F.I.R.E. is a movement that enables you to achieve financial independence and has many followers worldwide. The acronym stands for Financial Independence, Retire Early. This movement represents the dream of many people to retire early and shape their days how and where they want. Learn all about this movement, how it works and a little about its history.

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How did the F.I.R.E. movement come about?

The concept of early retirement is not new, but it gained popularity after the publication of the book “Your Money or Your Life” by Vicki Robin and Joe Dominguez in 1992, which proposes a nine-step programme to change one's relationship with money and eventually achieve financial independence. The book by the two authors teaches readers not only how to manage money, but also how to find more freedom, joy and meaning in their lives. By following the nine steps, you will not learn to make more money or spend less money. Rather, this book teaches you to get an idea of how much you need to live the life you want. That is the main purpose of these nine steps and was the starting point for the creation of the FIRE movement.

This movement is currently spreading through digital media, blogs and social media, and we can call Mr. Money Mustache (Peter Adeney) the pioneer of this movement. Since 2011, he has been blogging about the events that led him and his wife to retire at the age of 30. Like him, others encourage people to follow the FIRE movement and use different methods to achieve financial independence.

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What is financial independence?

We can define financial independence as the freedom to choose what to do with one's time without worrying about working to earn money. To achieve this goal, people should manage their money in such a way that they will have enough money in 15 or 20 years to retire. Many join this movement not only to retire early but also to take a sabbatical in between careers or to devote themselves entirely to unpaid activities such as travelling the world or volunteering. The goal can be varied, and you can even continue working in your current company with the added benefit of having more money to spend at the end of the month.

It may sound like a far-fetched idea, but many have done it and shown that it is possible. The basic idea is that you quantify your goal and collect it over a while. Once you reach the desired amount, you can invest the money in index funds, shares or real estate to earn a regular income from the money invested. We know that investing in real estate is still the safest method because you can rent it out, sell it or maybe even live in your own house.

The 4% rule can help you figure out how much money you'll need to reach your goal. This rule states that you should deduct a maximum of 4% from your investments each year to prevent the total value from falling. Here is an example to better understand how to calculate this figure: if you want a monthly income of €1,000 (€12,000 per year) and consider a return of 4% per year, you need to divide €12,000 by 4%, which gives you €300,000. This is the figure that allows you to reach the target of the FIRE Movement.

This practice can mean a complete change of habits and a better understanding of personal finances. You must reduce non-essential expenses and diversify your investments across multiple platforms. It is a concept that requires a complete paradigm shift, but it will ultimately compensate for all the sacrifices.

Are there strategies to achieve financial independence?

1. Financial literacy

There are, and they depend heavily on willpower to change your lifestyle. First, you should have a broad idea of financial literacy and what you want to do when you reach the final number. It is also critical to understand what type of investor you are and to adhere to the strategies shared by others in books, blogs, or podcasts on the subject.

2. Saving money

The second step to an effective strategy is to save money. Saving money can be one of the most difficult steps in today's society because consumerism is so prevalent. You need to focus on this lifestyle change and whenever you need to buy something, do not do it on impulse and always question the benefits of the product or service. Everything should be done with the goal in mind, and to achieve this goal, you can take some of the actions that followers of the FIRE movement share on digital platforms.

• Once and for all, eliminate unnecessary spending (for example, stop eating out, use your car only when you have no other choice, cancel your subscription to certain entertainment services, or even rent a room in your house to share the cost).
• Keep the family budget to a minimum.
• Change the geographical region where the cost of living is lower.
• Find other sources of income.

3. Investment

The third and final step is to invest. You can make your savings work for you by investing and taking advantage of compound interest to increase your income. Here are some examples of how to diversify your investment portfolio.

• Retirement savings plans;
• Investments in the stock market (mutual funds, ETF, or shares);
• Real estate investments.

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Are Portugal and the FIRE movement compatible?

Apart from countries like the United States of America or even the United Kingdom, where this movement has gained great notoriety, there is also Portugal, where reality can be a challenge. Those who want to follow in the footsteps of the FIRE movement should know that nothing is impossible and that if they are realistic about their goals, they will certainly reach the famous FIRE goal.

The reality of the international FIRE community aims to save very different amounts than the Portuguese reality. In cities like New York or London, the cost of living is higher and the savings target is inevitably higher. Portugal could be the answer for foreigners who want to retire early or work as freelancers but need financial stability.

The cost of living in Portugal is low for those coming from other countries. If you live outside the big cities, like some towns in the Alentejo and the Algarve, the values are even more encouraging for a comfortable life.

The cost of living in Portugal

A meal in a Portuguese restaurant, which includes the main course, drinks (such as a small bottle of wine) and dessert, can cost as little as 25 euros, or even less if you opt for restaurants with a daily menu, where prices range from 10 to 15 euros.

Prices in supermarkets have increased, but remain affordable for foreigners. Monthly shopping can be done in supermarkets or local markets, where you can find quality fresh produce at reasonable prices.

The cost of accommodation depends on the city you are in. As already mentioned, the cities with a higher population density, such as Lisbon and Porto, are the most expensive in the country. The Algarve, on the other hand, manages to avoid these values by offering houses near major cities at lower prices. Another advantage of living in the Algarve is the proximity to the beach and the mild climate, which invites you to take long walks along the coast.

Buying a house in the Algarve usually pays off more than renting. Since rental prices can rise at the end of any contract, or, in the worst-case scenario, your contract will not be renewed. The cost of buying a house in the Algarve varies greatly, but the closer the house is to the coast, the higher the price. Even so, a three-bedroom house, ready to live, can be found for less than €200,000.

For example, health care prices in Portugal are lower than in the United States of America. The reason for this is that health care in Portugal is provided by the government. You have to pay for the services you use, but the cost is minimal, and some services are even free. A consultation at a health centre costs €4.5, and a specialised consultation costs €7. On the other hand, the Portuguese public health system can be slow, so health insurance is beneficial for accessing private hospitals. The cost of health insurance in Portugal varies between €30 and €100 but is not too high compared to other countries.

Learn more about the cost of living in Portugal in this article.

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 In summary, we can say that Portugal is an excellent destination for those who follow the FIRE movement. For those who want to reach their FIRE goal as soon as possible, the low cost of living is an advantage. Other benefits of moving include good health care, fresh gastronomy, street safety, a mild climate, and friendly people.

Once you have obtained your Portugal Residence Visa, or if you prefer, the latest Digital Nomad Visa, you can embark on the best adventure of your life and enjoy this country. Talk to us about your plans, and we look forward to finding you a property in the Algarve.