If you don’t spend a lot of time reading personal finance blogs, you may not have come across the term FI/RE, which means Financial Independence/Retire Early.

This is a small group of people who have figured that if they can super charge their savings rate for about 10 years, they can achieve financial independence and retire early.

(That is a super simplified version of it.)

I am not a part of this movement. However, one of the two guys I credit with teaching me an awful lot about personal finance before I started to learn on my own did plan to retire at 40 when we met.

We haven’t stayed in very good touch and I think his plans may have gotten slightly derailed when the show we both worked on shut down a few years ago, but that being said – he had planned to work for about 20 years.

He was an OG FI/RE dude and I don’t even know if he realized it.

What makes him extra interesting is that many (but certainly not all) FI/RE folks seem to work in tech or other high paying jobs. He was a musician.

At the end of the day, FI/RE comes down to math and trust that stock market isn’t going to totally fall apart and tank your plan (though many early retirees have a backup work plan in their heads for if it’s necessary).

Some numbers you need to know are:

• How much you make
• How much you spend
• 4%
• 25

4% is considered a “safe” withdrawal rate from your investments.

This is why a lot of folks invest heavily in general index funds of the stock market, because historically the average return is 10%. A lot of folks think you can safely bet on 7%. A gentleman named William Bengen did a study in the 90’s and found that there was no scenario that depleted a retirement account over a 50 year period if the withdrawal rate was 4%.

So what this means is that you need about 25 times your annual spending in your bank account to consider retiring.

People who FI/RE are often pretty frugal, because the lower you can get that “how much you spend” number, the sooner you can escape the rat race.

There are also people who just love the mental relief of financial independence but are totally happy to continue their jobs.

While I don’t consider myself a follower of this movement at all, I do have a goal of financial independence sooner rather than later. Using these numbers and knowing I spend about $30,000 a year I’m a mere $500,000 away from that goal.

LOL. That’s probably going to be a while. Especially with my whole industry dead right now and everything. Sigh.

What I do really like about this movement is that it shows you some concrete numbers to financial freedom. It’s full of really frugal folks and interesting tips on how to cut costs (also some of those tips are insane and go much, much further than I want to go :: cough, cough, Mr. Money Mustache, cough ::).

I also like the idea of control it provides, but on that note, there’s an excellent article  at The Financial Diet that points out that FI/RE is a super privileged movement disguised as bootstrapping. As they point out in their article calling out the movement, “I’m personally responsible for 20% of my current situation, while the other 80% is just plain good luck, circumstance, and privilege.”

If you have like literally anything not going for you, FI/RE probably isn’t an option, and a problem with the FI/RE community is that they will hardcore judge you for not “working hard enough” if you have – student loans, a disability, an unfortunate choice of a partner, addictions, poor family members who need your financial support, mental health issues, chronic illnesses, unstable work, essentially anything that doesn’t allow you to optimize every penny you make.

So if you’re just getting into personal finance and seeing the term FIRE in places, now you know. Read it all with a grain of salt – and steal whatever tips and tricks help you out – but it isn’t some magical formula achievable by all if they just work hard enough. And don’t feel bad if you don’t think you can do it either.