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The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement whose goal is financial independence and retiring early (in NZ this is 65'ish). Those seeking to attain FIRE intentionally must maximize savings by finding ways to increase income and / or decrease expenses. The objective is to accumulate assets (e.g. stocks, apps, books,retnals), until the resulting passive income provides enough money for living expenses in perpetuity. The goal of this website is to help thos living in New zealand to achieve financial independence.
About the F.I.R.E movement
FIRE is an acronym which stands for Financial Independence Retire Early. There’s a growing movement of people who are practicing FIRE principles and retiring decades earlier than expected as a result.
From Wikipedia, the free encyclopedia
The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement whose goal is financial independence and retiring early. The model became particularly popular among millennials in the 2010s, gaining traction through online communities via information shared in blogs, podcasts, and online discussion forums. Those seeking to attain FIRE intentionally maximize their savings rate by finding ways to increase income or decrease expenses. The objective is to accumulate assets until the resulting passive income provides enough money for living expenses in perpetuity. Many proponents of the FIRE movement suggest the 4% rule as a guide, thus setting a goal of at least 25 times estimated annual living expenses. Upon reaching financial independence, paid work becomes optional, allowing for retirement from traditional work decades earlier than the standard retirement age.
Background
FIRE is achieved through aggressive saving, far more than the standard 10–15% typically recommended by financial planners. Assuming constant income and expenses, and neglecting investment returns, observe that:
- 10% savings rate: 9 years of work (1-0.1)/0.1.
- 25% savings rate: 3 years of work (1-0.25)/0.25
- 50% savings rate: 1 year of work (1-0.5)/0.5.
- 75% savings rate: 1/3 of a year of work(1-0.75)/0.75.
From this example, it can be concluded that the time to retirement decreases significantly as savings rate is increased. For this reason, those pursuing FIRE attempt to save 50% or more of their income.[7] At a 75% savings rate, it would take less than 10 years of work to accumulate 25 times the average annual living expenses suggested by 'the 4% safe withdrawal' rule.
Criticism
Some critics allege that the FIRE movement "is only for the rich", pointing to the difficulties of achieving the high savings rates needed for FIRE on a low income. Another common criticism is the FIRE movement's early retirees have not adequately saved for retirement. Because the retirement phase of FIRE could potentially last 70 years, critics say that it is inappropriate to apply the 4% rule, which was developed for a traditional retirement timeframe of 30 years; this criticism is based on the lack of empirical evidence supporting the 4% rule over a much larger time horizon.
The easiest way to measure how much money you’re saving is to track your savings rate. Your savings rate is the total percentage of your income you’re saving in all of your accounts (retirement, savings, etc.). There is a direct correlation between your savings rate and the years it will take you to retire early. The savings rate math is simple. No matter how much money you’re making, here’s how long you have to work to save 1 year of living expenses.
During my own financial independence journey my saving rate started at 40% and went as high as 82% some months. it’s easier than you think!.
I like to track my savings rate in both dollars and percentages. This is really easy to do using this savings rate calculator.
While not all members of the fire movement embrace traditional retirement, the milestone for having reached FI (Financial Independence) is the moment when the money you earn from your investments will pay for your expenses. When you hit that tipping point, the choice to work or not work is now yours to make and you are in control of how you spend your time and your life.
How F.I.R.E became a movement
The F.I.R.E movement may be a new concept to you, but it has been around for a number of years now.
The origins of the F.I.R.E movement
The F.I.R.E movment is catching on because as a society we need better financial advice more so at the job market is changing so offten.
What does it mean to be financially independent
To truly understand the FIRE movement, you also need to realize that our traditional views of retirement are out of date and constantly changing. According to data from the Bureau of Labor Statistics, nearly 20% of people over 65 are still working and that number is expected to grow.
Yes, some of these people work because they can’t afford not to. But others work because they’re pursuing a second act in their career: they’re finally doing work their passionate about or starting that business they’ve always wanted to. But, importantly, they’re doing it on their own terms.
FIRE allows people to do life on their terms. It gives them the financial breathing room to start a business, work part-time doing something they enjoy, spend time with their family, or yes, sip margaritas on the beach.
When we say that someone is retired, what we are really saying is that they have the option to not work. Instead of retiring FROM something, many people within the FIRE community choose to retire TO something.
Glossary
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