The concept of Fire – financial independence, retire early – promises the ability for people to reach a point at a young age where they don’t need to work. Nick Martindale explores the logistics.
Fire is gaining ground. Originally emanating from the US through online sites such as Mr Money Mustache, the concept has now attracted a small but growing following in the UK.
The idea itself is relatively simple. Individuals – usually in their 20s or 30s – undertake a life of frugality with the aim of saving around half their monthly income to create a pot of money that would enable them to retire early, possibly from the age of 40. It works on two key assumptions: first that individuals need savings of around 25 times their annual outgoings, and second, that by taking out 4% of this a year they can generate enough income to live without having to work, and without impacting on the real value of the portfolio.
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