FIRE! Where is it burning?


I almost got you there, didn’t I? Vel, in this case it is not burning… What I mean more specifically is the FIRE movement. FIRE is the abbreviations of Financial Independence, Retire Early and it is a lifestyle movement where the goal is to ye... retire early with enough money to live of what you have collected. This FIRE movement actually became popular back in the 2010s, hence a very new lifestyle movement. I still got friends and family that do not understand what I talk about when I say that my goal is to retire early. In Norway, they look at me with a big question mark – it is like they got kicked in the head and the brain went dead. My mum gets angry, the government has indoctrinated in her brain that she shall retire when she is 70! Not a day before!

I might exaggerate a bit, but it is not far from the truth. Anyways, I like the thought of being able to retire early, for me I would put it more like; FIRWIW – Financial Independence, Retire When I Want. I mean you cannot just retire; you need to have a plan for what you are going to be doing when you retire. If you do not have a plan, I believe you will get bored or even worse; unhappy and you will eventually fall back to the life you had before FIRE. You need a plan that when you retire, you will never look back – you will never work for somebody else ever again. If you manage that I believe one could achieve happiness.

When are you financially free?

When you have decided that one of your goal in life is to get financial independent the next question should be: when am I financially free? There is no correct answer here, it depends really, in which lifestyle you want to live. Do you want a mansion with a 240 m² swimming pool and a car like Porsche you would probably need a bag full of money? On the other hand, you could buy a studio apartment or a Tiny House like the ones in the TV-show “Tiny House Nation”. Based on the latter you would probably not need a bag full of money, it really depends on what life you want to live. What could be your standard of expectations?

You have found your standard of expectations, now we need to do some quick math’s. No worries, we are talking about percentage calculations you learned in 5th grade - nothing scary about that. I will explain further down the line.

Introducing savings rate!

You probably understand that for mathematics to function you need numbers - in this case you only need one number, the number that will give you financial freedom. But before we dive into that number let us talk about “savings rate” – a common financial term within the banking industry.

Let us say we want a month off from work, I am talking about unpaid vacation. How long do we have to save to afford such a month? This is where the saving rate comes into play. Savings rate is basically the percentage of your salary that you save (scale of 1-100). E.g., you save 10% of your salary then you have a savings rate of 10, and if we save 10%, we need to save for 9 months to afford to take 1 month of vacation. If we, however, increase to 20% and at the same time reduce consumption to 80%, we must save 4 months to afford to take 1 month of vacation. As you understand, we have halved the time we need to save to afford one month of vacation. Vel, the reason why this calculation is so brilliant is that there are two factors that changes when savings are increased. When the rate of savings increases, the monthly consumption goes down at the same time. We need less money to live our lives!

Let us increase the saving rate. We now save 50% of the income every month. For how long do we need to save to finance a month of unpaid vacation? The answer is 1! Ye, I know, mind blowing (If you save 50%, you only use 50% and a monthly salary then lasts for 2 months). What if we saved 75% of our salary? Then we have "turned" the whole calculation and with a month's work, you can finance 3 months of unpaid vacation. If you manage to save 75% for three months, you can do whatever you want for the remaining 9 months of the year. Summer holidays just started in April, where is the champagne guys!?

Return on Investment (ROI)

Based on the above savings rate, whether you have 10% or 75%, the money needs to be invested in something that provides a return. As you might already figure it is not the amount saved to be used as financially independence, your ROI will grant you financial independence.
What is the return rate that you need? Many that have committed to the FIRE movement suggests the 4 % rule as a rough withdrawal guideline. This was the same suggestion as “the budgetary rule” of the Norwegian Government Pension Fund until 2017 when they changed it to 3%. It states that the maximum of 3% of the fund’s value should be allocated to the yearly government budget.
Based on a ROI of 4% you can find the answer of how much you need to save to get financially free:

  1. How much money do you need for a year of living? Find “the magical number” (E.g., In time of writing I need $25 000 USD a year)
  2. What the FIRE movement suggest is that you multiply “the magical number” with 25. Then you have calculated the amount you need to invest in something that gives 4% ROI or higher.
  3. So, if you want to join the FIRE movement you better start saving, or at least get started with a small amount of money each month.

I believe my “financial independence number” in time of writing would be approximately $625 000 USD. Based on the latter that is $25 000 USD a year and approximately $2100 a month. Which is manageable in a country like Norway.

Always pay yourself first!

Then what? When we are done with the quick math’s you only have one job: start saving money. Every month you would need to pay the biggest bill to yourself first; “Always pay yourself first” – which is a phrase commonly used by the FIRE movement.

What is your number or what do you need it to be in time of writing? Let me know! It is exciting to see how people differs! 😊

Note: For the coming posts I will touch different fields within finance but if the interest of FIRE is there, please let me know. It was what got me into finance in the first place. Leave a comment if you have any suggestions based on the latter.

Remember guys; “Keep calm and Save your Money”!
and when I reach my number of financial independence with my brother we would be like;



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