Whether You Call It Retirement, Financial Independence, or FIRE…

This Is the Most Sustainable Way to Reach Financial Independence

There are three ways to reach FIRE faster, but using this one is most likely to get you to stay the course

Opher Ganel
Jan 16, 2020 · 5 min read
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Photo by Jingda Chen on Unsplash

I know. I’m weird. I love numbers.

But maybe not so weird after all, if it helps you reach FIRE faster.

You know. FIRE. Financial Independence, Retire Early?

How Far Away Is Your FIRE Point Now?

In “How Soon Can You Reach Your Personal FIRE Point?” I show a table that lets you figure out how many years it’ll be before you can “fire your boss” and declare financial independence. All you need to do is figure out your current savings rate and how much of your current income you want to replace in retirement.

For example, say you’re only saving 2% of your current income and thus need to replace 98% of your income once in retirement, the table there will reveal that it’ll take you about 79 years to retire!

Increase your savings rate to 10% and decrease your replacement rate to 90% and that drops to a still mind-numbing 51 years.

Things start looking up if you increase your savings rate to 25%, 35%, or even 50%, lowering your replacement rate appropriately. In those three scenarios your FIRE point will be 33 years, 27 years, or 19 years in the future, respectively.

Want to know how long it’ll be before you reach FIRE? Go visit that other article. I’ll wait for you to come back so I can tell you how to make it come sooner…

Three Levers to Reach FIRE Faster

Oh good, you’re back…

In principle, there are only three ways (within your control) to move your FIRE point closer.

  1. Increase your savings rate
  2. Decrease your retirement budget
  3. Earn more and invest your new income

You can move each of these three levers independently of the others, and each has its pros and cons.

I. Increasing Your Savings Rate

As I share in another article, this is probably the hardest way to reach FIRE sooner. It’s also the one most people try first. You have to become super-frugal to move your FIRE point closer by many years. For example, without changing your income or your retirement budget, you can cut 11 years out of 51 by increasing your savings rate from 10% to 20%.

To cut another decade off, you have to cut your spending from 80% of income to 60%, saving 40% of what you make.

Cutting another decade to bring your FIRE point to within 20 years requires you to cut spending to less than 25% of your income. That’s unsustainable for almost anyone.

II. Decreasing Your Retirement Budget

Most FIRE adherents who managed to retire very early saved a prodigious part of significant incomes, but also had to cut their retirement budget to a small portion of that income. If you’re saving 30% of income and plan to retire on the same amount you currently spend (70% of income), you’ll need to keep working for 30 years.

To cut a decade off that by reducing your retirement budget, you’ll need to cut that budget to less than 35% of your current income.

Cutting another decade off requires you to live on far less than 25% of current income. This is usually only doable by moving from a first-world country to a third-world one.

III. Earning More and Investing the New Income

The third lever is what FIRE followers usually call a side hustle. The point is to increase your income and, crucially, not spend that new money. If you let yourself fall prey to lifestyle inflation, spending more as more money comes in, FIRE will be even more elusive.

If you invest all the side-hustle income, you can indeed pull FIRE closer. Depending on how soon you want to reach FIRE and what your savings rate is now, the table below will show you how much new income you need as a fraction of current income.

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Needed increase in income to move your FIRE point closer based on current savings rate

For example, if you currently save only 2% of income and want to retire in 30 years instead of in 79, plan on increasing your income by 40%.

If you’re currently saving 25% and want to retire in 15 years instead of the expected 33, your side hustle needs to bring in 88% as much as your day job.

Saving 35% and want to retire in 9 years instead of the expected 27? Pump up your income by 165%. That means that if you currently make $50,000 a year, you’ll need to increase that to $132,500 and invest all the new income!

If You’re Considering Starting a Side Hustle (e.g., Freelancing) Here Are Some Articles You May Find Useful

The Bottom Line

There are three separate but related ways to reach financial independence earlier. Increasing your savings rate, decreasing your planned retirement budget, and/or increasing your income while investing the new money.

Any of these will bring your FIRE point closer. The first two are harder to sustain than the third, but even that one isn’t very easy. With the above table, however, you at least know what it’ll take.

About the Author

Opher Ganel has set up several successful small businesses, including a consulting practice supporting NASA and government contractors. His most recent venture is a financial strategy service for independent professionals. You can connect with him there, or by following his Medium publication, Financial Strategy.


This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

Originally published at https://wealthtender.com.

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Opher Ganel

Written by

Consultant | physicist | sys eng | writer |financial strategist (opherganel.com) | avid reader | amateur photographer and artist ➜ medium.com/financial-strategy

Financial Strategy

From financial goals to success — follow us and learn how to develop your path

Opher Ganel

Written by

Consultant | physicist | sys eng | writer |financial strategist (opherganel.com) | avid reader | amateur photographer and artist ➜ medium.com/financial-strategy

Financial Strategy

From financial goals to success — follow us and learn how to develop your path

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