Financial Independence

An overview of FIRE (Financial Independence/Early Retirement) including why, budgeting, saving, and investing. FIRE means “retiring” before the traditional age of 65, sometimes even in your 20’s or 30’s.

  1. Spend less than you earn. Save the rest.
  2. Invest your savings in low-cost, broad-based index funds.

As with anything, you can go much further down the rabbit hole but the basic premise of my view on finances is that simple.


To start with, it is prudent to determine why you’d want to do this in the first place. Here is a good question to get the ball rolling:

What would you do if you didn’t have your job and didn’t have to worry about money?

If your answer is a description of your current job, then congratulations. You’re either already leading the life you dream of or you need to spend some more time pondering this question.

Most likely your answer will involve having the time to do things like travel, hobbies, volunteering, or spending time with the people you care about. In other words, things that won’t help you earn a living. Once you have determined the direction you’d like your life to take then you can concentrate on making it happen. Part of the whole idea is to make incremental changes to your situation that bring you closer to your ideal life. Diligent Saving and Investing are not the only ways to do this but they are a sort of fallback that, with enough time, will get almost anyone to where they want to be.

Recommended resources:


A prerequisite for spending less than you earn is tracking your expenses. If you don’t know how much you spend you’re just guessing. Budgeting is a great tool to be intentional about where you spend your money and my favorite is You Need A Budget (YNAB).

The key metric for FIRE is your savings rate, which is the percent of your total income you put in long term savings. Using some reasonable and widely accepted assumptions what this boils down to is the following table that will tell you how long you need to work with your savings rate.

Savings Rate Years to FIRE
10 51
20 37
30 28
40 22
50 17
60 12.5
70 8.5
80 5.5
90 3

The assumptions and math are laid out in The Shockingly Simple Math Behind Early Retirement.

The Shockingly Simple/Complicated/Random Math Behind Early Retirement goes even more in depth on the different variables and which ones are most important. For savings rates >50% things like asset allocation and returns are far less important.

Once you understand all the variables and assumptions you can use this calculator to change them and find even better estimates to suit your situation.


The gist of the FIRE investing philosophy is to invest in broad-based, low-cost index funds for these reasons:

  • No one can predict the future.
  • The stock market has risen consistently over long periods of time (>10 years) with periodic short term downturns since inception. There is no reason to think that it won’t continue to do so.
  • Only a small percentage of investors beat the stock market index in any given year, but essentially no one continues to do so year after year. Is nearly impossible to beat the market consistently regardless of your level of effort and skill. Doing so is generally regarded as luck or unique circumstances more than skill.
  • There is a trivial way to match the performance of the market: total market index funds. It is available to anyone and takes minimal effort.
  • The most important factor (behind savings rate) in investing is choosing your asset allocation (generally how much you put in stocks vs bonds).

These are great resources that have a broader overview and some details on this philosphy.