FIRE Movement: What It Is and How Much You Need to Stop Relying on a Salary
Disclaimer: This article is for informational purposes only and does not constitute financial, tax or employment advice. The examples are illustrative and do not guarantee results.
Working, getting paid, covering your expenses and starting all over again the following month. When your salary increases, so do your rent, travel, shopping or car expenses. It is the rat race: you earn more, but your dependence on your salary never really goes away.
The FIRE movement aims to achieve the opposite. Instead of increasing your spending every time your income rises, it focuses on building enough wealth to eventually cover your expenses without depending on a salary.
That does not mean you have to retire at 40 or that there is a magic number that works for everyone. FIRE is primarily a way of figuring out how much you need to gain more freedom over your time.
What does FIRE mean?
FIRE stands for Financial Independence, Retire Early. The concept became popular following the publication of Your Money or Your Life (1992), by Vicki Robin and Joe Dominguez, and gained traction in blogs and online communities during the 2010s.
The main goal is financial independence. In other words, your assets generate enough income to cover your expenses, making work optional. Retiring early is one possibility, not an obligation. Many people continue working on projects they enjoy, but they no longer depend on their salary to make a living.
The 4% rule and your target number
One of the best-known calculations in the FIRE method is the 4% rule. The calculation is straightforward:
Annual expenses × 25 = target portfolio
If you need €24,000 a year to maintain your lifestyle, the calculation would be:
€24,000 × 25 = €600,000
According to this rule, you would need a portfolio of approximately €600,000 for an initial withdrawal equivalent to 4% to provide €24,000 a year.
Where does the 4% figure come from? The rule is not arbitrary. It is based on US studies from the 1990s examining how much could be withdrawn from a portfolio over extended periods without exhausting it under the historical scenarios analysed. William Bengen published his research in 1994, and the Trinity Study examined the question again a few years later.
The problem is that these studies were based on specific US market conditions, time periods, taxes and other circumstances. You cannot apply the 4% rule in Europe as though it were a guarantee.
That is why the FIRE community also uses more conservative withdrawal rates, such as 3% or 3.5%. With a 3.5% withdrawal rate, for example, the calculation would be approximately:
€24,000 ÷ 0.035 = €685,714
The amount you need depends on how much you spend and what percentage of your wealth you consider reasonable to withdraw each year.
Lean, Fat, Barista and Coast FIRE
Not everyone wants the same kind of financial independence. This has led to several variations of the FIRE movement:
| Type | Main idea |
|---|---|
| Lean FIRE | Financial independence with very low expenses, usually through a minimalist lifestyle and a low cost of living. |
| Fat FIRE | Financial independence while maintaining a higher standard of living and a larger portfolio. |
| Barista FIRE | You leave full-time employment but keep a part-time or flexible job to cover some expenses and often retain access to benefits, such as health insurance. |
| Coast FIRE | You have accumulated enough capital for it to grow to the amount needed for traditional retirement without further contributions. You work only to cover your current expenses. |
That is why asking what the FIRE number is does not make much sense without knowing how much you need to live on. Someone who spends €1,500 a month and someone who spends €4,000 a month are working with completely different figures.
Your savings rate: the factor that matters most
In the FIRE model, the factor that most influences when you reach financial independence is not how much you earn, but what percentage of your income you save and invest. The higher your savings rate, the fewer years you need to keep working.
If you earn €2,000 and spend €1,900, you have very little room to build wealth. If you earn €2,000 and manage to live on €1,200, you can allocate a much larger share of your income to your goal.
To see the effect, let’s run a simple simulation.
You start with €0, keep your income and savings rate constant, invest the amounts you save and earn a real annual return of 5%, meaning a return after inflation.
