FIRE movement

And I was previously, you know, fully employed getting like a typical W-2 salary.

So I'm really curious to see FIRE in the context of like, I'm juggling a business.

It has profit.

Like, what do I do with this profit? How do I be responsible as a business owner, but also think about my eventual exit? And so you've got like the full stack for those answers.

I took a long time in college.

So anyway, she had a few more years under her belt.

The main idea with the FIRE movement, Financial Independence, Retire Early, you save up a nest egg, the sort of rule of thumb that people will throw out, it's a good rule for like accumulation is the 4% rule.

So you could flip it over and then look at your annual expenses and multiply it by 25.

Of course.

And so what we're talking about, I guess, just to kind of set it up, we're talking about this whole fire movement, right? You kind of want to set that up, like what is fire?

Yeah, financially independent, retire early.

Financial independence, retire early, so fire, which is not at all a new concept.

So having children would be a big one.

It could be getting married, but getting married might give you two incomes and help you get fired faster.

So I think it's cool to think about that even in the FIRE movement, there's a spectrum from we're really, really, really going to challenge ourselves and live ultra lean all the way to maybe one of the people that i was reading a thing about is um is still is living off of about 250 000 a year uh which was 50 of a 500k income you know so that that's cool i think if you look at classics like the richest man in babylon by george clayson that says take 70 of your income and live off of that save 10 uh do fun things with 10 and give 10 to charity uh Those are all kinds of things to think about.

But generally, the concept is that they want to get out of having to work and particularly having to work in the job that they don't love as fast as possible.

Now, as an adult, it's interesting because I definitely recognize that the power of surrounding yourself with people who, you know, have similar values and may be able to help you think of ideas that another group of people would have never thought of and things like that.

and it's just interesting to see how these different communities in these different places like can really affect your entire life right the direction of your life so like it was interesting right because I took this trip in the summer and I got to visit some of my fire friends and My FIRE friends, FIRE, for those who may not know, it's an acronym.

It stands for financial independence, retire early.

A lot of the FIRE people don't actually ever retire early, but nevertheless, it's basically a mindset, right? A mindset of, you know...

basically living a life where you spend on things you value and not on things you don't and you're not trying to keep up with anybody else just to get social status you're doing the things that you really value in life and you're optimizing for that and so when i visited these folks some of my friends live in just one particular area and it was shocking to me it shouldn't be but it really was because, you know, I realized that they all live within like 10 to 15 minutes of each other and they hang out like every week.

And it was a diverse intergenerational group of friends.

So I came up with FIRE Your Career, but I am not the founder of the FIRE movement.

And that has been going on for a while.

So to just start off with what that means, FIRE stands for Financial Independence Retire Early.

And you might also just call it FI, so the F-I.

Some people consider the retire early portion an optional thing.

How do you actually bridge the gap between where you are and where the math says you need to be?

Well before we talk about the incremental steps, we need to briefly touch on the FIRE movement which the Investpedia piece highlights as a major benchmark.

Ohhh! F-I-R-E: Financial Independence Retire Early.

Yes.

The people aiming to quit the corporate grind at like age forty.

We do ,we have to look at the movement that birthed it

The original FIRE Movement .the OG FIRE

You really cant understand the coast part without understanding the og fire part so FIRE is an acronym stands for Financial Independence Retire Early Right Its been this dominant subculture in personal finance gosh over a decade now core premise of traditional fire aggressive almost extreme front loaded frugality Like beyond packing lunch instead eating out Oh way beyond were not talking about standard advise putting aside ten fifteen percent paycheck traditional fire practitioners are saving fifty sixty sometimes up seventy five percent gross income which wild It is goal amass portfolio equal roughly twenty times annual expenses theoretically allows officially quit working entirely maybe forty On paper that phenomenal listening who wouldnt hand resignation letter thirty five drop microphone spend next five decades whatever want Its dream when stress testing that math less glamorous Yeah seems structurally fragile dig into mathematically punishing frankly carries hidden risk brings fantastic perspective Chris Woods certified financial planner based Charlotte North Carolina From Silvis Financial think Yes exactly points monumental hurdle original FIRE Movement simple expectancy manage complete retire looking fifty plus year horizon Fifty Years think about that Zero active income half century buying groceries paying housing absorbing healthcare costs dealing macroeconomic shifts Funded savings window maybe ten years Crazy Exactly clear trying fund half century living single decade saving difficult unless staggeringly high tech salary living poverty accumulation years massive inheritance Stretching finite pool capital massive timeline hyper vulnerable things inflation Incredibly vulnerable averages three purchasing power money halves roughly every Twenty four years fifty year retirement money halve value twice Wow okay visualize mechanics sort plays head compare fire sprint better analogy orbital mechanics Okay where going Traditional fire launch rocket solar system unbelievable amount fuel endure g forces crushing weight gravity break free Very narrow margin error Even trajectory off fraction degree drifting void everything perfectly pressure immense Much more accurate way look gravity cost living original fire movement escape velocity own power short window Rocket analogy different burning engines low earth orbit You still have to exert a massive amount of force to get off the ground, but once you're in orbit-

You just cut the engines.

Exactly.

And that distinction, you know, cutting the engines but staying in orbit, that's exactly why Chris Woods calls Coast Fire an upgrade to the original movement.

It really is an upgrade.

Because the original fire movement carries this crushing psychological burden.

With early retirement, you need to go beyond tier one, tier two, and that's because...

So FIRE is an acronym for financial independence retire early.

And so the FIRE number really is the amount of investment that you want to have that should be able to sustain you.

There are certain formulas that you can use to estimate it.

Yeah.

Please, what is it?

So FIRE is, um, an acronym for Financial Independence Retire Early.

So it's, um, um, um, it's a, it's a move, call it a movement that a couple of, I mean, young people came up with, I mean, um, globally, and their whole focus is that, look, I'm not going to wait till I am 60 or 65 to retire.

Yeah.

So there's a really cool thing happening right now called the FIRE Movement.

Oh, yeah.

I, I don't think we've talked about it before on the show.

We really do.

We are basically tearing down the facade of traditional retirement to examine the mechanics, uh, the rigorous math, and honestly, the deeply complex psychology of the FIRE movement, financial independence, retire early.

Yeah.

Specifically, we're gonna calculate your personal freedom number.

Exactly.

They plan to retire on incredibly minimal expenses, typically modeling an annual spend of between twenty-five thousand and forty thousand dollars a year.

And applying our twenty-five x rule, a lean FIRE target requires a total portfolio of between six hundred and twenty-five thousand and one million dollars.

Which is very attainable.

Today, we are doing a really thorough deep dive into a comprehensive breakdown from the financial platform Saxo.

And we're going to dive into the mechanics, the lifestyle variations, and the Well, frankly, the very real dangers of the FIRE movement.

Yeah.

FIRE standing for financial independence, retire early.

Let's delve deeply into market and withdrawal risk.

What actually happens to a retiree when a bear market hits in year two of their early retirement?

This is the nightmare scenario for the FIRE movement.

It's the sequence of returns risk applied to the decumulation phase.