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April 12, 2017, 11:46:08 AM
Last edit: April 12, 2017, 12:15:39 PM by Lorenzo |
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Basically the idea is that anyone can retire if they have ~25 times their annual expenses in savings due to return on investments such as stocks and property. Those whose goal is FIRE aim to minimize their expenses while they work until they reach this amount so that they can retire at age 30, 40, or 50 rather than the more typical 65+.
So if you want to live on $30,000 a year after retirement then you will need 30,000 * 25 = $750,000 in savings.
The two most popular FIRE blogs out there are Mr. Money Moustache and Jacob from Early Retirement Extreme. MMM lives on $25,000 a year and lives a fairly normal lifestyle while Jacob from ERE lives on $14,000 a year and lives a very frugal lifestyle.
I guess the question boils down to whether or not you're willing to avoid the temptation of buying new cars, fancy electronics, and expensive restaurant meals, etc. during your twenties and thirties so that you can be freed from the burden of having to work in your forties, fifties, and beyond.
A typical example:
Bob is a recent college graduate who lives on $20,000 a year. He cooks his own meals rather than dining out in order to save on costs and drives a 1988 Toyota Camry. After graduating with a bachelor's degree in software engineering at 22, he gets a job that pays $80,000 a year. He could do what all of his friends are doing and upgrade his lifestyle to match his new salary. He could dine at expensive restaurants every week, go on luxurious holidays, furnish his house with expensive furniture and electronics, buy designer clothes, and upgrade his Camry to a brand new BMW. Or he could take the FIRE approach and continue to live the same way he did for 13 years while diligently saving most of his income. By age 35, Bob has saved $60,000*13 = $780,000 which enables him to retire provided he spends no more than $31,200 a year from then on.
Good idea? Bad idea? What do you think? Would you ever consider FIRE for yourself?
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