Financial Independence, Early Retirement and FIRE

FI = Financial Independence FI is pretty much everyone's goal (I would think!).  FI means that you don't have to work for money. Traditionally, FI was equivalent to “retirement.”  Retirement meaning you stopped working all together usually around the age of 65 or so. Think days at the golf course, river cruises in Europe, and a drink with a little umbrella in hand. Now, the definition of retirement is evolving and FI seems more fitting now since it includes the traditional definition and more.

You've arrived.

RE = Retire Early

RE is pretty self-explanatory. What counts as RE depends. In the non-physician world the famous RE folks are in their early 30s:

• Mr. Money Mustache retired at age 30
• Financial Samurai retired at 34

Early 30's would be exceedingly difficult for a traditional physician who begins attending life at age 30. I guess you'd have to be a Dr. Doogie Howser to do that. Physician on Fire is almost there as he recently announced that he is going part-time at the age of 41. I think a physician who can “retire” at age 45-50 is considered RE.

FIRE = Financial Independence, Retire Early

FIRE is a special club. You've officially arrived if you're a member. Not only can you not work for money if you don't want to but you've attained this at an age much earlier than anyone else. This is a popular goal to strive for.

FF = Financial Freedom

Isn't FF and FI the same thing? Maybe. If you're a splitter (vs. a lumper) then FF is one step beyond FI. It's FI + generous wiggle room. It's a bit naive to think you know and can predict your expenses 20 or even 30 years into the future. Things may go as planned, but often, they do not. Your wants will most certainly change. Health care costs are nebulous and completely unpredictable. A health crisis can easily eat up several 100s of thousands of dollars for things like home health care or a long-term care facility. A family member may need help and maybe you'd like to be in a position to help them and not derail your goals either.

Stay tuned for the second part of this post – how to determine your FI or FF number and more!

What's your FI number? Are you FI, RE, FF, or FIRE? Comment below!