When was the last time you thought about retirement? If you’re like most Americans, it’s probably been a while. And while the average retirement age is on the rise — up to 65 for men and 62 for women — retiring early doesn’t have to be a fantasy.

Let’s take a look at the history of the Financial Independence, Retire Early (FIRE) movement, followed by seven steps to finding the FIRE style that works for you. 

So, what is the FIRE movement?

You may have heard of FIRE from that friend who’s always talking about the latest money trends. But this one’s a bit different from the typical finance fad: the frugal lifestyle movement that started in the ‘90s takes penny-pinching to another level with maximum savings, minimal spending, and results that last a lifetime.

The way that lifetime looks is up to you.

Want to live easy in the middle of nowhere? Start saving soon and that cabin off the grid will be paid off in no time. More of a mansion person? Some FIRE followers’ homes would make an MTV Cribs host blush, but being rich comes at a price. While upping your tax bracket takes much more discipline up front, you’ll always have something to show for it — and much more time to enjoy it.

Who started the FIRE movement?

The FIRE movement was initially sparked by Vicki Robin and Joe Dominguez’s 1992 co-written bestseller, Your Money or Your Life. As the first and foremost book on FIRE, their nine-step guide to early retirement introduced the idea of financial independence through mindful money management.

It took a couple decades to catch on, though. The movement regained momentum among millennials in the 2010s after FIRE success story Jacob Lund Fisker published Early Retirement Extreme, which follows his journey to financial independence at the ripe age of 30.

Why should you consider FIRE?

For those up to the challenge, the rewards speak for themselves. FIRE followers often beat other retirees to the finish line by three decades, with many reaching financial independence as early as their 20s. So if retiring before the rest of your friends sounds like a dream, read on to see how you can make it come true. 

Which FIRE style fits you?

Everyone’s finances and standard of living are different, so there’s a FIRE for every budget. Here’s a look at the top FIRE plans: Lean, Fat, and Barista. Check ‘em out.

Lean FIRE

Serious about saving? Lean FIRE is the way to go. By far the most rigid FIRE approach, Lean takes minimalist living to an extreme. And when we say extreme, we’re talking food, rent, and transportation — full stop. So if you like a little wiggle room in your budget, you may want to leave Lean FIRE to the experts.

Fat FIRE

If moderation’s your thing, then Fat FIRE might be right up your alley. This middle-of-the-road approach to saving still lets you enjoy some of the things you love without having to pinch too many pennies. That way, you can spend your money and save it, too — easy as cake. 

Barista FIRE

For those about to retire, we salute you. For everyone else, there’s Barista FIRE. If you’re looking to ditch the 9-to-5 but still want to earn some cash on the side, Barista keeps you busy while avoiding cabin fever. Scratching the itch to make a little scratch also keeps your hands off your FIRE funds. Win-win.

7 steps to achieve FIRE

FIRE doesn’t happen by accident — it takes a great deal of planning, saving, and investing. Here are seven steps to achieve financial independence and retire early.

1. Figure out your financial goals

Start by asking yourself how much money you need to retire. The amount of money will depend on several personal finance factors, including: 

  • Annual income
  • Annual expenses
  • Health insurance
  • Investments
  • Marital status
  • Retirement accounts
  • Social Security
  • Work (part-time vs. full-time)

Once you calculate your score, you’ll have a detailed breakdown of your current financial status. Knowing where your money stands now will make it much easier to build a retirement plan for the future. And with a snapshot of your finances right at your fingertips, focusing on the big picture will be even easier.

2. Evaluate your current situation

While some folks know their net worth like the front of their Rolex Submariner, others aren’t so sure. If you’re like a lot of people whose finances aren’t so cut-and-dry, deducting your liabilities from your assets may take some work.

No matter where you’re coming from, knowing your net worth is key to finding your FIRE. Here are some popular assets you may have in your possession: 

  • Investments
  • Fine art
  • Jewelry
  • Classic cars
  • Real estate
  • Rental properties or other passive income
  • Retirement accounts

And here are some common liabilities: 

  • Bank loans
  • Credit card debt
  • Mortgages
  • Student loans
  • Unpaid bills

If your net worth is a little lower than you’d like, you’ve got plenty of time to make it grow. Take a look at your current spending patterns and adjust as needed to keep your FIRE fund going strong into the future.

