The 10 Commandments of FIRE

Photo by Austin Neill on Unsplash

I’ve written extensively about the Financial Independence, Retire Early (FIRE) movement.

  • I’ve shared details on my journey to FIRE
  • I’ve written dozens of case studies of real-life people who have achieved FIRE
  • I’ve addressed various criticisms of FIRE
  • I’ve covered the math behind FIRE
  • I’ve written several stories about the psychological motivations behind FIRE

I basically have an undergraduate in FIRE (in addition to a graduate degree in economics).

After hundreds of hours of researching and writing about FIRE, I have come up with what I believe to be 10 essential rules to live by to achieve FIRE. Let’s call them the “10 commandments of the Financial Independence, Retire Early movement”.

1. Thou Shalt Calculate your Savings Rate

One of the virtues of the FIRE movement is that it does not rely on a lot of complicated financial projections. The only thing you need to calculate is your “Savings rate”.

Your savings rate is the amount of your after-tax, take-home pay you invest. If you can calculate your current savings rate, you can use the following table developed by Mr. Money Moustache to determine when you should reach FIRE.

Source: Mr. Money Moustache

Two steps to calculating your savings rate

Step 1: Calculate your Take-Home Pay

If you are a salaried employee who gets paid every two weeks your monthly take-home pay is very easy to figure out.

  • Grab your paystub and find your net pay (after taxes and deductions)
  • Multiply that number by 26
  • Divide that number by 12

If you clear $1,000 every two weeks, your monthly take-home pay would be $2,166.66 ($26,000 divided by 12 months).

Step 2: Determine how much Money you are Currently Investing each Month

Let’s say you are investing $500 per month. If we use the above example of $2,166.66 you would have a savings rate of 23%.

With a savings rate of 23%, you will reach FIRE in about 34 years.

2. Thou Shalt Track thy Expenses & Create a Budget.

It’s hard to manage your finances if you don’t know where your money is going every month. Tracking your expenses is a useful exercise to find areas that you can easily cut back on and save money.

Once you have calculated your take-home pay (see the first commandment) and have tracked 3–6 months worth of your expenses you can get onto creating your budget.

Here is a breakdown of an easy budget to get you started.

3. Thou Shalt live a Frugal Life

To boost your savings rate and accelerate your timeframe to reach FIRE you can do two things;

  1. Spend less money
  2. Make more money
Making more money takes time, but you can immediately choose to spend less money.

There are four categories I always examine when I want to bump up my savings.

  1. Housing. Housing is most people largest expense.
  • If you own your own home the simplest way to reduce your housing costs is to engage in a house-hack.
  • If you are not willing to engage in a house-hack or live with roommates, you should rent or buy the “least amount of house” you feel comfortable with. If you live alone, do you need a 4-bedroom, two story house?

2. Transportation. If you live in a city with good transportation and you are struggling to find money to save, consider selling your car and buying a bus pass. When you account for car payments, repairs, gas & insurance the average car owner spends over $700 per month on their car.

3. Food. Food is most people’s third largest expense. Two tips to reduce the amount of money you spend on food.

4. The “Latte factor. This refers to the fancy, $6 coffees and all the other “small” daily spending’s that add up over the course of a lifetime.

4. Maximize your Income

Once you’ve minimized your expenses it’s time to maximize your income. I can think of to increase your earning potential.

  1. Maximize the earnings at your job
  2. Pick up a side hustle
  3. Start a side business

Maximize the earnings at your job

If you are an employee looking for a raise, a promotion or a career change there is one thing you need to remember: We don’t get paid for our time, we get paid for creating value.

If you want your employer to pay you more money than you currently make, the value you bring to your organization must exceed your current salary.

Personally, I keep a running log of every activity I do while at work that provides value to my employer, my co-workers or our clients. Every year I review my annual activity log and ask myself “is my current salary a bargain for my employer based on the value I provided last year?”

If the answer is “yes”, I have justification to ask for a pay raise.

If the answer is “no”, I find new ways to add value.

More on adding value and asking for a raise, here.

