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What is Financial Independence Retire Early (FIRE)?

The FIRE Movement originated in the early 90s from a best-selling book, “Your Money or Your Life” by Vicki Robin and Joe Dominguez.

However, it didn’t really catch…well, fire, until more recently when big money bloggers like Mr. Money Mustache, Choose FI and Retire by 40 took the concept mainstream. The idea has attracted a cult-like following with younger generations embracing, and boasting, about their restrictive financial lifestyles.

So what does it mean?

Financial Independence

You can break the concept into two parts. First is Financial Independence.

Being financially independent means you are able make lifestyle decisions free from financial constraints or concerns. You can continue to work or not work, or you can choose to stay in or leave a relationship.

Maybe you are considering moving or going back to school. Regardless of what you are contemplating, the idea is that you are in a financial position where money doesn’t have to be considered.

The idea is liberating and highly attractive, particularly to younger generations who value flexibility. But reaching that level of independence long-term may require significant sacrifices in the short-term.

Those looking to achieve financial independence want to accomplish two things:

  1. Significantly reduce or eliminate debt.
  2. Build a bucket of wealth to generate passive income and fund their future.

Of course, accomplishing those two goals requires individuals to save a much higher percentage of their income than the typical American family. Our ability to control our income is limited, so most FIRE followers accomplish their goals by aggressively saving—with many identifying 50% as the targeted goal.

Yes, you read that right. For example, an individual earning $60,000/year would try to save nearly $30,000 of that. How the savings are captured varies across individuals.

When working with individuals looking to accomplish this, or who are facing any sort of budgeting issues, I prefer to focus on the large fixed expenses.

It is an exercise in mental strength to deny yourself things you enjoy, like eating out, vacations or shopping. If we can exercise control on larger purchases or expenses like a home, auto or student loans—then we can replicate that savings every single month for years and years.

Retire Early

The second part of the movement speaks to Retiring Early, but I consider this a nebulous term. The definition of “retirement” varies drastically from person to person. To me, it is truly a repetition of being financially independent. For some, retirement is changing careers from one job to another that you enjoy more.

For others, it may be a house in Florida and bi-weekly golf games or volunteering with charitable organizations. At the end of the day, the ”Retire Early” concept is really the idea you can make lifestyle decisions free from financial constraints.

Achieving the goal savings rate of 50% may be extreme to many, but in my opinion, the overall concept is healthy and one more Americans should adopt. As we continue to battle a society that lives paycheck-to-paycheck, it’s a breath of fresh air to find such a cultural movement gaining ground.

Interested in the FIRE Movement? A CFP® professional is a great resource to help you plan for, and achieve, your financial retirement goals.

Respective services provided by ARGI investment Services, LLC, a Registered Investment Adviser, ARGI CPAs & Advisors, PLLC, ARGI Business Services, and Advisor Insurance Solutions. All are affiliates of ARGI Financial Group.

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