How to Achieve FIRE: The Complete Guide to Financial Independence (2025)

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So, if you’re reading this – you’re probably questioning how to quit your job and move to a beach somewhere. Yeah.. that was me too! If you’re looking for validation that you aren’t crazy for not wanting to work tirelessly until you’re 65 only to enjoy the last few years of your life, then you’ve come to the right place. After spending countless hours studying and implementing the principles we’re about to review, I’m going to break the entire “FIRE Movement” down for you – so that you can leave here armed with a plan and be one step closer to your dream life.

Defining FIRE

What Is FIRE? Everyone loves a good acronym, but chances are you’re going to love this one a lot more! FIRE is short for Financial Independence, Retire Early. This means that you’ve got enough money saved up and invested that work is completely optional. But what it means to us here at the early escape and to a lot of others who follow this movement is more than retiring to a beach chair with a mai tai in hand. It’s about following your passions and freeing up one asset that we can’t create more of – TIME.

Some potential passions of yours could include: 

• Pursuing passion projects
• Volunteering and giving back to your community
• Traveling the world
• Spend more time with family

The awesome part about all of this is that there’s not a one size fits all – it’s totally customizable to YOUR goals. 

The Different Types of FIRE

What FIRE means to you and someone else may vastly differ from one another. Someone else’s goal may be to retire a family of 5 with 5 million in the bank and yearly expenses topping $150,000 a year. This type of FIRE would be considered “Fat-FIRE”. Whereas, someone who wants to be free from the chains of working at their 9-5, would supplement their retirement income with a little side money from a part-time job so that they can focus on their passions. This type of FIRE is what the community often refers to as “Barista-FIRE”.

Whatever side of the spectrum that you live on, just know that there is no one size fits all when it comes to achieving FIRE. This is why it is truly important to spend some time asking yourself what you truly want out of this journey and to write it down as your mission statement. A good mission statement will be your guiding light when you are on this journey and oftentimes remind you why you’re saving and sacrificing now so that you can be rewarded later.

The First Step: Setting a Goal and Calculating Your FIRE Number

So now that you’ve written down your mission statement, it’s time to put some numbers behind your FIRE goal. Every strategy is not complete without a goal and what gets measured, gets managed. This means that we need to put a real number on the table so we know exactly where to steer the ship as we begin to save and invest our way to financial independence. Your goal is to have enough money saved and invested to live off of the returns forever. This is your FIRE number.

Here’s the simple formula: Annual Expenses × 25 = Your FIRE Number

This number is based off of the 4% rule – coined by the Trinity study (add link and more information). The basis of the study found that a withdrawal rate of 4% from a portfolio of stocks and bonds would be sustainable for 30+ years in all historical scenarios. This also took into account adjustments for inflation, and confirmed the notion that there is a high probability that you’ll never run out of money. It also concluded that portfolios with 75-100% stocks performed best over the long-term.

Let’s take a look at an example: 

Say a couple needs $52,000 to cover all expenses and want to allocate an additional $15,000 for international travel in early retirement. This would mean that the couple would need to withdraw $77,000 a year in early retirement. Following the simple formula from above we calculate that in retirement, the couple would need $1,925,000 to sustain $77,000 in withdrawals a year. But wait!! I know what you’re thinking… How the heck am I supposed to save almost 2 million dollars? 

Here’s a couple things to remember:

• You may not need that much to retire – especially if you are able to lower your monthly expenses.
• Investing is the 8th wonder of the world; your money will grow and compound over time.
• The power of your savings rate will determine how fast you reach your goal.
• Take it one step at a time with defined milestones.

Step Two: How to Actually Achieve FIRE

So now that we’ve defined FIRE and your targeted savings “number” – let’s dive into the actionable steps towards reaching that goal! There are two elements that will exponentially help you achieve fire – savings rate and investments.

Savings Rate

The amount of money you save each month is pivotal to reaching FIRE. Your savings rate is THE most important factor in reaching FIRE. There’s two ways you can drive your savings rate up to begin reaching your FIRE goal faster – income optimization and expense optimization.

Income Optimization:

• Develop a side hustle
• Learn a valuable skill to negotiate a raise
• Consider switching jobs for higher pay
• House Hack through renting out an extra room your home

Expense Optimization:

• Begin tracking expenses and develop a budget
• Focus on decreasing the “big three” expenses: housing, transportation, and food
• Cut ruthlessly on things that you don’t need: subscriptions, impulse purchases, etc.

One thing to note here is that you must still live your life while saving! Do not cut out everything that brings you joy and remember to budget for things that will help you make it through the saving – this will help avoid burnout.

Investing Wisely

Without investing, it’s impossible to grow our wealth to reach our goal of FIRE. Investing will help us take advantage of the 8th Wonder of the World – Compound Interest. If we invest consistently over time, we will benefit from the compound interest within our portfolio and ultimately grow our wealth indefinitely. Also, investing doesn’t have to be scary or complicated!

So to keep things simple, a solid start could look something like this:

Start with a 401(k) if you have one:

•    Contribute at least enough to get the full employer match – this is free money!
•    Also, contributing pre-tax dollars helps offset income taxes to help you save more of your earned income.

Open a Roth IRA:

• This tax advantage account is going to be key in retirement
• Contributions can be withdrawn penalty-free
• There are no minimum distribution requirements – which means it can grow forever

Open a Brokerage account:

• Invest all remaining dollars in taxable account to take advantage of stock market returns

Lastly, open a High Yield Savings Account

• To offset inflation, storing your cash in a HYSA can help you gain a little interest income
• A standard savings account with your bank won’t give you the returns like a HYSA can

Asset Allocation

Okay, so you’ve opened all of these accounts and then you’re now ready to start putting your money to work. 

A simple asset allocation within all of your investment accounts could look something like this:

• 55% in a US total stock market fund/S&P 500 index fund or ETF, such as Vanguard’s VSTAX, VTI or VOO
• 45% in sector index funds or ETFS such Technology, Utilities, High Dividend Yielding, and International; 
• Less than 5% of individual stocks.
• Any remaining cash in a HYSA for an emergency fund

It’s really important to remember that you don’t need to be a stock-picking genius. Simple, diversified investments work best for most people pursuing FIRE. It’s more important that you actually invest in stable index funds than trying to find the next Tesla or Amazon stock. Index funds contain these stocks and still give you the exposure at a much lower level of risk.

Key Things to Remember on This Journey

Try to avoid the “All or Nothing” trap when starting this journey. Don’t expect yourself to hit a savings rate of 70% overnight – start with baby steps and gradually increase your savings rate to a sustainable rate. Trust the process and know that you can work up to your optimal savings rate. 

Also, try your best to avoid lifestyle creep – when you get a raise, maintain the way you’re living and direct all new income towards your savings to increase your savings rate. Question every subscription and wait 48 hours before making that impulse buy, ensuring that you’ve really thought about that purchase.

And finally, avoid analysis paralysis – do not wait for the “perfect investment” because the best time to invest was 10 years ago, the next best time is now. Start small, start with one investment and as you learn more and become more financially literate – expand. That’s what this journey is about, it’s falling in love with growing your wealth and hitting your goal of retiring early and living a life of financial independence!

The Road Ahead

Remember, Financial Independence and Retiring Early is a marathon, not a sprint. You’ll have setbacks, the market will go up and down and life will throw you curveballs, but staying focused on the end goal – financial freedom – makes it all worth it!

Start small, stay consistent, and keep learning my friend. Future you will be incredibly grateful you started this journey today!