Top FIRE Books: Financial independence retire early resources

The Financial Independence Retire Early (FIRE) movement has garnered a lot of attention in recent years. The FIRE movement encourages people to rethink the current model of living paycheck to paycheck and retiring in one’s 60s. Instead, the FIRE method advocates for people to live frugally, save aggressively and retire early.       

If you want to know how to get started with FIRE and what it will take to achieve financial independence and retire early, we recommend these 5 books to help you along on your FIRE journey. You may find there are many similarities in the concepts you can learn from these books, but they also have their own approach and philosophy.

Also refer to our blog post Top 5 Books to Learn Financial Literacy

1.'A Simple Path to Wealth’ by JL Collins

In ‘A Simple Path to Wealth’, JL Collins offers money advice based on letters he wrote to his daughter that outline the basics of sound money management and financial independence.

Some common principles relevant for FIRE practitioners:

The Important of F-You Money

The goal is to have enough savings and investments that provide us optionality in our lives. For example, you could retire early, or work on something you are passionate about, or simply have the courage to seek options if you have a toxic job.

Debt is an unacceptable burden

Avoid debt, especially high interest debt such as credit card debt. This requires being disciplined and living within one’s income. Any extra money one may have should be used to pay off high interest debt, before using this to invest.

Learn how the stock market works

Money novices can sometimes find stock market investing to be a little intimidating. Collins explains that stocks are a way to own parts of a business and participate in the growth of these businesses. In the long term, the stock market has grown and delivered returns, despite short term ups and downs and volatility. So do not be fazed by short term volatility and invest in the long-term growth of stock markets. Market crashes are also expected from time to time. Do not do panic selling or timing the market. Stay the course.

Index investing, asset allocation and risk management

An effective approach is to invest in index funds instead of individual stocks. Index funds help you buy the entire stock market instead of having to predict how an individual stock performs. Moreover, invest in low cost funds with lower fees. High fees erode investment returns over time.

Collins also recommends managing asset allocations to have a high proportion of stocks in your early working years. As you get closer to financial independence milestones, add bonds to reduce the volatility from stocks. Periodically rebalance your portfolio to make sure it fits in within the desired asset allocations.

Use the 4% rule

The 4% rule helps you safely withdraw enough in retirement while helping money last for the duration of your lifespan. Multiply your annual expenses by 25 to get your financial independence number. Once you have this, you can retire.

Invest your money in an order of priority, like below:

• First, pay off debt
• Build emergency fund that will support you for at least 6 months.
• Invest in tax advantaged funds (401K, IRA)
• Invest in taxable accounts

In general, keep your budgeting and investing strategy simple by paying off debt, saving as much as possible and investing in the entire stock market via low cost funds. Ignore market noise and chatter and focus on the long term.

2.'Your money or your life' by Joe Dominguez and Vicki Robin

This book puts all our financial decisions in the context of our entire life. We trade our ‘life energy’ – our energy and vitality - in return for money. Every dollar we earn is due to spending some life energy. When we analyze our finances from this perspective – we really understand the cost of our financial decisions.

Some key themes in the book are described below:

Make peace with the past

In order to plan where you are going, you first need to understand where you are and how you got here. Start by doing the following;

• Calculate your total lifetime earnings
• Calculate your net worth
• Understand your current financial situation and full picture
• Track and understand your real hourly wage: You may think you earn a lot, especially for highly aid professions. But do you really understand the actual, real wage per hour?
• Start with gross income: Subtract all work expenses such as commute, clothes, travel and any other job-related costs.
• Calculate the time you spend at work, not just in an office, but also commute time, prep time and even factor in the time needed to decompress from work.
• Finally, calculate your real wages per hour.

A lot of people will find they earn much less per hour than they think. This is especially true of people working in high-stress professions such as investment banking, law or consulting, that involve long hours.

Evaluate expenses in terms of time and energy

Put your expenses in the context of your time and energy.  Divide each expense by your salary per hour and figure out the real cost of that expense in life energy. Make thoughtful decisions on your expenses by evaluating whether each expense really is worth it. As yourself if you received value from each expense in proportion to the time and effort spent. Also think about whether it aligns with your values. This prevents you from spending on pointless things you may not even care about.

Maximize income

Now that you have the expenses under control, focus on your income. Firstly, look for work that aligns with your values. In parallel, build additional income streams or a side income if possible. Build your skills over time by increasing the value you add to your workplace. This will help you earn more in the longer term, especially by doing work that matches your values and for which you have developed the skills.

Find your crossover point

Find the crossover point where your monthly investment income matches your monthly expenses. This means you can sustain yourself on just investment income without having to work- if you want to, of course.

Attain financial independence

By living below your means and investing more savings and generating income, you will be on the path to financial independence. Focus on long term fulfillment, instead of short term wants and make sure you have financial security in the medium to long term.

3.'The richest man in Babylon' by George Samuel Clason

This book has a novel approach towards discussing money techniques. It uses parables from the ancient world, specifically, from Babylon, to explain the basics of financial independence.

The central figure is Arkad, the richest man in Babylon, who shares his wisdom with his fellow citizens in Babylon. 

