How to Retire Early: FIRE movement

What is the FIRE movement and how can you start with it?

Do you feel that you have to work until your 65th year? For young people, the expectation is that the current generation has to work for up to 68 years or even 70 years. It makes people look for ways how to retire early. Dreaming of retiring at 45, or becoming financially independent before 50? Would you like to retire at a younger age? That is possible if you get started with FIRE in a serious way.

Building passive income & gaining financial freedom.

For many people this is a big dream. In fact, many digital entrepreneurs work hard every day to eventually realize this dream. This does not only apply to digital entrepreneurs, but also to people who join the FIRE movement.

In recent years, the FIRE movement has become increasingly popular. That prompted us to delve deeper into FIRE, after which we started writing this article for you. In this article you will find all the information about the FIRE movement, where we also indicate how you can start with it yourself.

Many other digital entrepreneurs, we ourselves also had the dream of building a passive income. We have been able to build that up in recent years, but it was also our dream to expand this further and further. After all, stagnation is decline, which is why we have also started working on FIRE!

How to Retire Early Table of Content verberg

What exactly is the FIRE movement? How does it help retiring early?

What exactly is FIRE? To answer that question, you first need to know what the abbreviation FIRE means. The abbreviation FIRE stands for: Financially Independent & Retire Early. Loosely translated, this means the following: becoming financially independent and retiring early.

Does that sound like music to your ears? Then it is good to know that more and more people are able to achieve this goal. This is clearly reflected in the popularity of the FIRE movement. Because more and more people are getting involved with FIRE, more and more people are able to retire earlier.

What exactly is FIRE about?

When you start working with FIRE, it is important to know what the basic principles of this movement are. It is precisely on the basis of these principles that it is possible to retire early. For the overview, we have listed these basic principles:

You don’t spend your money on unnecessary things in life
You try to save as much as possible every month; You should save at least 30 to 40% of your total income every month
You are going to use the interest-on-interest effect; you will read more about this later in this article
You have to spend your annual expenses times 25; the amount that comes out here is the amount you need to enjoy financial freedom.
We would like to clarify the last two points in particular of these starting points. These points may not be immediately understandable, but they do play a crucial role in the FIRE movement.

Interest-on-interest effect speeds up your early retirement

Suppose you have 10,000 dollar in your savings account. You can buy a lot of nice things from that amount, but you can also make the amount work for you. In that case, it is possible, for example, to invest in an index fund.

If you invest 10,000 dollars in this index fund in year one, the end result of that year will depend on the return achieved. Suppose you achieve a return of 6%. In that case, you will have a total capital of 10,600 dollar at the end of year one.

With this amount you start the second year, in which you again achieve a return of 6%. This means that at the end of year two you already have an amount of 11,236 euros in the index funds.

You then start the third year with this amount. In this year you again manage to achieve a return of 6%. This return ensures that at the end of the third year you already have a capital of 11,910 euros.

Consistency is king in how to retire early without real effort

By persisting this year after year, you know how to profit from the interest-on-interest effect. Your capital is worth a little more every year, whereby the increased increase will immediately lead to an additional increase in the coming year.

In the above story, we have assumed an annual return of 6%. However, if you do it the right way, you can achieve a much higher return. If you manage to do that, you can benefit even more from the interest-on-interest effect in your roadmap how to retire early.

Conclusion: the interest-on-interest effect plays a crucial role in the FIRE movement. In this way you can automatically increase your money’s worthwhile you do not have to do any work for it. It is important to focus your arrows on the long term. If you can maintain the above example for 20 years, you will have a capital of 32,071 euros after 20 years. Look, that adds up nicely!

First Step in how to retire early: Make annual expenses times 25

When you start working with FIRE, it is important to calculate exactly what amount you need. You can calculate this in the following way.

Keep track of your expenses for 1 year, 2 years or 3 years. Make a strict note of all your expenses in an Excel file and ultimately add these expenses at the end of the year. You then immediately have insight into how much money you spend per year. If you do this for 3 years in a row, you can then take an average over these three years. In general, this often works a little better.

According to the FIRE movement, it is important that you do your annual expenses now times 25. So suppose you spend 20,000 euros on an annual basis, you have to do the following calculation: 20,000 euros times 25 = 500,000 euros.

