Financial Independence and Retiring Early, or FIRE, is an economic ethos which prioritizes personal freedom through strategic financial management. The goal is to maximize your earnings and savings in the present, so that you can free yourself from work in the future.

That could mean retiring early and spending the rest of your life in shorts and sandals, or it could simply mean finding a happy balance between work and play.

Ultimately, the FIRE community is not about working yourself to death in an effort to get rich, but about making your money work for you in such a way that you don’t have to be stuck in the rat-race for the rest of your life.

In practical terms, this means having enough money to do what you want, when you want – one lump sum that will take care of you for the rest of your life. The FIRE philosophy states that you need 25 times your annual spending in order to retire early.

The process requires discipline, but is not complicated: FIRE is founded on three basic principles:

Minimize expenses

This is the simplest, and perhaps most effective way of saving money, and one that you should implement immediately.

Look at it this way: imagine you no longer spent $10 a week on coffee. That amounts to $520 a year, and assuming you maintained that rate of saving from the age of 25 until 50, you’d be looking at an extra $13,000 for your early retirement.

Now imagine you stopped eating out so often and saved another $10 a week.
What about cooking meals from scratch instead of buying branded foods – another $10 a week? Do you smoke or drink often? What about cutting down and saving another $10?

If you could achieve those four things, you’d be looking at an extra $52,000 by the time your retirement comes. Depending on how much you need to live on, this could shave several years off the total amount of time you need to stay in work.

Maximize earnings

The goal is to retire early, so that means maximizing your earnings in the here and now. The idea of a second job may seem daunting, but things have changed drastically in the internet age, and lots of opportunities exist for the average person to make some extra income.

Sites like Etsy and eBay allow you to sell items and make money without requiring huge operating costs, while freelancer sites make it possible to make more from your skills outside of typical work hours.

If that sounds unrealistic, then perhaps it’s time to learn new skills. There’s a lot of time between now and your early retirement date – an extra skill or two could add tremendously to your current income.

You may not have time to go back to college, but what about night school? Or online university courses?

If these options are out of the question, you can always take on more overtime at your current job, ask for a raise, aim for a promotion, utilizing every avenue available to you in an effort to maximize your earnings.

Make your money grow

Keeping your funds in a standard savings account simply won’t cut it, and should be considered a net loss on your overall income.

Maximizing interest gains should be a priority here, while reducing the amount of tax you need to pay. This means you want to be looking at 401k, HSA, FSA and IRA accounts, and figuring out how to avoid (but not evade) as much tax on your savings as possible.

A big favorite of the FIRE community is a Vanguard ETF/Mutual Index Fund. Such an investment tool can generate earnings of around 4%. British or European investors will have slightly different options, such as Cash ISAs and Lifetime ISAs (LISA), but ultimately, maximizing your interest gains and minimizing your tax costs is going to have a compounding effect over the years, and could mean retiring a year or two earlier than you planned to.