The FIRE Movement: What It Is and How to Achieve It

March 14, 2025 by Partner Colorado Credit Union

The pursuit of financial independence is not new, but in recent years, the FIRE movement has gained significant traction among individuals seeking to live life on their own terms. FIRE stands for “Financial Independence, Retire Early,” and it’s a lifestyle and financial strategy that prioritizes saving and investing aggressively to achieve early retirement. Here, we’ll take a closer look at what the FIRE movement is, why it has resonated with so many people, and steps you can take to join the movement.

What Is the FIRE Movement?

The FIRE movement’s core principle is achieving financial independence at an age much earlier than the traditional retirement age of 65. It encourages individuals to rethink and limit their spending, while focusing on saving and investing to create a lifestyle that allows them to retire early and focus on personal passions, hobbies, or alternative careers.

FIRE enthusiasts often adopt extreme saving and investing strategies. This could mean saving 50% to 70% of one’s income by minimizing expenses and maximizing income. The ultimate goal is to accumulate enough money to live off the returns of investments, typically using the 4% rule as a guideline. The 4% rule suggests you can withdraw 4% of your total retirement funds each year without running out of money (accounting for inflation as you go), assuming you have a 30-year retirement.

For example, if you have $500,000 saved for retirement, you would withdraw $20,000 in the first year, then adjust that amount every year based on inflation and the cost of living. The idea behind the 4% rule is to make sure you don’t outlive your savings and you have enough money to get you through retirement. When you only pull out 4%, the rest of your money can continue to earn interest.

Why the FIRE Movement Is Popular

The appeal of the FIRE movement lies in its promise of freedom and flexibility. Many individuals having a feeling of disappointment with the traditional work-life cycle, which often involves working long hours for decades only to enjoy retirement at an older age. FIRE provides an alternative path, empowering people to take control of their finances and time.

Social media has also played a significant role in popularizing the movement, with blogs, podcasts, and YouTube channels dedicated to sharing success stories and practical advice. Communities of like-minded individuals offer support and inspiration, making the journey to financial independence feel more achievable.

How to Achieve FIRE

The FIRE movement requires dedication and sacrifice to achieve. Here’s how it works.

Set a Clear Financial Goal
Determine how much money you’ll need to retire early. This involves calculating your annual expenses and multiplying that number by 25 to 30, based on the 4% rule. For example, if you expect to need $30,000 per year in retirement, you’ll need $750,000 saved.

Track and Reduce Expenses
Create a budget to understand where your money is going and identify areas for cost-cutting. This might include downsizing your living space, traveling less, cooking at home, or finding low-cost entertainment options.

Maximize Your Income
Look for ways to increase your earnings, such as negotiating a raise, pursuing a higher-paying job, or starting a side hustle. The more you earn, the more you can save and invest.

Invest Wisely
Investing is a cornerstone of the FIRE movement. Most people focus on low-cost index funds, which provide broad market exposure and are known for their reliability over time. These types of investments usually have minimal management fees and are therefore a lower cost. Automate your investments to ensure consistency and take advantage of tax-advantaged accounts like 401(k)s and IRAs.

Embrace Minimalism
FIRE and minimalism often go hand in hand. By prioritizing what truly matters, you can reduce unnecessary spending and focus on building long-term wealth.

Stay the Course
Achieving FIRE requires discipline and patience. Stay committed to your goals, even when faced with challenges or setbacks. Reassess your plan periodically and make adjustments as needed.

Different Approaches to FIRE

While the basic philosophy behind FIRE is the same, several variations exist to make it easier to pick an approach that suits the lifestyle you want to have. Here’s a look at the different approaches to FIRE.

Lean FIRE
This approach is for those who live frugally before retirement and will continue to live frugally after retirement. This means your retirement nest egg will be smaller and you may be able to get to your savings goals faster, but it will also leave you with less room for unexpected spending during retirement.

Fat FIRE
This approach is for individuals who want a more comfortable lifestyle in retirement like going on expensive vacations or eating out a lot. This mean your savings pool will have to be larger and your investment strategy will have to be more aggressive. This is one of the more challenging approaches.

Barista FIRE
This approach is for people who may not be in a position to achieve full retirement or simply don’t want to fully retire, but instead continue to work part-time to cover some expenses. The idea is to save as much money as you can before retirement so that you’re able to only work part-time or have a more relaxed job during your retirement years. For example, in retirement, you may replace your 40-hour a week job for one where you work 10 or 20 hours per week as a barista or something similar.

Coast FIRE
This approach is for those who save aggressively early on and then let their investments grow over time while working a less demanding job. The idea is to get to a point where you can stop making contributions to your investments and just watch them grow. Think of it as a way to “coast” into retirement.

Challenges and Considerations

While the FIRE movement offers many benefits, it’s not without challenges. Living on a strict budget can be difficult, especially when unexpected expenses arise. Market volatility can also impact investment returns, requiring flexibility in withdrawal strategies.

Plus, retiring early doesn’t necessarily mean stopping all work. Many FIRE achievers find purpose in pursuing passion projects, part-time work, or entrepreneurial ventures.

The FIRE movement is more than just a financial strategy; it’s a lifestyle choice that prioritizes freedom, intention and long-term planning. By saving aggressively, investing wisely, and embracing a mindset focused on value over consumption, you can take steps toward achieving financial independence and retiring early.