How to get FIRE’d: Financially independent, retired early

While many dream of early retirement, some are working hard to achieve it through the Financial Independence, Retire Early movement.

The movement, called FIRE for short, combines frugal living, a high savings rate and growth investing to accumulate enough of a nest egg so that you no longer need to work to cover living expenses. With a disciplined FIRE approach, you could retire years, perhaps decades, before the traditional retirement age of 65.

For many, though, quitting work as soon as possible isn’t necessarily the goal. Neither is lounging on a beach.

They’re seeking financial independence instead because they want options: Retire early but with a purpose, to do something more fulfilling. Take a lower-stress, lower-paying job. Or even keep working if you like your job and co-workers, until you’re ready to leave on your terms.

The FIRE movement also is about community. Personal finances might be difficult to discuss with family and friends, but members share cost-cutting and investing tips and openly discuss their progress on the road to financial independence in meet-up groups, retreats, blogs and podcasts both locally and around the country.

Here is some advice on the FIRE philosophy from Minnesotans who are pursuing it, and others:

Many of the principles of what would become the FIRE movement come from “Your Money or Your Life,” a personal finance bestseller published in 1992. It emphasizes, for one, considering how much “life energy” goes into earning the money you need to make a purchase.

“If we’re spending all our time making money and then spending money on things we don’t necessarily value, deep down, we know that means we’re wasting time — and we don’t know how much of that we have,” said Stephen Baughier, the Georgia-based founder of CampFI, a series of financial independence retreats that will host two weekend gatherings this year in Marine on St. Croix. “Knowing that you’re spending your time in line with your values, that brings you a lot more happiness.”

The FIRE movement focuses on these principles:

Live frugally. Focus on minimizing “the big three” expenses: housing, transportation and food, Baughier said. He cut his spending “to the things that I need vs. the things that I want.” When going through a divorce, he moved to a smaller house he had been renting out to others. He drove the same car for 20 years, only letting it go recently after logging 315,000 miles.

Among its common sense “pillars of financial independence,” the ChooseFI podcast and blog points to “house hacking,” or buying a duplex or triplex and renting out the other units to live at low cost or even for free.

To “crush your grocery bill,” ChooseFI recommended meal planning, cooking at home and in bulk, using leftovers and buying seasonal ingredients. Purchasing staple foods instead of processed ones can save money and improve your diet.

Live within your means, said Tim Huebsch, organizer of the Minnesota on FIRE meet-up group. Use credit cards as a tool but avoid carrying a balance, or focus on paying them off while minimizing other debt.

“A lot of times, you hear people talk about the FIRE movement, and it’s only about real extreme frugality,” said Huebsch, who still works full time for a Fortune 500 company. “The community has evolved over the last five years where at its heart, the idea is: Spend less than you make, save for the future, and that then gives you more freedom to make choices about what you want to do.”

There are several other ChooseFI “pillars,” some that start as young as your school days. “College hacking” saves by going to community college for two years before a four-year school, taking Advance Placement and other courses to earn college credit while in high school and taking advantage of scholarships. “Travel hacking” uses credit card rewards and points to lower costs, unless existing credit card debt is an issue. Cutting cable or streaming services and looking for low-cost cellphone service are additional tips.

Boost your savings. FIRE followers typically aim to save 50% of their income or more, to pour into retirement investments. Huebsch said he has saved up to 40% of his income for years, while maxing out his 401(k) and Health Savings Account. College graduates starting a first job should increase their standard of living by a little above their student days and save the rest of what they make. Do the same every time you receive a raise or promotion.

Chris Luger of Forest Lake, who writes about financial independence on his Heavy Metal Money blog, said he saved 60% to 70% of his income for several years. He was able to do that after paying off his truck and using the proceeds from the sale of his late father’s house to help pay off the mortgage on his house.

“Everything I made, I just paid off my debt,” he said.

Invest for the long term. FIRE adherents typically invest in low-cost index funds. They should maximize contributions to employer-sponsored retirement savings plans and then consider contributing to a traditional or Roth IRA, according to Investopedia.

Determine your FIRE number. That’s how much you need to save to reach financial independence.

“Defining that number gives people a lot of clarity,” Baughier said. “It just brings peace to a lot of people, knowing that they’re on pace to get there.”

The general idea, followers said, is to have saved 25 times what you spend in a year before you retire. That should enable you to withdraw 4% of your investments a year during a 30-year retirement, beginning, say, at 50.

Using those figures, you could spend $40,000 a year after you retired if you had $1 million in your nest egg, said Kevin O’Brien, a software engineer in Minneapolis. With $2 million saved up, you could spend $80,000 a year in retirement.

“I do run those numbers and look at those options,” O’Brien said. “It gives you a lot of confidence to start having some answers and data and good advice around this and finding a community of people that talk about money.”

Luger, the Heavy Metal Money blogger, gave himself 10 years to reach his FIRE number. He got there in nine and retired — or “fired,” as the community terms it — last February, at 50.

“I understand I come from a position of privilege,” said Luger, a divorced father of two who worked in tech and made $80,000 a year when he started with FIRE and $130,000 a year when he retired.

He had purchased 10 rental properties and planned to live off the rental income. But he has since sold two of those while working on a commercial real estate project.

In 2020, he launched a nonprofit to help families who have incurred substantial medical debt from premature births.

Post-firement, Luger has gone to 17 concerts and music festivals around the country. He took his adult children on a trip to Los Angeles, making memories now rather than leaving them a large inheritance they might not need. He started a side hustle, buying items like box fans or space heaters from big-box stores in bulk and reselling them on Amazon.

“I liked my job, and there are times when I kind of still miss it,” Luger said. “But there are so many other things I want to do in life, and that was the kicker. I’d earned the opportunity to try other things.”

While your FIRE plan might allow you to retire long before your peers, a limited lifestyle might mean missing out on going to the movies or weekend trips with friends or traveling for family holidays, weddings or other events, said Jerry Lee, a certified public accountant in Wayzata who has worked with clients in the FIRE movement.

Be prepared for plans to turn out different than expected, he said. A financial hiccup is always around the corner. Build up an emergency fund to cover four to six months of expenses.

“Health care costs can be unpredictable,” Lee said in an email. “Health care costs between early retirement and Medicare eligibility could cost a fortune.”

He recommended creating a FIRE community, because friends and family members might not understand your new way of life. Find good websites or connect with a financial adviser to figure out your way forward with the FIRE philosophy.

Retired life, Luger found, has not been without challenges. He’s responsible for structuring his time and has stressed about his progress on various ventures. Last year, he had a “panic attack,” flew home early from a music festival and saw a doctor. He began talking to a therapist and is trying to slow down.

“Think of retirement as a five-speed manual transmission,” Luger said, quoting one of his FIRE friends. “When I left work [last] February, I thought by March, I would already be in fifth gear, and that’s nothow it works.

“You need to take a year first in maybe second gear. You’ve got to learn how to be retired.”

Todd Nelson is a freelance writer in Lake Elmo. His email is todd_nelson@mac.com.