The FIRE movement has emerged as a revolutionary financial counter-culture, offering a bold vision of financial freedom and early retirement. In response to conventional life models based on working hard until late retirement, this movement proposes an alternative approach. Objectives, principles, financial investments: find out all you need to know about it in this article!
What is the FIRE movement?
FIRE is an acronym for "Financial Independence, Retire Early". It is in fact a financial and lifestyle philosophy that has grown in popularity in recent years and has two main aims:
- Financial independence FIRE: This means having accumulated enough financial assets, usually in the form of investments, to cover living expenses without having to work to earn a salary. Followers of the FIRE movement aim to reach a point where their passive income (dividends, interest or rental income) covers all their financial needs, giving them a degree of freedom from traditional financial constraints.
- Early retirement Once financial independence has been achieved, supporters of the FIRE movement have the option of retiring early, i.e. leaving their jobs at a younger age than the traditional norm for retirement (traditionally around 40) and devoting their time to activities that are close to their hearts, whether that's travelling, pursuing personal passions or getting involved in voluntary work.
What are the main principles of the FIRE movement?
To achieve the objectives of the FIRE movement, it is essential to understand its main principles. These are the principles that individuals who embark on the adventure follow to succeed in creating a financially independent life for themselves:
- Aggressive savings FIRE: FIRE followers aim to save and invest a significant proportion of their income, often more than 50%, or even up to 70% or more. This generally involves living below one's means and limiting non-essential expenditure.
- Long-term investment The FIRE movement focuses on long-term investment strategies, such as investing in index funds, equities, bonds or property. Investments are selected on the basis of their potential for growth and passive income generation.
- Reducing expenditure FIRE: Supporters of the FIRE movement seek to reduce their spending to a minimum by adopting a frugal lifestyle. This may include choices such as cooking at home rather than eating out, reducing housing costs, using public transport rather than the car, etc.
- Increased revenues As well as cutting back on spending, followers of the FIRE movement often seek to increase their income with additional sources of income (secondary jobs, rental income, online income), or professional skills to obtain promotions.
- Rigorous financial planning Financial planning is essential to achieving the goals of the FIRE movement. This means setting clear financial goals, keeping a close eye on spending and saving, drawing up a budget, and adjusting plans as circumstances change.
- Flexibility and adaptability While the FIRE movement has general principles, it also recognises the importance of flexibility and adaptability. Life circumstances can change, and it's important to adjust your plans accordingly while staying focused on the goal of financial independence.
What type of financial investment should I use with the FIRE movement?
Practitioners of the FIRE movement generally use a combination of different types of financial investment to achieve their goals of financial independence and early retirement. Here are some of the types of financial investments often used:
- Individual actions Some followers of the FIRE movement choose to invest in individual stocks, looking for solid companies with long-term growth potential. This often requires in-depth research and fundamental analysis of companies.
- Index funds and ETFs (Exchange-Traded Funds) Index funds and ETFs are investment instruments that make it possible to diversify a portfolio by investing in a basket of shares representative of a specific index or sector of the financial market. These investments offer diversified exposure to the stock market while reducing the risks specific to a single company.
- Obligations Bonds: Bonds are debt securities issued by governments or companies, for example, that offer regular income in the form of interest payments. They are often used in portfolios to provide a stable source of income and to diversify risk.
- Real estate Investing in real estate, whether by buying rental properties or investing in listed real estate investment trusts (REITs), is another common strategy used by followers of the FIRE movement to generate passive income.
Why call on the expertise of Ravel Finance?
Now that you know more about the FIRE movement, you're wondering how to go about it? Why not call on the services of Ravel Finance?
In fact, our company offers services that are perfectly suited to building a portfolio to achieve a monthly return target for people wishing to apply the investment principles of the FIRE movement, including :
- The service Index Invest Ravel Finance: accessible from €100, the experts on the Ravel Finance team invest on your behalf in a basket of shares (which you own directly), representative of a pre-identified index.
- The service Estate Invest Open from €500, this alternative to traditional property investment approaches enables de Ravel Finance to offer personalised strategies through targeted investments in REIT shares.
In short, the FIRE movement embodies an innovative approach to financial freedom and early retirement, encouraging savings, strategic investment and frugality. By challenging traditional norms of work and retirement, it offers the opportunity to re-evaluate one's relationship with money and time. While FIRE may not be for everyone, its principles offer valuable inspiration for rethinking the relationship between work and finance.