Introducing FIRE: How To Retire Extremely Early

Introducing FIRE: How To Retire Early

What if I told you it was possible to retire in your 30’s? Would you believe me? Would you want to?

For most people, early retirement would be age 55 – provided you’ve built up a big enough private pension. Retiring any younger is often met with a raised brow.

“Did you win the lottery? Start TikTok? Rob a bank?”

But there is a growing number of ordinary people choosing to retire in their 40’s, 30’s and even their 20’s! How is this possible?

Extreme early retirees are choosing to adopt what is known as FIRE (Financial Independence Retire Early).

In this article, we’re going to introduce the FIRE movement, handle some of the common objections and share the steps required to achieve early retirement through financial independence.

What Is FIRE?

In its simplest definition, FIRE is a lifestyle that involves living frugally to save as much as possible, and then investing your savings to retire as soon as possible.

By prioritising wealth building and choosing to forgo many of the consumerist trappings of modern life, FIRE adopters take advantage of the freedom that money provides and can retire much sooner than traditional age.

Instead of having a career spanning 40-50 years, they’ve shortened their working life to just 5-15 years!

FIRE has two distinct parts:

{Financial Independence} and {Retiring Early}

Financial Independence


Financial Independence (FI) is achieved when the income you receive from passive and semi-passive investments is at least equal to your living expenses.

Or to put it another way; you’ve accumulated enough cash-flowing assets that work for you, so you no longer have to work, and you can spend your time however you like.

Retire Early


When you no longer trade your time for money, you free up a world of opportunity: you could travel the world; learn another language; start a family and have the luxury of being a stay-at-home parent; play video games all day, or do whatever the hell turns you on.

You’ve earned your freedom, and you can do whatever you want with your time.

That being said, FIRE adopters often choose to work in some capacity – if you have the drive and determination to become financially free at a young age, it’s highly unlikely that you’re the type of person to lounge around all day.

Some choose to do voluntary work, pursue a career in a new field or start a business around a hobby they’re passionate about (without the usual risks).

FIRE Objections

I never used to share my FIRE plans. On the rare times I did, I usually got one of two responses:

Those that didn’t quite understand it:

“Why would you want to live like a cheap weirdo for years and then stop working and spend all day in the house?” Sounds boring, mate.”

To those that flat out disagreed with it:

“You can’t retire at 34! You have a duty to contribute to society!!!”

There are loads of reasons why someone would be opposed to FIRE, and some of them are incredibly valid: not willing to sacrifice, not fair on family, takes too long, too risky, if everyone did this the world would fall apart.

The FIRE lifestyle isn’t for everyone. You will have to make sacrifices and go against societal norms.

But retiring extremely early is an unusual thing to do, and if you choose this path, then you can’t follow the crowd.

If FIRE still appeals to you, then like me, the desire for freedom and control over your life is a much stronger driving force than living conventionally.

FIRE - How To Retire Early In 5 Simple Steps

The main factors that determine how long it takes to retire early are your savings rate, return on investment and the cost of your future lifestyle.

It doesn’t take a massive salary (although that helps if you’re also saving a large proportion of it) and it doesn’t take specialist investment knowledge.

Retiring young is actually really simple. But as the saying goes; what is simple, isn’t always easy.

There are only five steps that you have to follow.

1.  Calculate Your FI Number

Calculate Your FI Number

Firstly, you have to calculate how much you require in investments to live off of. A quick way to do this is to calculate your future annual spending and multiply that number by 25.

Note: The 25x rule (a.k.a the 4% rule) comes from the Trinity study, which was research carried out on the safe withdrawal rates of savings. The study found that if you have 25x your annual spending invested in a portfolio of stocks and bonds, you could withdraw 4% of your pot each year without running out of money before you die.

If you want to know more about the 25x rule, check out How Much Do You Need To Retire In The UK?

So, if you anticipate your family is going to spend £30,000 per year (£2,500 / month) in the future, you will require a total of £750,000 invested to retire early.

“WAIT! What?!? I need almost a million bucks to retire early?”

Don’t freak out if you’ve calculated you need to save an impossible amount for early retirement. It is possible to save substantial cash relatively quickly, and you’ll probably find that you don’t need as much as you initially thought if you’re willing to make a few smart lifestyle choices.

2.  Cut Expenses (And Get Thrifty)


Saving for FIRE requires a different approach than regular saving. You’re not going to get there by shopping during sales or putting a few pennies in the jar whenever you feel you can afford to do so.

You may have to adopt frugality (to a greater or lesser extent) and cut a few things out to hit your savings targets.

And before you dismiss frugality, it is not deprivation. Frugality is about living an efficient life and not about being cheap or denying yourself of everything you enjoy.

The easiest way to make “sacrifices” is to assess how you spend your money and stop spending on things that aren’t bringing you value.

