Retirement and Financial Independence

The Truth About The FIRE Movement

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If you read any personal finance blogs or listen to any personal finance podcasts, you’ve probably heard of the FIRE movement. LMM has written and talked about it in the past, but some in the personal finance world devote their blog or podcast to the FIRE movement entirely.

But the concept of FIRE is nothing new. It’s just that a few savvy people found a slick way to package it. And a few of the OG FIRE guys like Mr. Money Mustache and the Mad Fientiest struck gold. They are arguably the most well known and successful proponents of FIRE. Reddit has several subreddits dedicated to the subject.

It’s not hard to understand why FIRE caught on like, well, fire. Who doesn’t want to achieve financial independence and retire early? But the skills and mindset used to becoming financially independent are diametrically opposed to a life of early retirement, so FI and RE make for a strange marriage. Everyone likes a sexy acronym though so here we are!

But there are indeed downsides to setting yourself on FIRE, particularly for young people. Living a life of extreme frugality can mean missing out on a lot of the pleasurable aspects of your life. And early retirement can be downright dangerous to your health.

Most of the people who make a living selling FIRE don’t talk about those downsides because it’s damaging to the brand. So is FIRE a matter of your money or your life?

We set about finding the truth about the FIRE movement.

Breaking Down FIRE

Part of the slick packaging of the movement is the cool acronym. FIRE stands for Financial Independence, Retire Early.

Give Me an F, Give Me an I

The F and the I in FIRE stand for Financial Independence. I guess some people have grandiose notions of that like being able to buy a helicopter because you’re bored or having a garage full of Lambos. But that kind of stuff takes a lot of money, way more than most of us are going to see in our lifetimes.

So let’s be a little more realistic and define Financial Independence as having enough money to make big life decisions based on what you want to do instead of what you have to do.

You want to quit your job to go back to school or start a business. You have the money to do that. Maybe you like your job well enough but would prefer to cut back from full-time to part-time. You have the money to do that.

Living in the city has become too much, and you want to buy a big piece of real estate in the middle of nowhere and build a house. You have the money to do that.

Notice what I did not include. You want to quit your job and sit around watching TV and playing video games. You can’t do that even if you have the money. We’ll get to that.

Give Me an R, Give Me an E

The R and the E in FIRE stand for Early Retirement. This is where the problems with the FIRE movement can arise. Lots of people define early retirement as never having to work again. Which can sound great if you’re 70 but what if you’re 35? You want to retire early but do you want to be retired for several decades?!

First of all, you’re going to get bored. Have you ever had a period of unemployment? It’s great for the first few days and maybe even the first few weeks, but once the novelty wears off, you have days and weeks of time to fill. And in the case of early retirement, you have years and decades to fill.

For all the bitching a lot of us do about work, not always unjustified, work serves a lot of purposes. It gives us routine, purpose, friends, or at least the ability to socialize. And then there is the small matter of keeping us alive.

The study found a strong correlation between people who begin claiming their Social Security three years early (at 62) and death – particularly men, whose mortality risk jumped about 20%. Retirement is ranked 10th on the list of life’s 43 most stressful events for a reason. If your social life was entwined with your work, then leaving that day job with your regular friends can be depressing and challenging.

We also have to consider what could happen to those very young early retirees when a bear market comes calling. We’ll cover that separately.

Kinds of Fire

There is more than one way to skin a cat (don’t skin a cat anyway), and there is more than one type of FIRE.


LeanFIRE is for those who want to retire really early, like 35 to 40 early. To get lean, you have to give up a lot. It’s a very minimalist lifestyle.

People into LeanFIRE live a life of extreme frugality, often living out of a van, cutting out nearly all of the pleasures most of us enjoy like going out to dinner or taking vacations, and doing a lot of DIY, everything from growing their own food to making their own clothes.

how to live in van

Leaners also tend to be childfree which is understandable given that it costs about $250,000 to raise a child to 18. LeanFIRE is probably not realistic for most of us. Even if it sounded enticing enough to try, most people wouldn’t be able to sustain it for very long.

But if you want to prove me wrong head over to Early Retirement Extreme, the leader in the LeanFIRE niche.


FatFIRE frankly sounds awesome! It’s having your cake and eating it too which is always the ideal situation but rarely possible.

That’s pretty much the case with FatFIRE. It definitely can be achieved but by a pretty small segment of people. It means being able to not only retire early but to live like a baller. FatFIREs want to live in expensive cities, eat at expensive restaurants, wear expensive clothes, and take expensive vacations.

