What exactly is the FIRE movement?

The following is general information and not financial advice or a recommendation to take any action. 

FIRE stands for: Financial Independence, Retire Early.

It's a movement built around a simple idea: save aggressively, invest intentionally, and achieve freedom from work years (or even decades) ahead of the traditional retirement age.

It's a mindset that’s reshaping how people think about money, their purpose, and their security.

What's the FIRE movement?

At its core, FIRE is about reaching a point where your investments generate enough passive income to cover your lifestyle.

This gives you the freedom to stop working, change careers, or take back some time.

There are variations within the movement: 

• Lean FIRE - living on a minimal budget to retire earlier
• Barista FIRE - reaching partial independence and supplementing income with flexible or part-time work
• Fat FIRE - achieving financial independence while maintaining a higher standard of living

The biggest misconception about FIRE is that it's about stopping work altogether. In reality, it's about freedom of choice. It is a compelling framework to invest more for freedom back, over time.

FIRE adopters work with two key metrics:

They calculate their FIRE number‍

This is an estimate of how much how much money you'll need, to reach a comfortable early retirement.

FIRE adopters calcuate their expected annual expense, and multiply it by somwhere between 25-30x

They then do everything possible to move towards their FIRE number. This in itself promotes excellent savings habits.

They plan to stick to the 4% rule

The 4% rule refers to the idea that, once they've this money is saved, you should aim to withdraw 4% of your savings per year during retirement.

At this rate, most retirees can keep up with their current quality of life while stretching their retirement over a 30-year period.

Great, but how do I get to my FIRE number?

Your FIRE number may seem daunting, but with a plan and discipline, it will happen faster than you think.

FIRE adopters use three core principals:  

Relentlessly drive low expenses

Adopters don't spend money on fancy dinners, fancy cars, vanity items, or the like.

They constantly work out how drive every cent cost lower - they buy food in bulk, optimise their rent situatation, take advantage of energy, mobile, and flight discounts.

Save 40-70% of income

By driving low expenses FIRE adopters aim to save 40-70% of their income.

Then, they make sure their savings are working for them.  

Putting savings to work

FIRE adopters target stable growth on their savings over the long term.

They generally steer clear of investing in speculative or volatile asset classes, and seek a stable return of 6.00% p.a or higher.

They may allocate their savings index funds, carefully chosen property they can add value to (not as easy as it used to be), or increasingly products like Earnr's range of accounts paying up to 7.20% p.a at the time of writing.

This means, their savings, are making them more savings.

Compounding and disciplined decision-making do the heavy lifting and they get to their FIRE number much faster.

Fully or partially retiring in your 30s is possible - here's an example

John is 20 and about to start his first full time job.

By adopting the FIRE movement now - he could partially or fully retire at 35! Whether he fully or partially retires is up to him, and his choice on the lifestyle he wants to lead.

But it is not too late to start if you're in your 30s, 40s, or even your 50s.

If John was 30, it is foreseeable he could retire at 45 or even earlier, as he'd most likely be earning a higher income. If John was 40, it is foreseeable he could retire at 50-55 due the likelihood he's in his highest income earning years.

Let's look at the assumptions to see how 20 year old John could retire at 35:

• John's FIRE Goal is $1,375,000 calculated as $55,000 annual expense x25
• His starting income is $100,000 increasing to $10,000 annually up to $250,000 per year
• His savings rate is 50% of his after tax income
• His starting savings are $8,000
• He targets a 7.00% p.a return using Earnr's 12 Month Term Accounts

John surpasses his FIRE goal within 15 years - moving past his FIRE goal, hitting $1,445,914 of savings by the end of year 15.

According to the FIRE principals and the above assumptions, John can fully or partially retire when he is 35.

For full workings and assumptions - feel free to reach out to Earnr Support.

How Earnr can help FIRE adopters 

We've noticed an inceasing number of FIRE adopters using Earnr Accounts to help reach their goals. We first wrote this article as an internal memo to educate ourselves!

FIRE adopters like Earnr Accounts because they pay equity like returns up to 7.20% p.a (at the time of writing) but unlike index funds and equities, Earnr Accounts are backed by Institutional Australian Bank Deposits and Secured Australian Property.

Adopters like that Earnr Accounts are higher earning, low risk accounts built by bankers, with no historical volatility.

FIRE adopters need to make every dollar work safely.

Earnr's products: 

• Provide stable, predictable cash flow
• Provide great rates which often match those received from higher risk equity investment
• Reduce portfolio volatility‍ ‍
• Preserve capital while still earning defined yields.

For those pursuing Fat FIRE or building a bridge to full retirement, Earnr could bring much-needed stability without sacrificing growth.

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‍The information in this article is intended to be factual though may also contain the opinion of the author. Whilst every effort has been made to ensure accuracy, we take no responsibility for any errors or omissions. Any opinions are those of the author alone and not a recommendation to take any action orobtain any product. You should consider whether this information is appropriate for you, and seek professional advice before making any decisions.

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