What does this amount of 500,000 euros say? This is the amount you need in investments to be able to live on this for the next 30 years. You must therefore be able to achieve an amount of 500,000 euros in your investments. Once you have done that, you can start living FIRE. You can then take early retirement and you never have to worry about money again. This is also due to the above-mentioned interest-on-interest effect!

Does FIRE really work? How to retire early with FIRE?


Earlier in this article we indicated that the FIRE movement has become quite popular. Is this popularity due to the beautiful pictures that are sketched? Or is this popularity possibly due to the fact that FIRE is really possible and actually works? The latter applies.

Many people have managed to retire early. This is entirely due to their investments, their way of life, and their choice to live according to FIRE, in short FIRE helped them achieve how to retire early.

In recent years, more and more attention has also been paid to the FIRE movement. You can see this in numerous forums where you can find messages about the FIRE movement. You can also help other people here, you can get inspired yourself and you can get started with FIRE yourself!

Who is Retire early with FIRE suitable for?


Can you only start working with FIRE if you earn above average? No definitely not. There is even a chance that your colleague – without your knowing it – is currently involved in the FIRE movement. With this example we show that FIRE is in principle suitable for everyone and is possible for everyone.

All you do need is some discipline. You have to invest faithfully, you have to keep a tight hand and you have to keep your income. Of course, it is even desirable that you know how to build up your income, so that you can ultimately benefit even more from the interest-on-interest effect.

The moral of the story: Basically the FIRE movement is suitable for everyone. Even if you are simply employed and do not have the highest salary, you will learn tips how to retire early. Much discipline and perseverance are an absolute requirement!

FIRE is one way but it shouldn’t be the only way in your way how to retire early, discover our post about Financially independent HOT living Happy (Healthy), Opportunity-Rich and Time-rich

How can you start with FIRE?


So how to retire early with FIRE? Would you like to stop working sooner? Then it is good to know that this is within reach. All you have to do is get started with FIRE. Before you can get started with FIRE, you have to change your mindset for yourself.

You have to start seeing money as something that will work for you. You keep working for the money, but in the meantime you let your money work even harder for you. Do you have that mindset once? Then you can start investing and limiting your expenses and evolve how to retire early.

What is the best way to start investing?

It is best to get started with an index fund for this. If you register with one of the brokers in our country, you can immediately invest money in an index fund. If you’ve done that, you’re off to a good start.

In the meantime, it is therefore also important that you keep your expenses as low as possible. It is precisely by spending less money that you also need less money in investments at the end of the line.

If you have lived this way for 1 or 2 years, you can take stock. After 2 years, you can see exactly what the return achieved in these two years has been. You can now also see exactly how much money you have spent and how much money you need to take early retirement.

Compound Intrest

After drawing up the balance, it is important to make full progress. You can now put more and more income into the investments, so that you can benefit even more from the interest-on-interest effect. For example, if you put an extra 100 euros into the index fund every month, you would have put 1,200 euros extra into the investments at the end of the year. You also achieve a 6% return on this 1200 euros, so that you can also achieve interest-on-interest with this extra investment.

If you manage to keep up this extra monthly investment for a long time, your capital will rise even faster. All the money you put in will also count towards the interest-on-interest effect. Without realizing it, you can really build up a lot of money this way. In the end, that only helps you in your plan how to retire early!

What do you have to take into account in your Early Retirement planning?

Is FIRE too good to be true? No definitely not. If you get started with this in a disciplined way, you should really be able to retire earlier. However, it is good to take into account two points:

You cannot lose your discipline for a moment. Are you suddenly spending thousands of euros on unnecessary things? Then you notice that you have to work a little longer. Your plan how to retire early is again 1 step longer.

Take into account lesser years. It is no guarantee that you will make, for example, 6% annual return on the index fund. For example, if you do not make a return at all for a year, it is especially important that you keep going. Bad years on the stock market are almost always alternated with very good years. This means that you have managed to build up your capital at the bottom of the line, despite the lesser years on the stock market!

Would you like to get started with FIRE?

There is no one who can stop you. Good luck and have fun with this unique and promising lifestyle and figure out your own formula how to retire early!

How to retire Early: Myths and Frequently asked questions about FIRE

Until a couple years ago, FIRE (Financially Independent, Retire Early) was still a hobby of a small group of unworldly Excel types.
Blogs, podcasts and online courses are now appearing in the media almost every week. And with that also the misunderstandings arise. Time to answer some questions and clear out some myths about the FIRE Movement and how to retire early.

