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FIRE movement in Australia

Financial Independence, Retire Early (FIRE) is about saving and investing as much as you can while you’re young, so you can retire in your 30s or 40s.

What is the FIRE movement?

The Financial Independence, Retire Early (FIRE) movement is a way of life that involves setting aggressive saving and investing goals while you're young, so you can achieve financial independence and retire by your 30s or 40s (or even younger!).

It's an informal, international movement that's challenging the status quo of getting a mortgage, working 5 days a week for 40+ years to pay off that mortgage and then, if you're lucky, retiring at age 65.

How FIRE works

Like the name suggests, FIRE can be broken down into two key steps:

  1. Achieving financial independence

  2. Retiring early

This generally involves adopting an extremely frugal lifestyle, working extra jobs and saving or investing every single dollar you earn in your teens, 20s and 30s.

The idea is that if you make these sacrifices while you're younger, by the time you're in your 30s or 40s, you'll not only be debt-free, but you'll have enough money to no longer need to work. You'll be financially free.

How to gain financial independence in Australia

The first step on your FIRE journey is working towards financial independence, which involves paying down your debt, setting yourself aggressive savings targets and adjusting your lifestyle to help you meet them. But perhaps the biggest change of all is the change you need to make to your mindset.

Pocket Money podcast: A FIRE expert shares his story

How to retire early in Australia

Once you've paid down your debts and are actively working towards your savings targets, if you want to be able to retire early, you need to get your money working harder for you. This involves investing, sorting out your super and considering home ownership.

Here's what you need to know about the "Retire Early" part of the FIRE movement as well as some strategies to help you achieve this.

Risks of the FIRE movement

Having enough money that you can afford to stop working in your 40s is a wonderful idea on the surface, but there are some things to consider before you commit yourself to the FIRE movement.

Unplanned costs

No matter how careful you are, there will be times in life when things go wrong. Job loss, illness, car accidents, a house fire, any number of things can derail your careful plans for early retirement.

A detailed FIRE plan should include some savings for emergencies, but you can't cover all possible eventualities.

Let's say you and your partner retire at 40 and continue living carefully, but one of you falls very ill at 45. You have medical bills and your home needs to be fitted out with a wheelchair ramp. Your partner might need to return to work or hire a carer, and you may need to dip into your savings and investments in the short-term.

And it's those kinds of situations that can derail or delay your FIRE dream if you don't prepare for them.

The best you can do is prepare for the worst:

  • Take out competitive insurance policies that provide you with appropriate cover (and make sure you're not underinsured).
  • Keep yourself fit and healthy and be aware of your family's medical history.
  • Build up a cash buffer for use in emergencies and be realistic about factoring old age and illness into your financial forecasts.

You could be missing out on a fulfilling youth

The FIRE movement goes well beyond being frugal and careful with your money. It really does mean making big sacrifices today for a more comfortable tomorrow.

You need to decide if you're really willing to miss out on a lot of the things people in their 20s and 30s consider not only fun but meaningful or life-changing experiences.

The FIRE movement isn't for everyone. If it isn't for you, it would be a terrible shame to spend years living very carefully only to find you've missed out on what really matters to you.

Investment returns aren't guaranteed

A key part of the FIRE movement is investing every dollar you can and then, hopefully, earning enough in passive income from the investment returns to get by. The 4% theory is based on the past performance of local and global stock markets, and there's no real guarantee that these returns will continue into the future.

Superannuation also relies heavily on the strong performance of the stock markets. If markets plummet, a lot of Australians stand to lose a great deal of money in their superannuation. Of course, the opposite is also true, and the market could outperform predictions.

More FIRE resources

Is FIRE right for me?

Only you can answer this question. Hopefully, the information on this page has helped you get a better understanding of what FIRE is all about.

If you are serious about FIRE, then there are many ways that Finder can help you get your finances organised.

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