Many Singaporeans want to leave the usual 9-to-5 job behind and gain financial freedom early. The FIRE movement offers a way to make this dream come true.
However, each person’s path to FIRE is different, so it’s important to find the best approach for your lifestyle.
But before we go further, let’s take a simple look at what the FIRE stands for and what the movement is all about.
What is the FIRE movement?
The FIRE Movement, which stands for Financial Independence, Retire Early, focuses on saving and investing aggressively while living a frugal lifestyle, allowing individuals to stop working much earlier than the traditional retirement age.1
Many FIRE enthusiasts aim to achieve financial independence by their 40s, or even 30s. To reach this goal, they practice extreme saving, often setting aside 50% or more of their income by cutting unnecessary expenses and living well below their means.2
In addition, they may also strategically invest their funds to grow their wealth over time.
Choosing the right type of FIRE
Not all FIRE paths are the same, and selecting the approach that fits your lifestyle and goals is crucial for long-term success.
Here are the main types of FIRE:
Fat FIRE
Fat FIRE is ideal for those who want to achieve financial independence while maintaining a higher standard of living. People pursuing Fat FIRE often aim to build a larger nest egg so they can enjoy more comfort and luxuries in retirement. This approach requires a higher savings rate and more aggressive investing.
If you don’t want to give up certain lifestyle comforts like travelling, dining out, or living in a big city, Fat FIRE might be for you. It’s suitable for those who prefer financial security without sacrificing a luxurious lifestyle in retirement. However, it’s important to note that a higher income is needed to achieve Fat FIRE because it does require higher savings and investing rates.
Lean FIRE
Lean FIRE is for individuals who want to retire early but are willing to live a minimalist lifestyle to do so. Lean FIRE focuses on cutting down expenses to the bare minimum, allowing for a lower retirement savings target.
If you’re comfortable living frugally—perhaps in a smaller home or by cutting back on discretionary spending—Lean FIRE could be a good fit. It requires fewer savings to achieve financial independence, but it also means maintaining a simpler lifestyle during retirement.
Barista FIRE
Barista FIRE is a blend of partial financial independence and part-time work. People on the Barista FIRE path save enough to cover most of their living expenses through investments but continue working part-time to supplement their income.
The term "Barista FIRE" comes from the idea of working a low-stress, flexible job like a barista to enjoy both the freedom of semi-retirement and the social or financial benefits of work.
If you enjoy the idea of having more freedom and time but don’t want to give up work entirely, Barista FIRE could be ideal. It allows for more flexibility and balance between work and early retirement.
How to start your FIRE journey
If you're inspired to pursue FIRE, here’s how you can get started:
Assess your financial situation
The first step to achieving FIRE is to understand where you are financially. Start by adding up all your assets—like your savings, investments, and property—and subtract your debts, such as loans and credit card balances.
This gives you your net worth and helps you set goals. You also need to track your income and expenses. Budgeting apps or simple spreadsheets can help you see how much money you’re earning and where it’s going, so you know what you can save.
Create a financial plan
Once you’ve got a clear picture of your financial situation, it’s time to create a solid plan. Start by setting specific savings goals and determining how you want to invest your money—whether it’s in low-cost index funds, real estate, or other options that align with your strategy. Consulting a financial advisor can also provide valuable guidance.
A popular method in the FIRE movement is the 4% rule. To estimate how much you’ll need for a comfortable retirement, multiply your annual expenses by 25.
For example, if you plan to spend S$100,000 per year, you would need S$2.5 million invested in assets that generate a conservative 4% return annually. This allows you to live off the returns without dipping into your principal.
Use budgeting and saving strategies
To reach FIRE faster, you’ll need to find ways to save more money. This might mean cutting back on extra spending, lowering your bills, and finding cheaper options for things you need.
Also, as your income grows, be careful not to spend more just because you’re earning more. Keeping your lifestyle simple, even as your income rises, will help you save faster and reach financial independence sooner.
Find extra sources of income
One way to speed up your journey to FIRE is to earn more money. You can take on side jobs, freelance work, or find ways to earn passive income, like through rental properties or dividends. Earning extra money on top of your regular job helps you save more quickly and gives you more security.
Stay Motivated and Disciplined
Reaching FIRE takes time and commitment. It’s important to celebrate small wins along the way to stay motivated. But remember, challenges will come—like market downturns or unexpected expenses.
Stay flexible and keep the long-term goal of financial independence in mind. This will help you overcome any bumps in the road and stick to your plan.
Final thoughts
The FIRE movement provides a few different ways to reach financial independence and retire early. You can go for Fat FIRE if you want a more comfortable lifestyle, Lean FIRE if you're happy living on a tight budget, or Barista FIRE if you’d like the flexibility of part-time work.
The main thing is to choose the path that fits your goals and values. By looking at your finances, making a plan, and staying disciplined, you can quite possibly achieve early retirement if you plan it right.
We hope this article helped you in your investment journey. Share this with a friend who might need it too.
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The views expressed in this media do not necessarily reflect the views of PFPFA Pte Ltd (“PFPFA”). The information provided herein is intended for general circulation and not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use will be contrary to local laws or regulation. You should also note that the information presented does not have regard to the specific investment objectives, financial situation or the particular needs of any specific individuals; and therefore, may not be appropriate to your individual needs. You should seek the advice of your financial adviser representative or a professional before making any commitment to purchase or invest in any investment product.
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