Becoming Financially Independent, means you can keep your own pants on, right?

Yes. You used to have campaigns like “smart people are prepared for her future”. But financially independent here means that you no longer have to work for your money. You can live on your assets. And there are people who do that somewhere between their 30th and 40th. Already in your thirties or forties? Don’t panic: Like Amazon founder Jeff Bezos states in his great business Quote: It’s always day one. (interested in more quotes on business? check here)

Retire Early with FIRE is only reserved for the super rich?

No. To be fair, it is definitely going to be difficult if you earn less than average. The average member of the FIRE movement has a higher education and a good salary. But FIRE is mainly about spending (much) less than you earn. Consume less, a smaller house, less stuff, lower fixed costs. And invest the money that you have leftover. For example in shares, real estate, crowdfunding, deposits or repayments on your mortgage. Applying FIRE consistently for years is one way to help you in your plant to retire early.

Why the need of retiring Early? What’s wrong with work?

Nothing. As long as you get pleasure and satisfaction from it. Work is healthy. But many people have jobs that are not that healthy for them at all. They burn out or think it is pretty pointless what they do. But they are there five days a week for about 45 years. The best years of their lives. The years when your kids grow up, your health and physical condition is at it’s best. It’s not about how to retire early, but how to love what you do and enjoy the life you’re given.

Why the need to Retiring Early? The Difference between Work and a Paid Job

Work is not the same as a paid job. It can also be voluntary work, your own business or work that makes you more self-sufficient: making things, learning a craft, sharing your knowledge, building a digital income, … doing the things they really love and gives back energy.
There is actually no one in the FIRE movement who has the ambition to lie under a palm tree for the rest of their life. That doesn’t make you happy at all.
People who want to retire early and pursue FIRE want to have the freedom to do what they love to do. Without worrying about whether the bills can be paid.

Frugal Living your whole life, you are not going to keep it up, are you?

Most people in the FIRE community don’t feel like they are sacrificing anything. There’s no fun in constantly being focused on every penny you spend. Aiming for early retirement is trading something for something better. No big car, no expensive items and no flying holiday twice a year in exchange for not locking yourself up in an office for 40 hours a week.
Consumption makes you happy for a moment. And then we want to buy something else.

What do you need to retire early?

That’s depending of your age, the standard of life you want to have, you family situation.
Everyone has to decide it for themselves what they feel comfortable with. Suppose you earn 3000 dollars net per month and you set aside 1000 dollars of your salary every month. Then you will eventually know whether 2000 dollars a month would be enough for you to live on for the rest of your life. Saving and living are communicating vessels: if you can do with less money, you can quit your job sooner. If you strive for “fat FIRE” and have problems saying no to spending money, you will continue to work longer.

Can you Calculate in advance how much money you need to retire early and become a FIRE?

What if the stock market collapses, or if you are left with a piece of life at the end of your money? There are all kinds of calculations, but there are no guarantees. And that applies to everyone, as you can also lose your job. The pension system can be reduced or abolished. The pension fund can become empty. Hyperinflation can break out. Perhaps the entire financial system will collapse, as almost threatened to happen in 2008. Then we are all screwed. The plan to retire early is all about spreading income: Think of a low mortgage (or a repaid house) and investments and something about passive income, savings and then some pension.

Why the need to retire early? What’s the fun of retiring early?

The term FIRE is a bit unfortunate. Because when we think of retire, we think of the classic way of retiring. Retiring is for old people. But you are actually withdrawing from your job. To then do what gives you satisfaction and what makes you happy. Many people who are FIRE started writing books, blogging, advising other people about their finances, entrepreneurship or teaching.

What ‘s the difference between FIRE and HOT

The term HOT is gaining more and more attention in the global FIRE community: HOT stands for Happy (or Healthy), Opportunity rich and Time rich. More and more people are not striving for 100% FIRE, but for a lifestyle that offers them as much space as possible to do the things they love to do. Check our post about Financially independent with HOT here.

Is Retiring early with FIRE only for the nerds and excel geeks among us?

FIRE is about much more than money, it’s a way of life. Therefore – again – the name is somewhat unfortunate. People who work with FIRE handle money consciously, but also think consciously.