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Understanding The FIRE (Financial Independence, Retire Early) Movement!

If you hang out with the cool kids or know a few Gen-Z individuals at work, you might have heard them use the term “FIRE” at times. In modern lingo, FIRE basically means something is impressive or amazing beyond compare. You might use it to say “the latest Eminem song is straight fire” or “last night’s chicken tandoori was fire, dude!”

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Although at Fello, a team of Millennials and Gen-Zs, we would use the term “FIRE” to describe a new-age movement that is helping people achieve financial freedom. Coincidentally, it’s literally called the FIRE (Financial Independence, Retire Early) Movement! 

In this blog, we explain all you need to know about the FIRE (Financial Independence, Retire Early) Movement. 

What Is FIRE?

The Financial Independence, Retire Early Movement aims to help people save enough money to avoid depending on a full-time job to pay the bills. FIRE works by combining extreme savings and investments that allow individuals to retire earlier than conventional retirement plans would permit.

The concept is often credited to financial advisors Vicki Robin and Joe Dominguez’s best-selling book “Your Money or Your Life,” published in 1992. FIRE encapsulates a basic idea of the book: people should evaluate every expense in terms of how many working hours it took to pay for it. 

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The goal isn’t just to retire early but rather to become financially independent by dedicating a percentage of their income to savings and investments while they are still working full-time. When their savings reaches a threshold (called the FIRE number), they can retire from all forms of employment. 

How Does FIRE Work?

If the FIRE Movement sounds too good to be true, then understanding how it works might help. There are two common retirement strategies that are used: 

The 25x Rule – The 25x Rule is a simple formula for calculating how much money you’ll need to retire early. It works by calculating your total annual expense, multiplying it by 25 and then expecting you to save up that amount before retirement. 

The 4% Rule – The 4% Rule is a financial principle that states how much money can be withdrawn from one’s retirement account each year (4%) to sustain a comfortable lifestyle while still leaving enough money in the bank for the future.

Using these strategies together helps individuals calculate an adequate amount for their retirement fund and set up a safe rate of withdrawal. Yet, these strategies do not follow a one-size-fits-all approach.

 What Are The Approaches To FIRE? 

While you may find Eminem’s latest song FIRE, others may not – different strokes for different folks!

Hence, depending on your earnings, expenses, lifestyle choices and risk appetite, you can choose from three broad approaches to FIRE:


This approach enables people to retire while maintaining their existing standard of living. Naturally, this demands the most aggressive savings and investment strategies. 


This approach is for individuals willing to live a minimalist lifestyle post-retirement by cutting expenses to the bare minimum. Such individuals need a smaller retirement fund and can achieve financial freedom sooner.

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This method is midway between Fat FIRE and Lean FIRE. With this approach, individuals do not need to cut their expenses to the basic essentials and can supplement their savings by working part-time or doing gig work in retirement

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So, how do you know which approach is best aligned for you? By finding your FIRE number!

How To Calculate Your FIRE Number?

As we mentioned before, there are two well-known ways to start with FIRE –

The 4% Rule helps calculate your FIRE number with the following formula:

Total Annual Expenses ÷ 0.04 = FIRE Number 

The 25x Rule will give you the same FIRE number with the following formula:

Total Annual Expenses x 25 = FIRE Number  

For example, if your living expenses are INR 35,000 per month, your annual expenses will be INR 420,000 and your FIRE number will be INR 1 million. Just imagine achieving your FIRE number and having a cool mil in your savings….

Well, yes, but actually no – FIRE is not just about retiring early and doing nothing!

Common Misconceptions About FIRE Movement 

The biggest misconception when it comes to FIRE is that it’s aimed at retiring early, whereas the focus should be on financial independence – you can still have a full-time job or start your own business. The goal is not to be living pay check to pay check, but having the freedom to leave your 9-to-5 job to pursue work that’s more meaningful and rewarding.

Another illusion is that FIRE is only feasible for individuals who are ready to sacrifice comfortable lives now to retire early in the future. Yes, there will be compromises on major expenses but individuals can also rely on passive income and investments to achieve their FIRE number sooner. 

Moreover, the FIRE approach isn’t only for those who earn 6-figures and up. By adopting a frugal lifestyle, avoiding unnecessary expenses and investing wisely, the average person can achieve their financial freedom goals up to a decade sooner. 

However, as with all financial advice, the FIRE Movement also carries some risks.

What Are The Risks Associated With FIRE Movement?

Early retirees who save 25 times their annual expense or use the standard 4 percent withdrawal rule may still run out of money owing to inflation, poor investments, or not sticking to their lifestyle choices. Individuals looking to follow a FIRE approach can limit this risk by generating passive income streams or working part-time to supplement their retirement funds. 

Conclusion (Plus An Investment Tip For Your FIRE Journey!)

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We agree with Michael Scott! If savings are not your cup of tea, then you should definitely invest in digital gold. Not only is the investment hassle-free and safe, but by doing so with Fello, you can also win rewards up to one lakh rupees! #NowThatsFIRE

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