Playing with FIRE (Financial Independence Retire Early)

“Are you working tirelessly for material possessions, or are you building a life that truly reflects what you value?”

1. Understanding the Cycle of Overspending

Many individuals get stuck in a lifestyle that encourages working longer simply to afford luxuries. Scott Rieckens was no different; he believed the expenses he and his wife accrued—like high-end appliances and constant dining out—were necessary to maintain their “perfect” life in Coronado, California. However, this cycle exhausted their finances and limited their options in life.

Rieckens discovered that their combined income of $142,000 after taxes was not sustainable for their desired goals, like buying a home or saving for their daughter’s education. With only $10,000 saved annually, he realized they were living paycheck to paycheck with the illusion of stability. This epiphany pushed him to seek alternatives because, under his current trajectory, he would need to work non-stop for decades.

The catalyzing moment arrived when Rieckens tuned into a podcast featuring Pete Adeney, also known as Mr. Money Mustache. Harnessing a frugal approach to finances, Adeney showed how the FIRE lifestyle allowed him to retire at age thirty. Inspired, Rieckens applied this mindset to his own life and saw an alternative path to happiness.

Examples

• Expensive daily dining habits drained their disposable income.
• A single podcast episode introduced them to FIRE as a solution.
• Minimal savings conflicted with their long-term financial goals.

2. Financial Independence Buys Flexibility, Not Stagnation

Achieving financial independence doesn’t mean stopping work altogether; it means working on what fulfills you without financial pressure. For Rieckens and countless others, this change opens a world of flexibility, from pursuing creative ventures to starting new careers or even traveling.

The story of Sylvia, a lawyer from New Orleans, provides a striking example. After Hurricane Katrina, she adopted a minimalist lifestyle, actively reducing expenses and saving aggressively. This allowed her to achieve financial freedom and opened the door for her to start her dream law firm.

Similarly, Kalen and Kyle, a couple with a modest income under $50,000, use FIRE to pursue more meaningful lives. Financial independence gave them the mental and economic space to reimagine their future rather than working in jobs they disliked.

Examples

• Sylvia built her own law firm post-financial independence.
• Flexible career choices became a reality for many in the FIRE movement.
• Kalen and Kyle reduced expenses to create a more intentional lifestyle.

3. Mastering the Math Behind FIRE

The FIRE formula suggests saving and investing twenty-five times your annual living expenses to generate passive yearly income. This fund ensures that withdrawing only 4% annually covers living costs indefinitely while still accounting for market volatility.

The Rieckens calculated that living on $60,000 per year would require a $1.5 million investment base. Assuming an average stock market return of 5%, this would translate to $75,000 in yearly returns. Any surplus reinvested (e.g., one percent) could grow their principal further and guard against market fluctuations.

Researchers at Trinity University solidified this method in their landmark study, which confirmed that following the “4% rule” made early retirement achievable over the long term. This formula has become a cornerstone for FIRE enthusiasts worldwide.

Examples

• The "4% rule" balances withdrawals to give financial freedom without exhausting savings.
• A $1.5 million portfolio would meet the Rieckens' target of $60,000 in annual expenses.
• Market returns of 5% ensure sustainability for years.

4. Spend Smartly by Tracking Every Dollar

Tracking expenses is the foundation of frugality. When Rieckens and his wife analyzed their annual spending, they identified wasteful habits. By categorizing their costs, they saw where savings mattered most: housing, transportation, and food.

They cut back on housing by moving to Bend, Oregon, where home prices were lower and quality of life remained high. Transport costs declined after they sold one car and purchased an affordable used Honda CR-V for $7,500. They also revolutionized grocery shopping, opting for simple, home-prepared meals rather than restaurant splurges.

This reallocation of their budget significantly reduced stress and enabled their financial goals. Small adjustments in big spending areas created exponential savings.

Examples

• Relocation saved them thousands in home costs.
• Purchasing a used car saved vehicle depreciation expenses.
• Eating at home eliminated luxury restaurant bills.

5. Low-Cost Investments are Key to Multiplying Savings

FIRE enthusiasts prioritize low-cost, diverse investments like index funds. These funds track the market's general performance and typically yield returns around 10% annually, providing substantial growth over time.

The Rieckens split their investments initially—part went into low-cost index funds, some into real estate, and another portion supported entrepreneurial ventures. Though the stock market has its ups and downs, over the long term, its reliable growth makes index funds an attractive and predictable investment vehicle.

Warren Buffett, one of the world’s most successful investors, underscores the value of index funds over actively managed portfolios. For FIRE participants, this approach minimizes fees and encourages higher returns.

Examples

• Index funds eliminated the need for expensive fund managers.
• Diversifying investments reduced risk for the Rieckens.
• Warren Buffett serves as a strong proponent of index fund investing.

6. Align Financial Choices With Personal Values

A life dictated by societal norms of prosperity often leads to unhappiness. By reflecting on what truly mattered, the Rieckens realized their financial patterns didn’t support their values.

To ensure compatibility, Scott had his wife write a list of “ten things that make you happiest weekly.” Their lists featured shared values like family time and being outdoors, not material possessions. Recognizing the disconnect between their spending habits and genuine happiness helped them wholeheartedly embrace FIRE principles.

When long-term financial plans connect with personal satisfaction, living intentionally becomes second nature.

Examples

• The “Ten Things Exercise” revealed family and nature mattered most.
• Material purchases like high-end appliances didn’t make their list.
• Framing finances around happiness, not trends, enriched their lives.

7. Build a Support System

Embarking on FIRE can feel isolating without support from peers or partners. For the Rieckens, engaging with community members online and at retreats provided immense motivation.

These connections, fostered during events like Camp Mustache, offered guidance through shared stories. Taylor expected a cultish atmosphere but found a diverse group of people living intentional, varied lifestyles.

Exploring forums or online groups builds trust while giving practical money tips. Sharing experiences can make this lifestyle shift feel collaborative instead of solitary.

Examples

• FIRE meetups allowed Scott to meet influencers like Mr. Money Mustache.
• Taylor realized the community wasn’t extreme but relatable.
• Online forums shared indispensable advice on expense management.

8. FIRE is for All Income Levels

You don’t need a six-figure salary to embrace FIRE. Kalen and Kyle proved this by maintaining a $32,000 annual budget and still projecting financial freedom within just six years.

FIRE isn't limited to certain demographics. For lower-income earners, it may take longer, but being mindful of spending creates meaningful results regardless of how much you earn. True FIRE success lies in shifting focus from consumption to well-being.

Examples

• Kalen and Kyle achieved FIRE goals with modest income streams.
• Small lifestyle changes allowed significant savings over time.
• Lower incomes still benefited immensely by applying these strategies.

9. Balancing Frugality and Living Fully

Living frugally doesn’t mean giving up joy. When Christmas caught the Rieckens off guard during an early FIRE phase, they pivoted with a simpler solution: secondhand gifts for their daughter and thoughtful but fewer presents for others.

Being intense about saving but lenient when meaningful moments arise supports sustainable happiness. FIRE encourages an intentional approach rather than rigidity.

Resilience means adjusting strategies to celebrate life events while staying on track.

Examples

• Secondhand presents preserved holiday cheer and budgets.
• Choosing intentional rather than compulsive spending set them free.
• Small splurges realigned joy with family priorities.

Takeaways

1. Start tracking every dollar you spend to identify opportunities for saving.
2. Write your own “Ten Things” that bring happiness and align your spending with these values.
3. Build connections in the FIRE community through retreats or online to stay motivated on your journey.