FIRE Basics: What It Is and How It Works
FIRE (Financial Independence, Retire Early) is a strategy that combines financial independence and the ability to retire early. The concept emerged in the late 20th century and gained popularity due to people’s desire to live freely, without depending on traditional work. The main idea of FIRE is to accumulate enough capital to cover your annual expenses using passive income.
History of the concept
The idea of financial independence is not new, but the FIRE movement became popular thanks to the book “Your Money or Your Life” by Vicki Robin and Joe Dominguez, which describes the principles of conscious money management. With the development of technology and changing priorities in society, more and more people realize the value of time as the main resource.
How does FIRE work?
The FIRE movement is based on a simple principle: reducing expenses, increasing income and wisely investing. People following this philosophy minimize unnecessary expenses, invest in high-yield assets, and plan their finances so that they can retire earlier than the traditional age. The main goal is to achieve a level of passive income that covers all necessary expenses.
How to start?
The first step is to understand your current financial situation. To do this, you need to make a complete list of income and expenses, determine how much you are willing to save, and calculate the amount needed to achieve independence. After that, you should choose an appropriate investment strategy, such as buying stocks, bonds, or real estate, to create sources of passive income.