FIRE stands for Financial Independence, Retire Early. This movement is quickly gaining popularity, especially among millennials. The core of the FIRE movement is simple: save and invest wisely to become financially independent early and stop working as soon as possible. It may sound like a dream, but for followers of the FIRE movement, it is a very concrete goal.

How does FIRE work?

The strategy behind FIRE is quite straightforward. It mainly requires a lot of discipline.

• Maximize your ‘savings rate’💰

This means saving and investing as much of your income as possible. Many people within the FIRE movement try to save at least 50% of their income. Some even aim for 70%. A high savings rate means you become less dependent on your monthly income for your daily expenses because you have reserves.

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• Minimize your expenses 📉

Avoid unnecessary costs and live as frugal as possible. This often means living a simpler life than you may be used to. According to the FIRE movement, you can retire as soon as your annual expenses can be covered by approximately 4% of your total assets.

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• Invest 📈

The money you save, you invest in stocks, bonds, real estate, or other forms of investments that can yield a stable return. This capital eventually becomes large enough to generate a passive income high enough to cover all your annual expenses without you having to work.

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These three steps lead to (relatively fast) financial growth. By consistently saving more than you spend and investing this difference wisely, you build up capital that eventually becomes large enough to be financially independent, allowing you to stop working.

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What are the challenges?

• Discipline

FIRE requires enormous discipline and dedication. You must drastically reduce your expenses and keep saving a lot.

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• Investment risks

Your investments can fluctuate, which brings risks. Therefore, it is important to stay well-informed and possibly seek advice from financial experts.

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Is FIRE for you?

The FIRE movement is not for everyone — and not everyone is equally fanatical. Diehards adjust their entire lifestyle and live very frugally, while others use the FIRE movement to adjust their way of life and only spend money on things they really find important (and thus be less influenced by external factors).

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📲 Stay financially healthy with Grassfeld

Are you considering ‘joining’ the FIRE movement? The Grassfeld App can help you to gain more insight in your finances. The app automatically categorizes your expenses, so you can always see where your money is going. You can also create budgets to ensure you don’t spend more money than you want. Download the app, create an account, and get a grip on your finances!