CHAPTER 1
WHAT IS FIRE

FIRE is the principle in which we try to become Financially Independent and/or Retire Early by having enough savings or assets that will generate income faster then your normal spending. The road to FIRE is harder for Belgians compared to people from the US (where you find most success stories). But even if you never reach FIRE, you should strive for it. 

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"Be better today then you were yesterday. Even if it's by small bit.  Even if you never reach FIRE, your live will be for the better. On the road to being financial independent are a lot of intermediate goals" .

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Some intermediate goals can be:

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• Having enough money to replace a broken smartphone versus waiting 3 months to save some money.

• Not sweating on how to scramble some money together to replace a broken dishwasher

• Your car broke down. And your financial situations allows you to just buy a new one without having to take a car loan.

• Your kid needs an expensive medical operation. You don't even need to think about how you can afford it and focus on your kids well being

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A common term in the FIRE movement is the withdrawal rate. It is the rate at which you can withdraw money from your portfolio without running out of money. For example: you have a portfolio of 500k€ that you invested in the stock market. If we assume that the average return of the stock market is 6%, then we can have a withdrawal rate of 4%. This corresponds with a monthly sum of 500k x 4% / 12 = 1666€/month.

 

In theory, your portfolio should grow faster then the 4% you are withdrawing. In practice, there are a couple of other factors to keep in mind (inflation, bearish/bullish markets etc...). More details will be explained in the next chapters.