Earlier this year, I shared two reflections:
Both were about creating strong foundations—for health and for money. This week, I want to connect those ideas to a bigger vision: FIRE—Financial Independence, Retire Early.
What FIRE Really Means
FIRE is not just about retiring at 40 or 45. It’s about freedom. The freedom to choose whether you work or not. The freedom to spend your time with family, travel, or build something you’re passionate about—without money being the deciding factor.
For me, FIRE is about retiring from compulsion, not from purpose.
The first step is clarity. Ask yourself: Why do I want FIRE?
Your “why” could be family, security, lifestyle, or peace of mind. Without that clarity, it’s just numbers. With it, every step feels meaningful.
Next, calculate your net worth (assets – liabilities) and track your expenses. Expenses are the biggest driver of your FIRE goal. Lower expenses mean you need less to reach independence.
The FIRE Calculation
There’s a simple formula to know your target:
FIRE Number = Annual Expenses × 25
This is based on the 4% withdrawal rule.
👉 Example: If your annual expenses are ₹12 lakhs, your FIRE number is ₹3 crores. That means if you withdraw 4% every year (₹12 lakhs), your investments should last for decades.
Cut your expenses, and your FIRE number goes down. Build multiple income streams, and you get there faster.
Safeguarding the Plan
Before investing aggressively, build a safety net:
- Emergency fund: At least 6 months of expenses.
- Insurance: Health, life, and disability coverage to protect your family and your plan.
These don’t speed up FIRE, but they prevent one crisis from derailing the journey.
Investing for FIRE
Consistency is key. Automate your investments and diversify:
- Index Funds (like Nifty50) → long-term equity growth.
- Diversified Equity MFs → exposure to different sectors.
- Debt/Hybrid Funds → stability and liquidity.
- Real estate, FDs, digital assets → additional layers of security.
A Practical Example
Let’s say you’ve reached your FIRE number: ₹3 crores.
- 50% in Nifty50 index funds
- 30% in diversified mutual funds
- 20% in debt funds
Then you set up a Systematic Withdrawal Plan (SWP) at 4%. That means withdrawing ₹12 lakhs per year—or ₹1 lakh per month—based on today’s expenses.
But here’s an important detail: inflation will change this number. Ten years later, the same lifestyle might cost you ₹1.5 lakhs per month, and twenty years later it could be closer to ₹2 lakhs or more. The 4% rule is designed with this in mind—you increase your withdrawal slightly each year to match inflation.
At the same time, because your portfolio continues to grow at an average of 8–10% over the long run, your wealth is expected to keep pace, allowing you to withdraw more while still preserving your principal.
This balance—steady withdrawals adjusted for inflation, and long-term growth from investments—is what makes FIRE sustainable.
Every year, review your FIRE plan. Adjust for inflation, rebalance your portfolio, and test living on your FIRE budget. As you get closer, shift to safer assets.
And when you finally cross the line—live your FIRE life. Not extravagantly, but intentionally. For me, FIRE is not about stopping work completely. It’s about having the choice to say yes or no—without money deciding for me.
My Reflection
FIRE is not one-size-fits-all. For some, it may be ₹2 crores. For others, ₹10 crores. The number is personal. What matters is clarity, discipline, and courage to design your life around freedom, not compulsion.
👉 If money no longer controlled your choices, how would you spend your time?
Discover more from Reflections by Mohan Natarajan
Subscribe to get the latest posts sent to your email.