To FatFIRE, you’ll need a pretty well-paying career before your early retirement and a relatively but not extremely frugal lifestyle during your working years. Once you retire early, you’ll need to have a lot of money in retirement savings and a big fat investment portfolio.

But probably most crucially, you’ll need a couple of income streams, and most or all of them will be passive income streams. And I’m not talking about earning passive income by answering surveys. You need to have things like income from dividend stocks and real estate investments.

Unsurprisingly, doctors make up a significant portion of the FatFIRE movement. Physician on FIRE spells it all out.


LMMFIRE is the brand of FIRE we recommend. Financial independence means largely divorcing your time from your income. That’s what passive income does. You have a way (ideally more than one) to make money that requires little effort from you.

At some point, there was some work or maybe a lot of work involved, but once that work is done, you continue to make money whether you’re asleep, hungover, on vacation, or in a coma.

LMM is a form of passive income. The ads on the podcasts and the affiliate links in the articles allow them to generate revenue without any additional effort once they’re recorded and written.

Rental property is another form of passive income.

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Our proven, data-driven approach to building a portfolio of income-producing rental properties that perform in the long-term.

LMMFIRE requires a side hustle though. You can’t just sit back and watch the passive income roll in no matter how much it is. Why? Because part of having a fulfilling life is having a sense of purpose and creating things.

Mr. Money Mustache, the frugal king, has a whole slew of businesses. If you follow his blog, you get the impression he’s addicted to creating things.

mr money mustache

LMM is a form of passive income, but it’s also a side hustle. I’m not 100% sure of this, but I doubt there has been a single day since it started in 2012 that Andrew and Laura have not worked on it.

Why would they or anyone want to work when money is not the goal? Because they like what they do, they like working on LMM. To use a dumb and gross but accurate phrase, it’s a labor of love.

Everyone who wants to FIRE needs a labor of love. Ideally, it makes some money, but it doesn’t have to if you have enough money to stay on FIRE coming in from other income streams.


I kind of like this one. BaristaFIRE means working just enough hours to get employer-sponsored health insurance. We’re all well aware of how ruinous medical expenses can be when you don’t have health insurance (and sometimes even when you do) and how expensive paying out of pocket for coverage can be so becoming a BaristaFIRE seems like a good solution.

coffee habit

Plus you have the pleasant aspects of a job, a purpose, a place to go, social interaction, but you aren’t slogging away for 40 or more hours a week.

There is another way to BaristaFIRE and if you choose to do it, tread carefully. You and your spouse can decide he or she will continue working to provide health insurance for the both of you.

It’s no one’s business how a couple manages their finances, but we had a guest on the show years ago who was early retired while his wife continued to work and he did not come off well at all. We got a lot of emails saying he sounded like a lazy jerk who sat around doing nothing while his wife worked her ass off to take care of him.

I’m (pretty) sure this wasn’t the case, but that’s what it’s going to sound like to some people, so either don’t say anything or be careful what you say. Everybody got an opinion, especially during family gatherings!


A little from Column A, a little from Column B is what TBDFIRE is about. If you’re going to FIRE, you’ll probably do it this way. TBDFIRE means you create your own version of FIRE based on the things that align with your values, whatever they may be.

You can’t see yourself living LeanFIRE for enough years to retire at 40, but you could do it for a few years and save as much money as possible. And when you do retire, you can BaristaFIRE because you’re too young never to work again and you’d get bored really quickly.

Little of this+ little of that=TBDFIRE.

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Catching Fire

If you want to achieve FIRE, there are three key components and most people will need to practice all three.

Frugal Til it Hurts

Being frugal means something different to everyone. For the LeanFIREs, it means living in a van down by the river. To FatFIRES it means not taking that eighth vacation for the year. For the rest of us, it means spending less money than we make.

A lot less. Take a look at this chart. If you’re 30 and want to retire at the magical FIRE age of 40, you need a savings rate of 65%. Clipping coupons won’t do it. To save that much money, you have to dedicate yourself to simple living.

A chart that shows how many working years until retirement based on your savings rate (percentage).

We’ve done a ton of stuff on ways to live frugally including saving on electric bills, groceries, and date nights. Those things help, but housing is the most significant expense for most people so keeping your housing costs low is the best way to get your FIRE started.


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Invest, Invest, Invest

If you want to FIRE you must invest and sticking your money in an Index Fund and calling it a day isn’t nearly enough. (It is a good start though!).

