I've been reading around the topic of "FIRE" for about a year now, but I don't think we've ever discussed it on TAS before. FIRE stands for "Financially Independent, Retire Early". Say what? Well, give me a minute and I'll do my best to explain....
- Let's say you spend everything you earn as you earn it, and save nothing. State pensions etc apart, that means that you won't ever have anything saved up for the future, and in effect have to keep working forever.
- Now let's look at the other extreme - suppose you can somehow live without spending anything at all. If you could do that, you could conceivably stop working right now.
- Now let's look at something in the middle. If you were able to live off half of your wages and saved the other half, investment returns aside that means that for every year you worked, you'd be able to live in retirement for another year with the same standard of living.
- Now let's get a bit more extreme and say you could live off a quarter of what you earned and saved the other three quarters. That way every year of working in effect buys you three years in retirement.
Still with me? Remember this is all hypothetical stuff at this point.
Well, some boffins have figured out that if you can save and invest 25 years worth of living expenses, you can retire now (pretty much regardless of your age), and live off those savings, with very little chance of running out of cash before you pop your clogs. (This is called "
the 4% rule".)
So, what some people are doing is adjusting their lifestyles until they can save some really high percentages of their takehome pay. Then, when they reach that magical 25x living expenses level, they either quit work altogether, or scale it right back (e.g. working purely for the love of it, not the money). How long would that take? Well, take our 25% / 75% example above. If each year you could save three times your annual living expenses, you could reach 25 times that in (25/3), which is only 8.5 years.
Of course this being the internet, there are loads of websites and blogs devoted to this topic. It's important to say that I'm not decided on it one way or the other. In particular, going fully hair shirt all for one magical day in the future when you can give up work seems a bit crazy to me. However, there are other FIRE concepts such as having a stash of emergency money saved so that you aren't dependent on a paycheck from month to month (and can hence escape a difficult job or home situation if you need to) that do seem sensible to me.
Anyway, if you're interested to find out more, here are a few links you might want to look up:
https://www.mrmoneymustache.com - "Financial Independence Through Badassity". In particular, start with "
The shockingly simple math behind early retirement", which is a longer version of what I tried to describe above.
https://www.frugalwoods.com/ - A financial independence and homesteading blog, which has now also been turned into a book. This is FIRE with a smallholding bent.
Mad Fientist - A blog and podcast site, with lots of tools for figuring out finances and all things FIRE.
Why all this FIRE talk is a load of irresponsible rubbish (Hint to the author - you've missed the point - you're spending far too much money!)
Anyway, let me know what you think!