FIRE: Financial Independence Retire Early
The idea of quitting your job decades before the traditional retirement age sounds like a dream. The FIRE movement has gained popularity over the past decade, especially among millennials and young professionals who want to live life on their own terms. But what exactly is FIRE, and how achievable is it for the average Australian?
In this blog, we’ll explore what FIRE is, what it takes to achieve it, the potential downsides, and how a financial advisor can help you get on the path to financial freedom. Whether you’re just curious or seriously considering FIRE, this blog will give you the knowledge to understand the concept in more detail.
What is FIRE?
FIRE stands for Financial Independence, Retire Early. The core concept is simple: if you can save and invest enough money early in life, you can eventually stop working full-time much earlier than the traditional retirement age of early to mid 60s.
FIRE followers aim to:
Live frugally and intentionally
Save a significant portion of their income (often 50% or more)
Invest those savings in income-generating assets (such as shares or property)
Build a nest egg large enough to support their lifestyle indefinitely
The goal isn't always to stop working entirely. Many people who achieve FIRE choose to work part-time, start passion projects, travel, or volunteer.
What Does FIRE Require?
Achieving FIRE requires a mindset shift and a long-term commitment to managing money differently.
Here are some key steps:
1. High Savings Rate
The average Australian savings rates vary, but those pursuing FIRE often need to save considerably more than the average person. This involves cutting expenses significantly and often prioritising saving over lifestyle luxuries.
2. Investing Wisely
Savings alone usually won’t get you to FIRE. It’s important to understand the different types of investments available.
Shares and Managed Funds
Investment properties
Superannuation (though access is restricted until preservation age)
The aim is to build a portfolio that can generate enough income or capital growth to fund your lifestyle indefinitely.
3. Clear Financial Goals
FIRE isn’t just about numbers it’s about aligning your money with your goals. Knowing why you want to retire early and what lifestyle you want to maintain is critical for staying motivated and building a realistic plan.
The Downsides of FIRE
While the idea of early retirement is appealing, there are several challenges and trade-offs to consider:
1. Sacrifice Now for Freedom Later
Living extremely frugally can impact your lifestyle, social life, and overall happiness. Constantly saying no to holidays, dinners out, or experiences can be challenging.
2. Market Risk
A portion of a FIRE strategy depends on investing. If your portfolio suffers a major downturn early in retirement, your plan may not be sustainable or may change your timeframes.
3. Longevity Risk
Retiring in your 30s or 40s could mean planning for 50+ years without a regular income. That’s a long time to rely on savings and investments, especially if you live a long and healthy life.
4. Potential Isolation
Some early retirees find that without the structure of work, they lose a sense of purpose or social interaction. Planning how you'll spend your time is just as important as planning your finances.
5. Savings Restrictions
For many people the money they earn now is just enough to get by and they don’t have the capacity to save or invest.
How to Get Started on the FIRE Path
Whether you want to go all in on FIRE or just improve your financial independence, here are the basic steps to begin:
1. Calculate Your FIRE Number
Estimate how much money you’ll need to retire early. This involves:
Tracking your current expenses
Projecting future spending
2. Assess Your Current Position
Add up your assets (super, savings, investments, property) and subtract your liabilities (mortgage, credit cards, loans) to understand your net worth.
3. Reduce Spending and Boost Savings
Look for ways to cut unnecessary costs, avoid lifestyle creep, and increase your savings rate.
4. Start Investing
The earlier you start, the more time your money has to grow through compound returns.
It’s beneficial to seek financial advice before making major investment decisions.
5. Monitor and Adjust
Your plan should evolve as your life changes. Regular reviews of your savings rate, expenses, and investment returns are key to staying on track.
How a Financial Advisor Can Help with FIRE
Working with a financial advisor can be incredibly valuable to achieve financial freedom and improve financial habits. Here’s how a financial planner can support your financial journey:
Clarifying Goals
We help you define what financial independence looks like for you and not just a generic formula.
Creating a Tailored Plan
FIRE requires a clear roadmap. A financial planner can:
Calculate the investments required to achieve your goals
Model different scenarios
Identify the most tax-efficient strategies
Investment Strategy
We help build a diversified portfolio aligned with your risk tolerance and timeframe.
Risk Management
A good advisor will help you manage risks like:
Market downturns
Inflation
Accountability and Support
It’s easy to fall off track. Ongoing advice and support can make a big difference in staying committed to your goals.
Tax and Superannuation Planning
Super plays a role in many retirement plans, even if access is delayed. We help you use it efficiently, while also building wealth outside of super for earlier access.
Frequently Asked Questions (FAQs)
Q: Can I still pursue FIRE if I have a mortgage or debt?
Yes, but managing debt effectively is a key step toward financial independence.
Q: Is FIRE realistic in Australia?
It can be, but it depends on your income, lifestyle, and location. Higher earners and those in lower-cost areas may find it more achievable.
Q: How long does it usually take to reach FIRE?
It depends on your savings rate and investment returns. Modelling and tracking expenses can provide insights.
Q: What happens if I run out of money in early retirement?
That’s a key risk of FIRE. Regular financial check-ins, flexible spending, and backup plans (like part-time work) are important to manage this risk.
FIRE ultimately is about achieving financial freedom. The freedom to spend your time as you choose. The freedom to leave a job that no longer serves you. The freedom to design your life on your terms.
Whether you want to fully retire at 40 or just build a stronger financial future, the principles of FIRE, intentional spending, disciplined saving, and smart investing can help you achieve greater independence.
If you're considering FIRE or just want to improve your financial position, working with a qualified financial advisor can help you make informed choices and stay on track.
About Us
After working as an advisor for a decade, Joel founded Unified Wealth.
Unified Wealth specialises in helping clients who are facing life’s big decisions.
Whether you’re contemplating your first property, growing your family or starting your investment journey we can help you focus on the simple steps to help you make your goals reality.
Our priority is making sure you have all the right information available to make the best possible decisions for you and those you love.
Our company values are:
Unity - We are most effective when we work together as a team
Trust - We are trustworthy and act in your best interests
Transparency - We are honest and communicate openly
Education - We are committed to lifelong education
At Unified Wealth our team is highly experienced and provides goal-based advice and solutions for a range of advice strategies.
Speak to our team today.