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The Essentials of Fire: Financial Independence Retire Early

You may have heard of the new movement and philosophy happening today that many call FIRE, but do you know what it is? This article will detail the basics of financial independence retire early, including what it is, the types of FIRE, and how you can get started on your FIRE journey.

What Is Fire?

FIRE (Financial Independence Retire Early) is a movement involving saving and investing a high percentage of your income with the outlook of retiring before standard pensions and retirement accounts become accessible.

Financial independence is where the investment returns outweigh the lifestyle expenses and liabilities. For instance, your annual expenses might be $30,000, and your investments might return $40,000 per year. That means you are financially independent and don’t need to work anymore unless you choose to.

Types of Fire

Considering the minimalist approach to FIRE, you need to have an annual expense of $40,000 or less. This is suitable for individuals who have a frugal and minimalist approach to life. You’d need to carry through with this type of lifestyle to keep your expenses low and forgo the need for extra income.

1. Leanfire

People pursuing this kind of FIRE don’t need to work full time. They can withdraw four percent of their passive income for most of their living expenses but need to work part-time to cover the rest.

2. Baristafire

This FIRE type is categorized as having enough money invested at an early age that you don’t need to contribute to your investment portfolio anymore. You will still have enough when you reach your retirement age. You’ve spent time and energy investing early on and can simply coast to your retirement age.

3. Coastfire

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