Learn FIRE
Financial Independence, Retire Early. Master the concepts, strategies, and step-by-step roadmap to take control of your financial future.
What is FIRE?
The fundamentals of Financial Independence, Retire Early
Having enough invested assets that the returns cover your living expenses indefinitely. You work because you want to, not because you have to.
The Simple Math:
Annual Expenses × 25 = Your FIRE Number
Example: $40,000/year × 25 = $1,000,000
Your savings rate is the single most important factor in how quickly you reach FIRE. It affects both how much you invest AND how much you need.
*Assuming 7% returns, 4% withdrawal rate, starting from $0
Types of FIRE
Different approaches to financial independence based on your lifestyle goals
Lean FIRE
$25-40k/year
Minimalist lifestyle with frugal spending. Lower target means faster achievement.
Regular FIRE
$40-60k/year
Comfortable middle-class lifestyle. The 'standard' FIRE target for most people.
Fat FIRE
$100k+/year
Luxurious lifestyle with no spending constraints. Requires larger portfolio.
Coast FIRE
Varies
Enough invested that compound growth will fund retirement. Work covers current expenses only.
Barista FIRE
A variation where you have enough invested to partially cover expenses, supplemented by part-time work. Often pursued for health insurance benefits (hence "barista" - referring to Starbucks' part-time benefits).
Key Rules & Concepts
The foundational principles behind FIRE calculations
Based on the Trinity Study, you can withdraw 4% of your portfolio annually with a high probability of not running out of money over 30 years.
Some prefer 3.5% for longer retirements (40+ years) or more conservative planning.
To find your FIRE number, multiply your annual expenses by 25. This is the inverse of the 4% rule (1 ÷ 0.04 = 25).
Calculate Your Number:
- 1. Track your monthly spending
- 2. Multiply by 12 for annual expenses
- 3. Multiply by 25 for your FIRE target
Example: $3,500/month × 12 = $42,000/year × 25 = $1,050,000
"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it." — Often attributed to Albert Einstein
$79,085
After 10 years
$263,916
After 20 years
$661,437
After 30 years
*$500/month invested at 7% annual return
The FIRE Roadmap
A step-by-step flowchart to financial independence (based on r/financialindependence)
Follow these steps in order. Each section builds on the previous one. Don't skip ahead until you've completed earlier steps.
Budget & Essentials
Build your financial foundation
Create a Budget
Know where your money is going. Track income minus expenses.
Pay Housing
Rent/mortgage including insurance if required.
Buy Food & Groceries
Prioritize essentials. You may need to prioritize utilities first.
Pay Utilities
Power, water, heat, toiletries, and other essentials.
Income-Earning Expenses
Transportation, internet, phone — anything needed to earn income.
Healthcare & Minimum Payments
Health insurance, care expenses, and minimum debt payments.
Employer Match & Emergency Fund
Get free money and build your safety net
First: Pay off high-interest debt (>15% APR)
Credit cards, payday loans, etc. These destroy wealth faster than you can build it.
Get Employer 401k Match
Contribute exactly enough to get the full match — it's 100% free money. Nothing more yet.
Build Small Emergency Fund
$1,000 or one month of expenses, whichever is greater. Use a high-yield savings account.
Then expand your emergency fund based on job stability:
Stable Job
3 months of expenses
Unstable/Variable Income
6-12 months of expenses
Debt Reduction
Eliminate moderate-interest debt
Do you have debt above the prime interest rate but below 15%? (Car loans, some student loans, personal loans)
Refinance if Possible
Try to reduce interest rates through refinancing or consolidation.
Avalanche Method
Pay off highest interest rate first, then the next highest, and so on.
Health Savings Account (HSA)
Triple tax-advantaged investing
HSA Triple Tax Advantage:
- 1. Tax-deductible contributions
- 2. Tax-free growth
- 3. Tax-free withdrawals for medical expenses
Requires HDHP
You need a High Deductible Health Plan to be HSA-eligible. Best if you're healthy with few medical visits.
Invest Your HSA
Don't just save — invest in index funds. Keep receipts to reimburse yourself tax-free later.
If employer HSA has high fees, you can rollover to a low-cost brokerage like Fidelity.
Individual Retirement Account (IRA)
Tax-advantaged retirement savings
Your IRA strategy depends on your Modified Adjusted Gross Income (MAGI):
High Income
Single >$122k | Married >$203k
Backdoor Roth IRA — Max traditional IRA, convert to Roth
Middle Income
Single $64k-$122k | Married $103k-$193k
Max Roth IRA directly
Lower Income
Single <$64k | Married <$103k
Choose based on whether you expect higher future income (Roth) or want deduction now (Traditional)
Pro-Rata Rule: If you have existing traditional IRA funds, backdoor Roth conversions will be partially taxed. Consider rolling traditional IRA into 401k first.
Additional Tax-Advantaged Savings
ESPPs and maxing out retirement accounts
Employee Stock Purchase Plan (ESPP)
If 15% discount and immediately vested, it's often worth buying and selling immediately for guaranteed return.
Max Out 401k
After getting employer match, max out your 401k contributions ($23,000 in 2024).
Large Purchases Coming?
Save in HYSA, or 529/Coverdell ESA if for education expenses.
Self-Employed
Evaluate Solo 401k or SEP-IRA for higher contribution limits.
Taxable Accounts & Beyond
After maxing all tax-advantaged accounts
Mega Backdoor Roth
If your 401k allows after-tax contributions with in-plan Roth conversion, you can contribute up to $69k total.
529 Plans
For children's education. Check your state for tax deductions.
Taxable Brokerage
Index funds in a regular brokerage. Consider tax-loss harvesting.
Extra Mortgage Payments
If low interest rate, investing often beats paying down mortgage.
Final Steps:
- • Pay off low-interest debt if desired for peace of mind
- • Consider Donor Advised Fund for charitable giving
- • Rebalance portfolio regularly (minimize fees and taxable events)
Roadmap based on the r/financialindependence FIRE Flowchart v4.1 by /u/happyasianpanda. This is general guidance — not financial advice. Consult a licensed professional for personalized recommendations.
Ready to Start Your FIRE Journey?
Use our calculators to find your FIRE number and track your progress.