Getting Started with FIRE: The Four Numbers That Decide Your Date
A practical starting guide to Financial Independence, Retire Early — what FIRE actually means, the four numbers that set your timeline, what the savings-rate maths really says, and what to do this week.
Most FIRE introductions open by telling you to save 50% of your income. That is a fine goal and a terrible starting point, because it tells you nothing about where you actually are.
FIRE runs on four numbers: what you spend, what you save, what you've already got, and what your money earns. Get those four written down and the date falls out of them. This guide is about getting them written down.
What does FIRE actually mean?
FIRE stands for Financial Independence, Retire Early. The two halves are separable, and most people who reach the first never bother with the second.
Financial independence is the point where your invested assets could cover your living costs indefinitely without you working. Retiring early is one thing you can then choose to do. Plenty of people hit FI and keep working — the difference is that they're choosing to.
You'll see four common variants:
- Lean FIRE — independence on a deliberately small budget. Fastest to reach, least margin if life changes.
- Fat FIRE — independence with room for travel, a bigger home, private schooling. Slowest to reach.
- Coast FIRE — you've invested enough that compounding alone will grow it to your target by your normal retirement age. You still need income for today's expenses, but you can stop saving.
- Barista FIRE — your portfolio covers most of your costs and part-time work covers the rest.
Coast FIRE is the one worth knowing about early, because it arrives years before full FI and it changes what a job is for.
Number one: what you actually spend
Your target is set by your spending, not your income. Somebody earning $200,000 and spending $180,000 needs a much bigger portfolio than somebody earning $70,000 and spending $40,000 — and will take longer to get it.
The standard target is annual spending × 25, which comes from the 4% rule. If you haven't met that rule yet, read What Is the 4% Rule? before you set a number; it explains where the 25 comes from and, more usefully, where it breaks.
You need a real figure here, not an estimate of what you think you spend. Twelve months of bank and card statements, totalled and divided by twelve, is enough. Most people's first honest number is 15–25% higher than their guess.
Number two: your savings rate, which sets the timeline
Savings rate is the share of your take-home pay you don't spend. It matters more than your income, more than your fund choices, and much more than which brokerage you use, because it moves both sides of the equation at once: saving more adds to the pile and shrinks the target the pile has to reach.
Here's what that looks like, starting from zero, assuming a 5% real return and a 25× target:
| Savings rate | Years to financial independence |
|---|---|
| 10% | ~51 |
| 20% | ~37 |
| 30% | ~28 |
| 40% | ~22 |
| 50% | ~17 |
| 60% | ~12 |
| 70% | ~9 |
Two things to take from that table. First, the early gains are enormous: going from 10% to 20% cuts fourteen years, and costs less in absolute terms than any later step. Second, it flattens. The distance from 60% to 70% is about three years, and buying those three years usually means a life you don't want to live for the twelve before them.
The table also assumes you start with nothing, which you probably don't. Any existing savings pull every row down.
Number three: what you already have
Add up everything that could fund retirement: brokerage accounts, retirement accounts, cash beyond your emergency fund, and — carefully — property equity. Property is the one people get wrong. A home you live in doesn't pay your grocery bill, so it isn't part of the portfolio that funds your spending unless you plan to sell or rent it out.
This is also where people discover they're further along than they thought, because nobody had ever added it all up in one place.
Number four: the return you assume
Every FIRE projection rests on an assumed real return — growth after inflation. The FIRE community usually models 5–7% real for a stock-heavy portfolio, based on long-run developed-market history.
Treat the number as an assumption you're making, not a fact you've been given, and see what happens to your date when you move it. A plan that only works at 7% is not a plan.
Most FIRE investors keep the implementation dull on purpose: broad low-cost index funds, bought on a schedule, held. The reasoning is that costs and behaviour are the parts you control, and returns are the part you don't.
What to do this week
- Total last year's spending. One number, from statements, not memory.
- Multiply it by 25. That's your first target. Write it down even if it looks absurd — it's supposed to, at first.
- Add up what you already have. Everything that could fund retirement, in one list.
- Work out your savings rate from the last three months, and find it in the table above.
That's a rough FI date, in an afternoon. To watch it move as you change the inputs — including life goals like a house or a sabbatical — FireFree does the projection for you: no spreadsheets, no linking your bank.
If you want to feel the cost of not starting first, the free Waiting Cost Calculator runs 23 years of real 0050 ETF returns to show what one year of waiting takes off the end result.
Three ways people get this wrong early
Optimising the small stuff first. Fund expense ratios matter over decades. They matter less this month than your rent, your car, and what you eat. Fix the big lines first.
Setting the target once and never revisiting it. Your spending changes. So should the number.
Confusing frugality with FIRE. Cutting expenses is one of two levers, and for a lot of people the income lever has more slack in it. A raise you don't spend moves your date further than another round of cuts.