• Start thy purse to fattening : In modern parlance, this means ‘pay yourself first’. Make sure to Save 10% of income before other expenses. Keep this in a separate account away from your expense accounts. And also set up automated savings.
• Control thy expenditures: live below expenses and distinguish between needs and wants. Create a budget. If you get a pay raise, avoid lifestyle inflation.
• Make thy gold multiply: Understand the power of compound interest and make your savings multiply through investing. Focus on getting rich with stead investing and planning and avoid gimmicky get rich schemes. Manage asset allocation wisely with a combination of conservative and growth investments.
• Guard thy treasures from loss; Protect your money from hidden and open risks. Avoid speculative investments that could put your principal at risk. Understand important of insurance to manage risk.
• Make of thy dwelling a profitable investment; Build home equity and make wise real estate investments. Save for down payment and understand total costs, including maintenance. If you need to, make strategic home improvements that will enhance home value. You can also refinance whenever advantageous.
• Insure a future income: Ensure that you have financial security in the future, especially for retirement. Try to generate multiple income streams. Put insurance in place to plan for any possible loss of income. You will need to consider life insurance, disability insurance. Maintain an emergency fund that will cover expenses in case of job loss or other issues. Do you have passive income streams such as rental income, investment income or side income?
• Increase thy ability to earn:  Continuously keep adding to your skills and make yourself more valuable. Obtain education that will help with your career advancement. Focus on networking and mentorship and take on more responsibilities that lead to higher pay and more learning on the job

4.'Early Retirement Extreme' by Jacob Lund Fisker

This book is meant for people whose overarching goal is to attain financial independence at the earliest, and are willing to make extreme sacrifices to achieve this goal. This book recommends a lifestyle based on extreme frugality and advocates minimalism as an approach to not only achieve FIRE goals but also for reasons of environmental sustainability.

Here are some key themes explored in this book:

Cut expenses drastically: Cutting expenses is the best way to build wealth and attain financial independence. While this is a common theme in personal financial advice, Fisker goes a lot further and advocates for drastic cuts in expenses and a savings target of 50% to 75% of one’s income.

21-Day Makeover: This book issues a 21-day challenge to overhaul one’s life and cut expenses in all aspects such as housing, entertainment expenses, food and transport. A 21-day challenge makes it easier to build a habit in 21 days while drastically overhauling one’s lifestyle.

Acquire skills, not stuff: Like other personal finance and FIRE books, this book also encourages people to focus on acquiring skills rather than stuff. This not only helps cut expenses but can also boost future earnings. Similarly, Fisker also encourages people to focus on passive income generating investments that support a FIRE lifestyle.

Sustainability: And last but not the least, the extreme early retirement lifestyle is very well compatible with environmental sustainability, as it reduces consumption.

5.'Financial Freedom' by Grant Sabatier

Many personal finance books emphasize the important of frugality and saving. But Grant Sabatier’s book ‘Financial Freedom’ focuses on abundance and designing the life you want and organizing your finances around it. This is an important mindset shift for people fixated on frugality.

To start with, calculate your financial freedom FIRE number. How much money will you need to sustain your desired lifestyle? Like many other authors, Sabatier also recommends saving money, but is not as extreme. Save 25% to 50% of your income, and supplement your income with side hustles.

Focus on investing for the long term, and follow a low-cost index fund strategy. Real estate can also be a good option for generating passive income and driving investment gains. Moreover, pay off debt, starting with high interest loans.

A lot of this advice is consistent with other books or sources. But where this book stands out is in reframing money as a way to generate opportunities rather than a scarce resource that needs to be conserved. It advises users to find ways to earn more money by adding value, something that is made more possible by an internet focused economy. Have a healthy attitude towards work, and find ways to earn more money by creating value in the world. Money is not inherently good or evil. It is a tool that can help you build the life you want. Thus, focusing on an abundance mindset can improve your relationship with money and get you to a better place financially.

Conclusion

As you can see, these 5 FIRE-related books have many common themes about being thoughtful about expenses and spending on needs rather than wants, building skills to generate more income, managing debt and investing in low-cost index funds. But they have different philosophies and approaches, for example, emphasizing extreme frugality, or focusing on an abundance mindset. Attaining financial independence is about figuring out the right approach that works for your lifestyle and mindset.

At Planwell, we are building a fully automated AI financial planner and advisor to help you make super personalized financial decisions such as how much house you can afford, while considering your lifestyle, retirement goals and other key factors. 

We will be launching the product very soon. Stay tuned for an update. In the meantime, check out our blog posts to help you plan your finances.

• Top 5 Books For Financial Literacy: Here are the best 5 books you can read to learn the fundamentals for financial literacy. 
• How to build a personal financial plan: Before you make a home purchase, make sure to build your personalized financial plan with our 10 step guide. 
• How to Use AI Budget Calculators and Tools to Plan Your Finances: Take advantage of our free FIRE calculator  to plan your finances more effectively.
• 5 Common Money Mistakes to Avoid: Learn about the pitfalls that could derail your early retirement plans.
• 5 Overlooked Workplace Benefits That Can Save You Money: Maximize your work benefits to boost savings and well-being.

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