Last year, a friend of mine did a workshop at an engineering college. He was shocked to note that almost half the class expressed a desire for FIRE (Financial Independence Retire Early). Do note, these are just students who have not yet joined the workforce, and retirement is already on their agenda.

What is FIRE?

The FIRE movement has gained traction across the world, but is certainly not new. Its origins can be traced to the 1992 book Your Money or Your Life. It focuses on extreme savings at a young age, so that money can be quickly accumulated allowing one to quit their 9-to-5 job at an age of their own choosing. This movement began as a reaction to the typical traditional job of working till you are a particular age (maybe 58 or 60 or 62), then retiring and hopefully get a pension. But by then, you are not young anymore and most of your life is behind you. Hence the title, Your Money or Your Life.

In actuality, there are two completely different aspects being tackled here, financial independence and retirement.

Financial Independence is NOT about retirement from work.

Being financially independent (FI part) does not necessarily mean that one has to retire (RE part). You can be financially independent and continue working at your job. Or, you can attain financial independence and work as a freelancer or consultant, or even parttime. Just because you are financially independent does not mean you have to stop working.

If I had to explain it in a very practical way, I would say that financial independence is just the ability to work on what you want, where you want, at your own pace, with who you want, and can quit at any time you choose to without having to worry about money to pay your bills. You work because you “want” to, not because you “have” to. You have the liberty and privilege to work on what you enjoy or gives you meaning. You no longer work out of insecurity or need

Financial Independence is NOT just a number on an excel sheet.

Financial independence requires a number, but is much more than that. It is not solely about having money to cover all your expenses. It is about psychological independence too. What is the corpus amount that will help you overcome your insecurity? What is the size of the portfolio that will make you feel safe? What is the cash flow you desire that will make you feel taken care of? You and your spouse may need Rs 5 crore to make it work, but your comfort level may be with Rs 7 crore.

Financial Independence is NOT a generalisation.

Financial independence means different things to different people. Whenever people talk of financial independence, they just want enough money that will enable them to live life on their terms. They want to write their own script that allows them to decide how to spend their time and money. It’s so deeply personal.

So ask yourself: If cash flow is not an issue, what will my life look like? Is it running a little bed and breakfast in a remote location? Is it walking away from your job and just volunteering a few hours a week? Is it living in a small town with extended family? Is it working solo in far flung locations?

High Income is NOT Financial Independence.

You may have a high income but spending almost all of it. Tomorrow, should you lose your job, you won’t have sufficient money to fund your lifestyle. A high income is a means to financial independence. It allows you to save substantial amounts of money and invest in smartly. Use your income to create assets and build wealth to sustain you should the income stop, or decrease. In other words, use your income to get financially independent. It is often the unseen layers of wealth that define a person’s level of financial independence.

Remember this:

• Financial independence gives you the power to walk away – either from a toxic workforce or a toxic relationship.
• Financial Independence is not about retiring early. The two are different constructs.
• You can be financially independent and still work. Financial independence does not automatically translate into retirement.
• Financial independence is deeply personal. Give thought to the life you really want; not someone else’s idea of a good life.
• As long as financial independence is a fuzzy notion, you won’t be propelled to move towards it. Deliberately visualising it will give you the motivation to work towards it.