Yes, you need to max out your retirement accounts because they’re tax-advantaged. But just because you retire doesn’t mean you can access the money in those accounts. You can’t take money out of those accounts until you reach a certain age unless you’re willing to incur a penalty (you’re not).

There are some exceptions to this, but by and large, money invested in retirement accounts should be left untouched until you reach the penalty-free withdraw age. If you can’t touch your “old age” nest egg, you need money in investment accounts that you can access to pay your annual expenses.

We did an episode on dividend aristocrats. They’re perfect for FIRE folks because they can supply a steady income stream. We’ve already mentioned rental property, but if you don’t want to own houses and all that comes with them, you can still invest in real estate through REITs. Fundrise lets you get started for as little as $500.


How do you know when you have enough invested to FIRE. There are a lot of ways to calculate it, and lots of them are super complicated. We like to keep it simple, so we like the 4% rule. Decide how much money you want to spend on annual expenses and multiply it by 4%.

By withdrawing 4% a year, your money will last at least 30 years.

Say you have $500,000 saved, you could withdraw $20,000 a year and never run out of money. If you’re a LeanFIRE, that might do it. A FatFIRE, you’ll be needing much more.

M1 Finance

They're perfect for DIY investors who prefer a hands-off approach but can still pick individual stocks and funds. We specifically use them for the Golden Butterfly portion of our portfolio.

Always Be Stashing

To kindle your FIRE, you must always be stashing away money, always saving. It starts with an emergency fund. It’s important for anyone, but it’s critical for FIREs. The gold standard is six months worth of expenses. FIREs probably want even more than that.

A rebellion against the unbridled materialism of the Baby Boomer generation (and against the willingness to enslave oneself to debt to achieve it) is long overdue.

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You can’t stop saving or investing once you FIRE yourself. Obviously, it’s more important than ever because you don’t have the steady income that a job provides.

What If?

It’s no coincidence that the FIRE movement took off right around the financial meltdown of 2007-8. People saw the writing on the wall. You cannot count on having the same job for thirty years and retiring with a pension.

That scenario wasn’t true well before 2007-8, but it was thrown into stark relief during that time.

People wanted to create their own escape route, and FIRE looked like a good one.

And it was because, since the collapse, the American stock market has gone up, up, up.

Since the bull market began on March 9, 2009, the Dow and S&P 500 have soared more than 300 percent each.

But nothing lasts forever, and a bear market could be looming.

Even if stocks do return 8-12% over time, it’s going to suck living on a LeanFIRE budget and watching your nest egg decline in value by 30-50%.

When this happens, those FIREs who haven’t made the correct calculations are going to stream back into the job market after an absence of many years. Not ideal.

Those FIREs who adopted the LMMFIRE approach, a bit of frugality, a ton of investing and saving, and a couple of solid side hustles, will come out okay.

Can Anyone Do It?

Probably not and this is where the FIRE community gets a lot of flack. It’s easy to promote the wonders of FIRE when you’re high earning DINKs (double income, no kids) but a lot harder when you’re a single parent making $40,000 a year.

Well, not everyone can play in the NBA either, but that doesn’t mean you can’t join a pickup league.

The principles of FIRE work for everyone.

Live frugally, save, invest, and have multiple income streams.

Not everyone can achieve FIRE, but everyone can improve their financial situation using FIRE principles.

Which Fire Are You?

We’ve detailed a couple of different types of FIRE, which one should you aim for?

Let me use the weight loss analogy because losing weight and personal finance have a lot in common.

If you want to lose weight, you have to eat properly and exercise. There are a million ways to eat well and to exercise. Which ones do you choose?

You choose the methods you can sustain. That means you have to find a diet and mode of exercise you enjoy or at least kind of like. You don’t have to go full wanker and proselytize your diet and spring out of bed amped to do your work out. But you can’t hate and dread them either. You have to embrace them.

The same thing is true for the FIRE method you choose. It has to be the one that is sustainable and realistic. LeanFIRE is probably not sustainable for most people nor is FatFIRE realistic for most of us.

But those two methods are extremes on opposite ends. The ones in the middle, most of us can do one or the other of those.

But really, LMMFIRE is the best one. Do that. See you around the CampFIRE.

The first one of you to email us with the correct count of fire puns I made in this article get a shout out on an upcoming pod. Here’s a hint, it was a lot.

Show Notes

Side Squeeze by Gun Hill Brewing: A farmhouse ale

Hip to the Lingo WeldWorks Brewing: A New England Style IPA

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Candice Elliott - Senior Editor Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.
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