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Have you heard of FIRE when it comes to talking about finances? What does FIRE mean in finance, and is it something for you?

There is a common term going around social media at the moment when it comes to finances. It’s all about FIRE. Everyone says that you should do it.

To be honest, I avoid the “should” when it comes to anything in life. If you want to do something and it’s good for you, then great, do it. However, finances are not a “one size fits all” type of thing, and not everyone wants FIRE.

What does FIRE mean in finance?

Before you can decide if something is for you or not, you need to understand what it means. FIRE stands for Financial Independence, Retire Early*. It’s an acronym.

Sounds great, right? It is for a lot of people, but it depends on what you want to achieve in life. Maybe you just want the first part of the acronym, and that’s okay.

I’m there with you. I want the financial independence, but I’m not really that bothered about retiring early. Then again, I do a job that I love. I work for myself, and it’s something that keeps my mind busy. The idea of doing this for another couple of decades, or even three, is perfectly fine with me.

However, I would prefer not to have the constant focus on surviving inflation. I’d like to be able to set my children up for an easier life. I’d also love to be able to travel more.

Is FIRE for you?

You need to determine if you even want FIRE. Do you want the financial independence part but not so bothered about the retiring early part? That’s okay. You don’t have to retire early just because you can manage it financially. This doesn’t mean that you never work again out of choice. The idea is that you never have to work again.

You have the financial freedom to do what you would like. If that means traveling the world more, then great. If it means relaxing with a good book more frequently but still working, then that’s FIRE for you.

In a way, I guess this “should” be the goal for everyone. Again, I hate using that word, though. Only you can decide what’s right for you. People will judge you for the decisions you make, but they’re not the ones living your life.

MORE: 5 types of savings accounts I have for my personal budget

How much do you need to save to retire early?

Now can you make FIRE* happen? Part of this is knowing how much you need to be able to retire early. The only way to tell that is by knowing how much you need to make each year and then multiplying it by the number of years you want to be retired for.

Let’s say you want to retire at 65 and you need to spend $50,000 per year. You need to multiply the $50,000 by the number of years you expect to live. Life expectancy is between 80 and 86 depending on gender, so you’re looking at 15 to 20 years of income needed. Maybe you’ll live longer, so you’ll want to save a little more just in case.

Do you want to retire early? Now you need to multiply that figure by the extra years. Maybe you want to retire at 50 instead. You’re adding another 15 years into the mix, with is another $750,000. Can you make that work? You’ll need to look at your saving options and your goals.

You can keep your retirement income in a pot that gains investments. You’ll want to be careful with the high-risk ones, but there are medium and lower-risk options available. This will offer some returns that will help you make up for money that you’re taking out to ensure that you’re able to afford retirement, especially if you live longer than the average.

You’ll need to budget well if you want to make this work. You’ll also need a good investment to help you save more in a shorter space of time. Yes, there are a lot of people doing it themselves, but there are mutual fund managers for a reason. That little extra coming out for their expertise has been worth it for me personally.

MORE: Why multiple side gigs are good for anyone

Do you want to talk more about FIRE? Get in touch so that I can help you figure out the best financial needs for you.