The most significant savings are going to be made by making changes to what are likely your three biggest expenses: housing, transport and food. Here are a couple of suggestions:

Housing: live in a smaller home, stay with a flatmate or use Airbnb to rent a spare room.

Transport: live closer to work, carpool or get rid of the car altogether and cycle everywhere.

Food: shop at discount supermarkets (Aldi, Lidl) and cook everything at home.

The secondary benefit of reducing your living costs is that you also reduce the amount you have to save.

If you decreased your annual spending from £30,000 to £24,000 (£2,000 / month), you would require £600,000 instead of £750,000.

That impossible savings goal is now starting to look a bit more manageable. And we’re not done yet, there’s still more we can do to reach it sooner.

3.  Work On Increasing Your Savings Rate

Your savings rate (i.e. the amount you save compared to how much you earn) is crucial in determining how long it will take you to reach financial independence.

The more you save, the shorter your journey.

For example:

If you saved 50% of your wage, it would take you 14 years to retire.

If you up your savings rate to 60%, it would take 11 years.

And if you could increase it to 70%, it would take just 8 years.

Percentage Savings To Retirement
Graph courtesy of forum.earlyretirementextreme.com

Saving 50% or more of your income may seem like a fantasy, but it is possible if you adopt a frugal lifestyle and optimise your life to reduce waste and unnecessary spending.

If you make a real go of step 2 (cutting expenses), you may even be able to half your living costs in a few short months.

4.  Explore Ways To Earn More

Discover Your Side Hustle

There are two ways you can save more; reduce your living costs or earn more.

In the beginning, it’s almost always easier to save more by reducing your spending. However, there’s a limit to how much you can cut, and once you’ve optimised your spending as best as possible, it’s time to turn your attention to earning more.

Think about all the ways you could earn extra money. Could you work overtime? Get a second job? Or switch roles to a better-salaried position?

If there are no opportunities in your current field and getting another job isn’t feasible, then I’d suggest starting a small business on the side.

It’s never been easier to make some extra income with websites like FiverrUpwork and People Per Hour connecting service providers with buyers from all over the world. And there are thousands of side hustles you could try, from walking dogs to performing voice overs.

Think about what skills you currently have or that you would like to learn, practice until you’re good enough someone would be willing to pay for your services, and then present your offer to the marketplace.

Side hustles cost little to nothing to set up, so you have nothing to lose.

If you build a successful side hustle, you will reach FI quicker with an additional income stream, or you could quit your job sooner if you’re happier working on your business than your job:

For example: A part-time freelance writing gig that netted you £500 / month working 10 hours a week would mean you would need £150k less in your retirement pot if you were keen to keep on writing in retirement.

And if you keep your side hustle once you’re financially independent, you could increase your lifestyle in retirement or continue saving for added security.

5.  Invest Wisely


The last piece of the puzzle is investing.

Investing for FIRE doesn’t have to be complicated. If you try to pick winning stocks, invest in cryptocurrencies, or try other risky investment strategies, there’s the potential that you will lose all of your investment.

There is no point gambling and potentially adding years to your FI journey when you could take a much simpler and safer approach.

My own strategy, and the one I suggest you follow, is to buy a diversified portfolio of index funds that track large, global markets like the S&P 500 (USA) or FTSE 250 (UK).

Note: I’m also heavily invested in property, which provides a greater return than my share market investments and means I need less to be financially independent. However, property is more hands-on and is more like a business than an investment, and I don’t want to complicate what is meant to be a simple guide to FIRE by discussing it here.

If you’re not familiar with index funds, they offer a cost-effective way of diversifying your investment by splitting it across all the shares held in that fund. A £1,000 investment in a FTSE 250 index fund would allow you to buy a tiny slice of the 250 largest companies in the UK.

You should pick funds that have low fees as these costs can seriously eat into your returns, especially managed funds that have fees of 1-2%. I use Vanguard in the UK, which has fees starting at just 0.07% (just my preference and not a suggestion).

I would advise setting up a standing order to buy index funds every time you get paid to take advantage of pound cost averaging. And buy funds in your ISA (until you max it out) so you’re free to draw an income from your portfolio at a later date without paying tax.

You may not get jaw-dropping-double-digit returns from consistently investing in index funds, but you will achieve the long-term average return of the stock market, which has historically been around 10%.

And you also don’t risk your investment going to zero as it is highly improbable that all companies within an index would lose their value… unless the zombie apocalypse happens.

Once the income from your portfolio covers your living expenses: CONGRATULATIONS! You’re now financially independent.

The Final Word


If you’re not satisfied with your career and long to do something else, FIRE offers a way out.

If you want to retire early, FIRE will allow you to no matter your age.

If you want more freedom in your life, or you just want to know you’ll be financially sound no matter what, FIRE is your answer.

FIRE is NOT “get rich quick”. It will take years of diligent saving and investing. But if you desire to escape the rat race before traditional retirement age, following these five steps is the quickest and safest way to financial and time freedom.

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