The Difference Between FIRE and FILE (and Which Is Right for You)
The FIRE (Financial Independence, Retire Early) movement has gained significant popularity in recent years, inspiring many to double down on savings and investments with the goal of being able to retire decades before traditional retirement age. However, there is now an alternative approach called FILE (Financial Independence Live Early) for those who don’t necessarily want to retire completely but still crave more flexibility and freedom in their lives.
Understanding FIRE
At its core, FIRE is about aggressively saving and investing as much as possible, often in excess of 50-70% of income, so that you can leave your job and maintain your lifestyle on investment income alone. FIRE adherents typically strive to achieve financial independence and have the ability to retire by age 40 or 50.
The FIRE mindset views work as a switch: You either continue to work full time every day to fund your lifestyle, or you pull the cord and retire once you’ve accumulated enough investments to cover your living expenses. for life. Many people are attracted to FIRE as a way to escape the daily hustle and bustle of 9 to 5 and an opportunity to pursue other interests and hobbies.
What is FILE?
FILE has the same fundamental goal as FIRE: to reach a point of financial independence where your investment income can cover your desired lifestyle expenses. However, rather than retiring completely, the focus is on creating more flexibility and breathing room in your life.
Instead of turning on/off the on/off mode, FILE treats the operation more like a dimmer. The idea is to return to work part-time, move into your own business or consulting, or simply have the financial runway to take long career breaks without being tied down to a job for a paycheck.
FILE supporters still save and invest diligently, but may have a lower “financial independence” goal than FIRE supporters since they plan to continue to earn some income. The Living Early aspect is about being able to live more freely on your own terms long before traditional retirement age, rather than having to retire entirely.
Which approach is right for you?
Both FIRE and FILE require initial sacrifices by cutting expenses and increasing the savings rate during the years of wealth accumulation. Your savings goal and investment horizon will ultimately determine which path makes more sense.
FIRE may be a better fit if you really have a strong desire to leave your job completely as soon as possible. But if you still want to continue to pursue some form of work or entrepreneurial activity, but with more flexibility and choice, then FILE could be a good middle ground.
There are also a number of variations within each approach. Some may use FIRE principles to retire from corporate life by age 50 but continue to earn income through freelance projects or small businesses. Others may use FILE to gradually transition from a full-time job to a casual job and live a very frugal lifestyle.
The common thread is that financial independence is prioritized to live life on your own terms, with or without a traditional salary. Your personal lifestyle, interests and savings discipline will help you choose the path that best suits you.