The goal is to accumulate 25 times your annual expenses, following the 4% rule. Taxes, fees and changes in income or expenses are not included.
| Savings rate | Approximate years to reach the target |
|---|---|
| 10% | 51 years |
| 20% | 37 years |
| 30% | 28 years |
| 40% | 22 years |
| 50% | 17 years |
| 60% | 12 years |
| 70% | 9 years |
Keep in mind that these are mathematical estimates, not predictions of what will happen to your money. The actual result may be very different if returns, inflation, income or expenses change.
The table also explains why FIRE places so much emphasis on the savings rate. Going from 20% to 40% does not simply mean saving twice as much. It also means that you need to fund a lower level of spending and, therefore, accumulate less wealth to reach your target.
It can be useful to separate your expenses into categories. Bitsa allows you to use multiple cards with separate balances to organise different types of spending. For example, you could have one for travel, another for subscriptions and another for discretionary expenses.
The idea is not to spend more just because you have several cards. It is to make it easier to see how much you spend in each category and identify where you could cut back to increase your savings rate.
What changes when you apply FIRE in Europe?
The FIRE method works differently across Europe because taxes, pensions and retirement rules vary from country to country. There is no single European version of early retirement that applies equally everywhere.
One thing to keep in mind is the gap between financial independence and public pensions. If you stop working decades before the normal retirement age, your savings and other sources of income may need to cover a long period before you become eligible for a state pension.
Life expectancy also matters. According to Eurostat, life expectancy at birth in the EU was 81.5 years in 2024. If you stop working at 40, your money may therefore need to support you for several decades. That makes the withdrawal rate and the assumptions behind your FIRE calculation particularly important.
Taxation is another variable. The amount you can actually spend depends not only on how much wealth you have accumulated, but also on how your income and withdrawals are taxed in the country where you live.
For that reason, a FIRE calculation made with a US-based rule such as the 4% rule should be treated as a starting point rather than a guarantee for someone living in Europe. Your country, tax situation, pension rights, spending needs and the length of your retirement can all change the number you actually need.
Criticisms and limitations of the FIRE movement
The FIRE movement can be a useful framework for saving and gaining greater independence, but there are risks worth understanding:
- Sequence-of-returns risk: If markets fall just as you start living off your portfolio, you may have to sell assets at a loss, potentially reducing your capital permanently.
- Inflation: If your expenses rise more than expected or your assets do not adequately protect against inflation, your purchasing power may decline.
- Unexpected expenses: Health problems, family responsibilities, major repairs or personal changes, such as having children or getting divorced, can alter your calculations.
- Returns are not guaranteed: No asset offers guaranteed long-term returns. The studies supporting the 4% rule are based on historical data, not promises about the future.
The FIRE movement is, above all, a way of viewing money as time and using saving and investing to create more options, rather than simply accumulating wealth. Before making decisions that affect your work, investments or retirement, remember that this content is informational and does not constitute financial, tax or employment advice.
FAQ
1. What is the FIRE movement?
The FIRE movement (Financial Independence, Retire Early) is a financial philosophy that aims to achieve financial independence through aggressive saving and investing, making work optional before the traditional retirement age.
2. How much money do I need to achieve financial independence in Spain?
It depends on how much you spend. A common benchmark is to multiply your annual expenses by 25 if you use the 4% rule. For example, if your annual expenses are €24,000, your target would be €600,000. This is a guideline, not a guarantee.
3. What is the 4% rule?
It is a guideline that suggests initially withdrawing 4% of your accumulated portfolio and subsequently adjusting the amount for inflation. It is based on historical studies of US markets and does not guarantee that your money will last throughout retirement.
4. Can you stop working at 40 in Spain?
It is financially possible, but it depends on your income, expenses, accumulated wealth and how long that wealth will need to support you. Also, stopping work at 40 does not mean you can immediately start receiving a public pension.
5. What is the difference between Lean FIRE and Fat FIRE?
Lean FIRE aims for financial independence with a lower level of spending. Fat FIRE assumes a much larger budget and aims to maintain a higher standard of living after leaving work. The main difference is how much you need to spend and, consequently, the size of the portfolio you need to accumulate.