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How the FIRE Movement is Revolutionizing Financial Planning

Millennials are perhaps wrongly considered less concerned and savvy with their finances compared to their parents and grandparents. The FIRE movement is breaking stereotypes and transforming younger generations and their financial future.

October 27, 2023 | Madison Foster

Smiling man in a suit walking down the sidewalk tossing U.S. bills in front of a tile wall.

The youth of America are no strangers to challenging the status quo. Every generation has in some regard – especially when it comes to economics. For Millennials, it’s sprung up as a movement dubbed FIRE.

So what is the FIRE movement and, perhaps more importantly, should you jump aboard?

What is the FIRE movement?

FIRE stands for Financial Independence, Retire Early and is exactly what it sounds like – a movement dedicated to growing savings fast and achieving financial freedom prior to the traditional retirement age in the U.S by aggressively saving and investing.

For many, financial independence isn’t about just being wealthy. It’s the freedom to choose whether to continue working, and how much, as well as spending with purpose and following their passions.

What is the main purpose of FIRE?

The FIRE movement takes aim at the “traditional” path to retirement in the United States. Enthusiasts are rewriting the rules of personal finance, advocating for a lifestyle that allows individuals to break free from the shackles of traditional employment and retire years, if not decades, ahead of the norm.

Rather than slow and steady saving and traditional investing, FIRE encourages people to engage in a lifestyle of more extreme savings, living well below their means and placing a larger portion of income into investments – typically anywhere from 50-75%.

By setting aside such a large amount, it allows some people to retire in their 40’s or even 30’s!

How does FIRE work?

The beauty of the FIRE method is that it is fully customizable to the individual and their financial goals. Some choose to set aside 70% or more of their annual income and live off the bare minimum until retirement. Others choose to set aside less and retire a little later with the intent to have a small amount for spending in the meantime.

Once they’ve hit their predetermined savings goal (either a dollar amount or yearly expenses multiplied) and retired early, participants withdraw a small amount – typically 3-5% – from their savings balance yearly for living expenses.

This takes both planning and discipline. Figuring out the realistic dollar amount you can actually live on and how much you can afford to withdraw each year is key.

Key Points of the Movement

  • Plan, plan, plan – Set aggressive (but still realistic) goals for yourself and put the time in to figure out what you need to do to get there. Try following the SMART goal-setting model by making your plan specific, measurable, achievable, relevant and time-bound.
  • Keep expenses low and income high - Maybe that means cutting up one of your credit cards to reduce monthly expenses, or maybe it means taking on a second job to raise your annual income. Whatever you decide, hard work and discipline are key to success with the FIRE plan. Remember that what feels like a financial sacrifice now often comes as a reward later in life.
  • Prioritize saving and investing – Aggressive saving and investing on a daily, week and monthly basis is essential. Even if you’re late to the party, you can start now with the power of compound interest. Put your money to work for you now and you’ll start to see the difference soon. Need a savings account with great rates? Check out OMB's High Interest Savings account.

Additionally, take advantage of any employer matches for your 401(k). That’s free money towards your retirement.

Whatever your financial and retirement goals, the FIRE movement is spreading - and changing the game in the process. Young people are challenging the historically acceptable path to retirement and learning more about finances in the process. It’s not the way it’s been done in the past, but that doesn’t mean it can’t get you exactly where you want to go.

OMB and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decision.

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