FIRE (Wealth) Is All About Math And Choices

I blog a lot about this subject (choices in life), because it really is at the core of all that I believe. The sum of your choices in life will determine where you end up (and with how much money). Of course there are people who get the “short end of the stick”… that’s not you. If you’re here reading this, you’re alive, have internet, you’re doing better than the folks who got the short end.

FIRE: Financial Independence Retire Early

The math of FIRE is simply to save 25-30 times your yearly expenses and live off that savings by withdrawing 3%-4% “forever”. If you spend $30,000/year, you need to save $750,000 to $900,000. If you spend $100,000/year, you need to save $2,500,000 to $3,000,000.

A lot of people seem to think it’s impossible to save 25-30 times your yearly expenses. It’s not. It’s all math and choices.

Does The FIRE Formula Really Work?

That question was asked on Quora, and this was my answer:

Yes. An emphatic YES. It’s math and CHOICES, and fairly simple math at that. The choices are not so simple.

Did you know even with minimum wage, if you were willing to make the CHOICE to work two minimum wage jobs (80 hours a week), live on half, save the other half, for just 10 years, you could save 250K-300K! And that’s if you never got a raise in 10 years! That would mean not starting a family, not having a lot of fun for 10 years, but just think where you would be financially after that. Do that from the age of 18-28. And if you did it for 20 years (you’d be 38), you could just about retire. CHOICES.

But you say, I don’t want to work that much, or not work for minimum wage for 10 years, blah, blah, blah… well this is an extreme example. Two people making 50k a year in their late 20’s or into their 30’s could live on one salary and save the rest. *If* you could live on 50K, it would only take 17 years to save enough to live on 50K forever.

Want more than 50K you say? Whatever your number is, if you can save and invest that amount for 17 years, you can retire on that same amount (so you would need to make twice that amount). If your amount is 100K/year, you need to make 200K a year and save half. There’s a lot of variables, and extreme saving may be hard, but isn’t it worth it? You’re purchasing your freedom. It’s pretty cheap in my eyes…

And whatever you do, don’t surround yourself with negative people who tell you it’s not possible.

Now, you would think that’s a pretty clear, math-based answer. The math doesn’t lie. But even with the clear math, you can bet there will be naysayers.

Read This Negative Response…

Response from someone with an MBA:

Not a chance. I will use [Mr. Hobo Millionaire’s] answer as an example of why. [He] said even working at minimum wage for 80 hours a week you can save $200-$300k. Let’s look at the fallacy of that. I will use $12/hour. Assuming you can patch together two full time jobs and don’t mind living a miserable existence, you gross $960 a week, net $750 or $3000 per month. First off, if I worked 80 hours to make that little amount there would be no need to retire, I would kill myself. Here’s where the BS pile grows even deeper – an apartment is $800 per month at least, even with a roommate. Transportation, food, insurance, phone…the other answer talked about choices. You want to choose to live like a third world impoverished bum? You could skip all that stuff. Personally I want a decent quality life. You want a girlfriend, a wife, kids? Forget it, no one wants to wallow in your miserable lifestyle.

But let’s say you manage to save $18,000 per year for twenty years, and also assume the stock market falls your way and you hit age 40 with $500,000. Now you want to make that last, what, another 40–50 years? You can withdraw 4%, or $20,000. There will be taxes so you have $16,000 or so. Congratulations, you are living well below the poverty line. Enjoy your retirement.

Wow! That guy has an abundance in his life… an abundance of negativity. If you go into life with that level of negativity, you could be handed a million dollars, and you’ll find a way to lose it. My whole point of using a 10-20 year window was to say “even if” you ONLY made minimum wage over 10-20 years, you would still win. But no one is going to work that hard for 20 years and stay at minimum wage. With raises over 10-20 years, you would be able to save even more! And yes I believe sacrificing an easy life for 10-20 years is worth it — I did it. Note, I didn’t say sacrifice a life… I said sacrifice an easy life. I still had plenty of enjoyment over my 20-25 years of sacrifice.

If you ignore all the negativity in his response (and please do), his math is way off on what he thinks the stock market will do over 20 years, t00. $18,000/year saved over 20 years will turn into between $750,000 and 1.2 million, not $500,000. That’s using a range of compounded returns at ~7%-10%. He’s also wrong on the taxes on that withdrawl, too, but that’s a post for another time.

Save Hard In Your 20’s And Never Save Again?

Due to the magic of compounding, I believe most young people should defer “life” in their 20’s and save really hard. I came to the conclusion over the past year doing some compounding calculations. If it’s possible for them to stay at home in their early 20’s rent free, do that, too.

Here’s the deal. Money saved in a broad Vanguard index like S&P 500 (VOO) or my preference the Total Stock Market (VTI) will roughly double every 10 years. Over a 50 year window, you’ll see doubling of money closer to every 7 years. That equals a range of compounded returns at 7% to 10%. What does that mean in real dollars?

For EACH $100,000 you can save by age 30, if you NEVER add to it again, just that $100,000 alone will compound into ~$1,000,000 to $3,000,000 in 35 years (age 65). $100,000 is a sizeable amount to save, but we’re only talking about $500-600/month compounded over 10 years. For most 20-somethings, that’s the savings of an expensive car payment or living with a roommate and splitting rent instead of living alone. Oh and what about money spent NOT completing college or spending frivolously on a wedding and honeymoon in your early 20’s… a lot of people would be much better off saving all that money.

I’m not advocating never saving again after 30, but you certainly wouldn’t have to go hardcore if you didn’t want to.


It is our choices, Harry, that show what we truly are, far more than our abilities.

J. K. Rowling in Harry Potter and the Chamber of Secrets

FIRE is all about math and choices. The math is easy; the choices are not.

Mr. Hobo Millionaire

FREEDOM At Any Cost?

Financial Independence is about buying your FREEDOM. Free to do whatever you want with your time. Want to keep working after reaching FIRE? Fine, it will be your choice. Want to do nothing? Fine, it will be your choice. Want to work for way less than normal at a non-profit? Fine, it will be your choice. Isn’t the FREEDOM of FIRE worth 10-20 years of really hard work and saving?

Stay positive folks… and get to work earning your FREEDOM (or is it FI-DOM).


Written by Mr. Hobo Millionaire
I blog about money, financial independence (FIRE), life, and entrepreneurship. I got rich slowly (over 20+ years) with a niche software business. I also failed at a number of other things (and mild success with a few others). I share what I did right along the way, and a lot of what I did wrong, with a goal to encourage you think differently about life and money.