Pick up a side hustle

If you want to immediately increase the cash you have coming in you could always pick up a side hustle like driving for Uber or Lyft. You won’t find any love for your side hustle, but it’s quick cash you can throw into investments.

Start a Side-Business

If you want to create an additional stream of income that is more fulfilling, you may consider starting a side business.

Unlike a side hustle, there is no guarantee that you will make any money at all with a side business. However, a side business will provide you with a lot higher upside income potential if you are successful.

“The 10% Entrepreneur” is a very interesting book that lays out the concept of using side business to supplement your current income. I’ve written a review of the book here.

5. Thou Shalt Not fall Victim to Lifestyle Inflation

There is a surprisingly weak correlation between income and net worth. This seems counterintuitive, we should expect those who make more money to have created more wealth, but this is not always the case.

If you don’t learn to manage money while you have little of it, you’ll never be able to manage money when you have a lot of it.

Lot’s of high-income earners fall victim to “lifestyle inflation”. When they make more money, they need to buy fancier things to have their “lifestyle” match their new paycheck.

Lifestyle inflation keeps millions of people on the wealth building treadmill. I avoid lifestyle inflation by redoing my budget every time I get a raise at work. If I got a 5% pay raise, I create a new budget as if I got a 5% reduction in pay. It’s helped me dramatically increase my savings rate in a few short years.

6. Clear your Debts

Before you get aggressive on long term investing, it’s time to get rid of your debts. The only guaranteed return on investment you will ever get in life is paying off debt.

Do you want a guaranteed 20% return on investment? Pay off your high-interest credit card debt.

I recently wrote about three strategies to ditch your debt for good.

  1. Mortgage refinance/debt consolidation
  2. The “Snowball” Method
  3. The “Avalanche” Method

If you are struggling with debt, you can read an in-depth explanation of these three strategies here.

BONUS TIP: Even if you are aggressively paying off debt, you should still put cash aside in an emergency fund.

7. Thou Shalt max out your tax-Sheltered Accounts

If your employer offers a 401(k) at work, you need to ensure you are doing the following.

  1. Ensure you are enrolled in the program
  2. Make sure you know where your 401(k) funds are invested
  3. Ensure you are contributing enough to get at least the full employer match.
If you are not receiving the full employer match in your 410(k), you are literally leaving free money on the table.

I’ve written here, that if properly utilized a 401(k) is the easiest and most boring ways to become a millionaire.

If you don’t have access to a 401(k) or a workplace pension, you may want to consider leveraging your traditional or Roth IRA as a tax-sheltered investment vehicle.

8. Minimize your Investment Fees

If you have taken care of commandments 1–7 pat yourself on the back, the hard work is done!

These final 3 commandments are about “optimizing” and ensuring you are squeezing every penny possible.

If you are investing in the stock market you need to watch how much you are paying in investment fees.

Low-cost index funds are the investment of choice in the FIRE community

There are two reasons the FIRE community favors Index funds over actively managed funds.

  1. The annual investment fees attached to index funds are a fraction of actively managed mutual funds
  2. Over the long term, very few active managers can outperform the stock indexes they are compared to.

Put simply, index funds are likely to give you a better return on investment at a cheaper price.

I’ve written about this topic in great detail, here.

9. Thou Shalt not try to time the Market

There has been a lot of talk lately about a looming recession. In an effort to avoid losses many people will end up selling their stocks to avoid a potential downturn.

While this strategy appears to make sense, there is extensive research that shows attempting to “time the market” backfires more often than not.

More money has been lost trying (and failing) to time the market than in actual stock market declines.

Bottom line

If you are investing in the stock market, there will be years that you lose money. If you can’t accept that fact, you need to consider if you are cut out to manage your own investments.

10. Talk About Money

If you are in a long-term relationship one of the most important things you need to do to ensure healthy finances and a healthy relationship is to talk about money with your partner.

My wife and I have almost opposite views on money and investing. It would have been easy for us to avoid the subject altogether. Instead, we talk about money ALL THE TIME. As a result, we have been able to get on the same page.

For an in-depth discussion about money and relationships, check out this story.


There you have it, the 10 commandments of FIRE. What do you think of the list, is there anything else that I should have included?

Let me know in the comments.


This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions