What is The FIRE Movement

The 9-5

Protecting yourself, avoiding these situations by having a large cash buffer makes navigating the situations easier. But what is even crazier and a topic of controversy, is investing. During this time the banks have recorded record profits with CBA posting a 5% increase to $10 Billion. Morally this may seem unjust but business is business and we live in a capitalist society which provides many fruits for people, such as Superannuation. So another way to protect yourself from economic difficulties is to invest. Companies find a way to make a dollar whether it is in high inflation, high interest rates, during war times and even pandemics. This is why we like to put our money into the best and brightest CEO’s in the world.

FIRE

Financial Independence Retire Early. Clear and concise on what it mean. But how is this achievable and why would someone want to follow down this path? After all it isn’t easy and most people around you won’t understand. Even though retiring early is often described in this movement it is very rare that someone would actually fully retire. There is always a passion project sitting in the back of their mind and becoming financially independent means they now have the time and resources to pursue what they really want.

How to Achieve Financial Independence

• Lean FIRE- This is the type of path being referred to when FIRE is being judged by critics. The bare essentials, your need-to-have expenses are being covered by your portfolio leaving little to no room for frivolous spending. This type is often the sore thumb sticking out as it could well be the first version created, leaving the 9 to 5 grind as fast as possible minimising all expenses. This could be for you if you are looking at following a passion project after your normal job, but for the long term it may not be sustainable.

• Fat FIRE- Bulging wallets and luxury holidays. Enough passive income to cover anything you would want to buy or do. Takes a fair while longer to reach, the 4% rule still applies however now that your spending is much higher you will need to match that with your portfolio. So originally a 1 million dollar portfolio would suffice but now you may need 2 million dollars.

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  Barista FIRE- This type is quickly becoming the most popular choice for a couple of reasons. First reason you require a lot less in your investments. Secondly most people don’t want to quit working, they only want a choice in what they are doing. Barista FIRE came from the term of being able to quit your high income job and become a Barista, this is only an expression, but means you are able to continue working in a lower paid job you enjoy.

• Coast FIRE- Similiar to Barista FIRE but this may be more goal orientated. You will still have a date where you want to stop working but it may not be for a while. So you sacrifice and grow your portfolio to a point where it will sustain it’s own growth achieving your nominated retire early target date. This can be a great strategy as you would only need to sacrifice a small portion of time to really knuckle down, reduce expenses and maximise investing. Once you coast FIRE target is reached you can slacken off the reigns spending more with comfort knowing your portfolio will grow with compound interest.

Purpose

It may seem like the process to reaching financial independence is all about accumulating as much money as you can while spending the least amount as you can, and in a sense it is true. However the culture surrounding FIRE is much more. It is about cutting expenses on things that don’t matter and spend freely on things that do. Intention and awareness is the core of the movement. Of course you can cut everything and achieve FIRE much quicker but creating a lifestyle while you are on the path is much more sustainable and emotionally rewarding. When you do hit that FIRE number you will have discovered what is truly important in life and 99% of the time it won’t be money. This is the reason most people leave the RE part out.

Conclusion