What is FIRE?

The reason for this blog is based around the concept of FIRE – that is Financial Independence, Retire Early. To sum it up in a sentence: if you have investments that generate enough passive income to sustain your current lifestyle and spending – you no longer have to work.

Imagine you spend $50k in total every year. If you have a $1 million dollar share portfolio that generates dividends of 5% each year, you will be able to sustain your current lifestyle indefinitely by living off the share dividends alone, without ever having to touch the principal (i.e. sell any of your shares). The same thing can be said about owning a $1 million dollar investment property that generates you $50k worth of rental income every year.

(Yes I know investment properties have maintenance and council fees, and in both examples you would need to account for income tax. This is just a simple illustration to explain the concept of FIRE to a complete newbie.)

Now the million dollar question… how does one get to $1 million dollars?

It all sums down to:

  1. Saving more than you spend.
  2. Investing the difference.
  3. Letting time and compound interest do the rest.