As you plan ahead, you may come across the 4% rule of thumb — but don’t be too quick to follow it. The 4% rule suggests that retirees should withdraw about 4% of their investment portfolio to live on during their first year of retirement, then adjust that amount for inflation each year.

But retiring early changes the formula — because you’ll be retired longer than most people — so 4% probably won’t cut it. A better system is to use a free retirement calculator to see how much you’ll need.

3. Create a plan for your finances

How do you currently spend your money? No judgment if you’re living paycheck to paycheck — it happens to the best of us, especially since the pandemic. Half of Americans now consider themselves broke, so you’re not alone if a layoff  — or life in general — has made just getting by even harder than usual.

The good news? It won’t be that way forever. The sooner you set up a plan for financial independence, the quicker you’ll be on your way to early retirement. In the meantime, here are some ways to improve how you spend your life and money:

  • Build a customized budget plan
  • Set up a personal savings goal
  • Invest in high-yield savings accounts
  • Back up your money in bonds

Even if you haven’t made financial plans for your retirement, it’s never too late to get started. And with tools like Quicken Simplifi, managing your money is easier than ever.

Wherever you are on your path to retirement, Simplifi keeps you connected to your finances with real-time updates on all your money. Plus, built-in savings goals help you stay accountable to yourself and on the right track to financial independence.

4. Keep out the lifestyle creep

As you grow in your career, keeping your eyes on the prize is key. When you finally land that dream job with the salary to match (congrats!), it may be tempting to spend that extra money as soon as you get it. But while a shopping spree may feel like the go-to move after getting good news, it can also set your retirement goals back a few steps.

The tendency to overspend when your income increases is common, and it even has a name: lifestyle creep (or ‘lifestyle inflation’). This urge to splurge is natural, so just be sure to pump the brakes before you celebrate. The more you can save for your future and retirement, the sweeter your success will be.

5. Make a little money on the side

Have you considered freelancing or part-time work? Adding a side hustle to your arsenal is an excellent way to boost your Barista fund or start saving for a leaner lifestyle. Food and grocery delivery are among the most common hustles, but the gig economy has created even more odd jobs than you may think.

No time for more work? No problem. Take a look around your place and see what you can sell. If you can’t remember the last time you used an item (looking at you, exercise equipment), it may be time to part ways for a little profit. There’s a good chance someone out there is willing to pay you more than you expected.

Regardless of how much you earn — or how you earn it — there are lots of ways to make quick money. A little cash is all it takes to spark your FIRE, so it’s just a matter of time before you find a hustle that works for you. And if you need a hand balancing business and personal expenses, the right tools make it easy.

6. Planning your investment strategies

How you invest your money plays a big role in your FIRE plan. In addition to the standard stocks, bonds, Roth IRA, and 401(k) options, you may be entitled to money you haven’t claimed yet through benefits like employer 401(k) matching or pension funds. 

Diversifying your portfolio also keeps all your assets from going in one basket, increasing your chances of catching the right investments and reaping the benefits. Whether you prefer active or passive investing will also shape your future finances on the way to FIRE. 

That may seem like a lot to add up, but you don’t need an abacus to do the math. Tools like Quicken’s 401(k) Retirement Calculator make it easy to crunch all your financial numbers. And if you haven’t started investing yet, there’s still plenty of time. Just make sure you’re comfortable with your choices first, because it’s always better to know before you grow.

7. Check in on your progress

The fruits of your FIRE labor won’t grow overnight, but that’s okay — the best things in life take time. Getting started is the important part, and that takes time, too. What matters is having a plan and sticking to it for the long haul. Once you’ve got enough money set aside, saving will start making more sense than spending.

Changes are bound to happen along the way. After your FIRE plan has gained some momentum, investing in an emergency fund is a good way to keep all your bases covered in case of the unexpected. As you move closer to retirement, you’ll likely find more FIRE followers just like you — and maybe you’ll spark someone else’s FIRE, too.

Ready to retire with FIRE? Let’s go!

Now that you know what it takes to find your FIRE, you’ve got a head start on the road to early retirement. Whether you choose Lean, Fat, or Barista, there’s no wrong way to fuel your financial independence and retire early.

And if you ever need a hand setting up a savings goal or a customized report to help you track your retirement progress, help is just a click, chat, or call away. Connect with Quicken today to learn how tracking your finances with Simplifi can help you reach your retirement goals.