If you’re wondering how people manage to quit work at the tender age of 30 to travel the world or spend more time with family and friends, the answer could be right here.

What is the Fat FIRE movement? Who is involved in it? And why? And how does it work?

FIRE: the early days

Fat FIRE is part of the broader FIRE (Financial Independence, Retire Early) movement, which dates back to the early 1990s and the publication of a book titled Your Money or Your Life. In their personal finance guide, authors Vicki Robin and Joe Dominguez encourage readers to track their income and increase in fixed assets while reducing their expenses. The objective: to reach the point where they no longer need to work for money.

FIRE today

The FIRE movement has gained ground in recent years and there are now a number of different variations, including Lean FIRE, Barista FIRE, Coast FIRE as well as Fat FIRE. Unlike the original FIRE followers, who cut down significantly on their spending in order to save, Fat FIRE advocates aim to retire early, while maintaining generous spending levels now, and when they have quit their day jobs.

FIRE numbers

It’s all in the numbers! In order to calculate your FIRE number, you simply estimate how much you spend on average in a year, then multiply it by 25. So, FAT Fire followers aiming to access US$100,00 (≈ AU$158,000) each year need to have a portfolio worth US$2.5 million (≈ AU$3.96 million) prior to taking early retirement. It’s a massive sum to squirrel away by your 30s or 40s. Little surprise then that Fat FIRE followers tend to be in high income jobs, e.g. in management positions in big law firms and consultancies or heading up successful start-ups. Their investments can vary; they might include stocks and shares, cryptocurrencies and real estate. Each year in retirement, they’ll withdraw up to 4% of their nest egg to live, while allowing their investments to continue to grow.

Playing with FIRE

Retiring early and not having to work to live might seem like a dream come true to many. But is it all it’s cut out to be? You’d likely have to work all hours in order to accrue enough money to pay for early retirement. (Besides, amassing a portfolio worth a few million certainly isn’t an option everyone can aspire to either). Plus, early retirement may not be plain sailing. As well as potential boredom and disillusionment, life is full of unexpected events, such as medical emergencies, divorce and market downturns. Imagine having to re-enter the labour market after 10 years living the high life in Bali or sailing around the world?

If, like most of us, you intend to continue in the world of work, contact the professional team at Optimal Recruitment today. You can reach us on info@gotlms.clippingways.com or 02 8416 4181.