How To Become Financially Independent So You Can Retire Early

Though it may seem like an impossibility to retire early if you are not a trust fund baby, the reality is that anybody can do it. I explored this a bit in a post about whether retiring early is possible

There is an actual movement called FIRE (Financial Independence/Retire Early) and it is catching on all over the world. Anybody who has ever thought of ripping up their time card at work and walking out has often imagined what their life would be like if they didn’t have to work anymore. 

It is a little more complicated than finding a way to sit on a beach and drink mojitos all day, however. The idea is to have the freedom to choose, when, how, and how much you want to work instead of being stuck in a cycle that you can’t get out of. With this in mind, it does take some planning and putting pieces in place to achieve financial independence. 

In this article, I will go over what you need to do to be able to actually retire early and live life on your own terms. 

Start investing

The most important thing to start before anything is to put money in investments as early as possible. It is the residual money that you make from the investments that will allow you to earn passive income so you are free to focus on the things that are important to you later on. The earlier you start, the more you will earn.

There are a lot of different types of investing from ETF trading in Canada to buying and trading cryptocurrency. It’s up to you to find the right fit that suits your personality, your budget, and your level of acceptable risk.

No matter how you envision your FIRE life, it will involve having a solid portfolio of investments. Without this, you may not have the freedom that you need to be able to live exactly the lifestyle that you want.

Once you have an investment strategy then you can move on to the actual planning of your roadmap to financial independence. 

Define your FIRE style

There are as many types of FIRE systems as there are people who decide to retire early. It is highly subjective to the person and their needs and wants so there is no one size fits all approach.

With that said, there are a few different categories that your idea may fall under. 

To hit your number for early retirement faster you can try out the LeanFIRE system. This involves stripping down your lifestyle to the bare minimum. Minimalists are the ones most likely to succeed in this type of system because they already have the lifestyle which requires frugality and the discipline that comes with it. 

LeanFIRE requires living with the bare minimum and then continuing that into retirement. You won’t live a life of luxury doing this style of FIRE. it is not for everybody since there is a lack of many creature comforts that most people require. The benefit is that with such extreme saving and barebones expenses needed to retire you can end up retiring earlier even if you don’t make a lot of money.

FatFIRE is very similar to LeanFIRE in that cuts and sacrifices have to be made, but there is some room for some reasonable indulgences. It does take a frugal approach which means having to make sure that you are cutting many unnecessary expenses. What it doesn’t involve is going vegetarian for the sake of saving money, as an example. Often, your lifestyle will remain almost the same with just cutting most of the fat out of your budget. 

BaristaFIRE is probably the most popular of the many different approaches. This simply means that you have done FatFIRE for instance but you want to continue working in your retirement. In fact, you are more interested in the financial independence aspect over the early retirement part. In other words, you plan to keep working but with more control over your options. 

You can “retire” from the regular job that you are not crazy about and take a lower-paying one that is more fulfilling or offers a more flexible schedule. The reason it is called the BaristaFIRE is that you could step down from your corporate job and take a job in a coffee shop with less responsibility and the ability to work fewer hours. The point is that you will still have some money coming in so you don’t have to use your savings, or even to keep your health insurance. 

Get rid of debt 

Regardless of which scenario is best for you, the one constant is that you have to eliminate or severely reduce your debt. This is what is going to hold you back from retiring early if you have it hanging over you. 

When you start cutting expenses, the savings should go to two places. One is to invest a portion and the other portion should go to paying down your debt. Start with the debt that is fastest to eliminate, or has a high-interest rate. Credit card debt is the most logical place to start.

Knock off as much of that debt as quickly as possible as it is what is taking a big chunk of your budget in the sense that you pay for so much interest over time. You should have zero credit card debt when you retire. Only use your credit cards to accumulate miles or points while making sure to pay off any charges as soon as the bill comes in.

You should try to also be mortgage-free as this also determines how long it will take to retire. If you can have no mortgage then you will have far more flexibility in your lifestyle and when you are able to retire. However, if you have other debts then pay those off first as you can keep deducting your mortgage interest from your taxes, unlike your other debt. 


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