In the previous blog post, I touched upon what FIRE means to me and the freedom it offers. In this beginner’s guide, I would like to expand on how to make a start and some of the basic concepts around FIRE. Fire can be boiled down to three Fire Principles.

FIRE Principle : Save, save, save

One of the basic FIRE principles is to drastically reduce your expenses and only retain what is necessary.

For example, everyone has bills that regularly come in weekly, monthly and yearly. Sometimes, these recurring expenses are superfluous: a streaming subscription you don’t use, a gym membership that you don’t make full use of.

These non-essential recurring expenses can usually be cut, saving a moderate amount of money without feeling any degradation in lifestyle. This can increase the money you have for other things.

I remember when I first started on my FIRE journey, I looked at my monthly credit card statement and was surprised by the number of recurring expenses, some I had not used in a while. I had a Spotify subscription, as well as Netflix, Disney+ and Amazon Prime. Cancelling those seemed small at first but suddenly, I had an extra couple of hundred dollars a month to put towards savings.

In a further article, we will discuss several ways to minimise your expenses and to maximise the amount of cash you have left after expenses..

Any cash you have lying around, that is not earmarked for investments, needs to be in a high interest-rate account. Currently, in 2025, this should be around 4.5%. You may find a little higher, you may find a little lower but it usually will be around that mark. (This may be coming down now with the rate cuts happening). You may be able to find high interest rate savings accounts on NerdWallet (for the US) and finder.com.au (for Australia), for example. 

I personally moved from an account which would only give me a high interest if I jumped through hoops to another account which gave me the high interest automatically. Previously, some months, I would forget to do the “hoop jumping” and forego the interest. It is so much better if you get the interest automatically without any added conditions.

By cutting down on expenses and maximising your savings, you will have more money for investments.

FIRE Principle : Invest, invest, invest.

On the investment front, most FIRE advocates prefer passive investments, where they don’t manage the investment daily. Index funds are a great way to get exposure to the market with low fees and diversification.

Diversification just means spreading your money across different things so you’re not relying heavily on a single thing. Just like the old proverb “Don’t put all your eggs in one basket”, if you put everything into one stock or one property and it crashes, you could theoretically lose a lot. But if you spread your money across shares, property, crypto and maybe even some cash for safety, then when one thing does badly, the others can help balance it out.

 You can diversify over asset classes as in the previous example, or diversify over regions (USA, Japan and Europe, for example), or diversify by owning more. An ETF that follows the S&P 500 index diversifies because you have a lot of different stocks which are spread over sectors, industries, geographic locations and asset classes (some stocks have underlying assets such as property).

Another way of maximising your investments is through tax‑advantageous accounts (such as the 401(k), IRA, or, in Australia, SMSFs and superannuation) to accelerate growth.

Real estate is another asset class that you can utilise but has different implications in terms of risk and liquidity, which is a fancy way of saying the ease of selling. Houses are generally complex to sell, so are classed as an illiquid investment. Liquidity is important if you want to be able to live off your investments. 

I once toyed with the idea of relying solely on an investment property for early retirement purposes, but when I compared it to the freedom of having liquid investments I could tap into if I wanted to travel or re-balance my investments, the choice was clear. Real estate, with its large financial outlay, ties you down more than a diversified portfolio of index funds. This was contrary to the flexibility I was after.

FIRE Principle : Mindful Spending

To fully adopt FIRE, you need to spend with full intention and knowledge. Know what are your priorities and make every dollar count towards living and enjoying your life. Don’t let money slip through your fingers and ensure that everything spent counts towards your end goals – be they ensuring that you retire earlier or that they increase your enjoyment of life. Another thing is to ensure you are not leaking money through inertia and habit. Just because things are the way they are and have been for a long time does not mean they can not be fine-tuned.

Your FIRE Number
In FIRE, your fire number determines your investment target in order to achieve financial independence.

Two related rules are used to determine this and both mainly originate from a 1998 paper called the Trinity Study which confirmed William Bergen’s study of withdrawal rates from 1994.

The 25× Rule involves multiplying your annual living expenses by 25. The 4% Rule states that you can safely withdraw 4% of your portfolio each year (adjusted for inflation) without drawing down too much on your capital.

These rules stem from historical market returns and aim to balance growth potential with preservation of capital.

There is more about the FIRE number in the next article, How to Calculate your FIRE Number.

You and FIRE

Your fire journey may be different to mine. You may wish to concentrate on different aspects of FIRE. People on higher incomes may want to leverage their income to increase their investments and multiply their earnings.

Average income workers may want to focus on savings with less emphasis onxt increasing their income.

Your journey may well include travel, side hustles or even a change in career.

There are many different flavours of FIRE and they are described in “The different Flavours of FIRE”.

I will be writing more and expanding on what I have talked about above and going into more detail on the steps that one can take in order to become Financially Independent and Retire Early.