early Frequently Asked Questions (FAQ)

What is FIRE?

FIRE is an acronym that stands for financial independence, retire early. It’s been called a “movement” for many years now since the way of thinking and life of those who are on the path to FIRE is much different than the average and traditional personal finance advice. The aim of FIRE is to reach financial independence through working, saving, and investing, and then retire early to live off your savings and investments for the rest of your life.

What is my Financial Independence (FI) Number?

Your financial independence number is what yearly amount you want to live off of in retirement multiplied by 25. It is a rough estimate but this is the traditional way of finding out what your FI number is, and gives you a goal to aim for.

When Can I Retire Early?

In theory, you can retire early as soon as you have enough money to live on indefinitely. That number is often calculated as your FI number. So, whenever you reach that, you can technically retire early. To figure out the exact time it will take to do that, it will depend on your savings rate. Please note, retiring early has become an optional part of the FIRE acronym for many.

What is the Savings Rate?

The savings rate is basically how much money you save each month as a percentage of your income. If you save a quarter of your money, that’s a 25% savings rate. If you save two thirds of your money, that’s a 66% Savings Rate. Your savings rate equals savings divided by income. It does not matter how much money you make to reach financial independence, but rather your savings rate. It is also directly correlated to how long it will take you to hit your FI number, here is a chart reproduced from above to show you how long it will take to hit your number for different savings rates.

Dennis Lynch is a civil engineer turned freelance writer with a passion for personal finance. While young, he acts as the spearhead of personal finance to just about everyone in his life, passing on his knowledge from the perspective of financial independence. You can find Dennis over at between his freelance ventures.