Financial Independence Retire Early (FIRE)

Financial independence is within reach with disciplined planning and perseverance. Learn how to navigate the journey to financial independence retire early (FIRE). 🔥

Key Takeaways


FIRE, short for Financial Independence Retire Early, represents a bold departure from traditional retirement norms, offering the prospect of retiring well before the standard age of 67 in Germany. This aspiration necessitates substantial investments, especially considering that the average government pension amounts to €1,700 for men and €1,300 for women, all received at the age of 67 and pre-tax.

Despite the daunting figures, achieving early retirement is indeed feasible, albeit not as glamorous as portrayed on social media. The journey towards financial independence demands strategic planning, disciplined saving, and prudent investing. Regardless of your current financial standing, this article will guide you through the precise steps required to attain financial independence. With the right approach, you can liberate yourself from the shackles of traditional employment and confidently chart your path towards early retirement.

Set Your Personal Goal

Becoming financially independent is not just about the allure of endless vacations or carefree living—it’s a journey that demands commitment, sacrifice, and long-term vision. Before delving into the intricacies of financial planning, take the time to introspect and define what financial freedom truly means to you. Challenge the glossy portrayals of social media and dig deep into your motivations. Is it the prospect of sipping piña coladas on a tropical beach, or perhaps the desire to escape a job that leaves you feeling unfulfilled? Maybe it’s the longing to break free from the shackles of financial worry, a sentiment deeply resonant for those who have experienced financial hardship.

Understanding your core motivations is key to staying the course when faced with challenges along the way. By anchoring your financial goals in your deepest desires and aspirations, you infuse your journey with purpose and resilience. Whether it’s reclaiming your time for cherished hobbies, providing security for your family, or pursuing a passion project, your personal goals serve as the North Star guiding your financial decisions and actions.

Moreover, setting clear and specific goals enables you to chart a course toward financial independence with clarity and determination. As you embark on this transformative journey, remember that your goals are uniquely yours and may evolve over time. Embrace the journey, stay true to your vision, and trust that each step forward brings you closer to the life of freedom and fulfillment you envision.

Make A Plan & Review Regularly

Creating a plan is pivotal in the pursuit of financial independence. It’s the roadmap that guides us toward our goals and ensures we stay on track amidst life’s twists and turns. Understanding why we seek financial freedom lays the groundwork for crafting a plan tailored to our aspirations. The cornerstone of any financial plan is determining the amount needed to achieve our desired level of independence. While the 4% rule is a popular benchmark, its limitations warrant consideration. This rule suggests withdrawing 4% of our portfolio annually, yet its applicability diminishes when considering early retirement or volatile market conditions. According to this rule, if you withdraw 4% of your investment portfolio annually, you have a low risk of running out of money over a 30-year retirement period. By multiplying your annual spending by 25, you can determine your personal FIRE number.

To mitigate such risks, alternative approaches like the 3% (for 40 years) or even 2% (for 50 years) rule offer greater security, albeit requiring a higher investment. These figures may seem daunting, but they provide a buffer against unforeseen circumstances and ensure long-term financial stability. Additionally, it’s crucial to remain flexible and adaptable as life unfolds. Inflation, family obligations, and unexpected expenses are inevitable, necessitating periodic reviews and adjustments to our plan. Based on the average German salary of €49,260/year, the FIRE number would be €1,231,500 with the 4% rule, €1,625,580 with the 3% rule, and €2,463,000 with the 2% rule.

Regularly assessing our progress allows us to course-correct and realign our actions with our objectives. By embracing flexibility and recalibrating our plan as needed, we safeguard our journey toward financial independence, ensuring it remains resilient in the face of life’s complexities.

Budget & Live Below Your Means

Budgeting and living below your means are essential components of achieving financial independence. Upon realizing the substantial gap between our current financial status and the target amount required for retirement, it becomes evident that disciplined financial management is non-negotiable. Whether aiming to accumulate €1.23 million in 10, 20, or 30 years, the numbers are staggering, underscoring the imperative to prioritize savings.

Adhering to the 50-30-20 rule can serve as a practical guideline in this endeavor. Allocating 50% of income to essential expenses like housing and food, 30% to discretionary spending such as dining out or vacations, and reserving the remaining 20% for savings and investments cultivates a balanced approach to wealth accumulation. However, depending on individual circumstances and desired financial goals, allocating 20% to savings may not be sufficient.

In such cases, adopting a more stringent savings plan becomes necessary. By embracing frugality and consciously reducing discretionary expenses, we bolster our savings rate, accelerating our progress toward financial independence. The logic is clear: the more we save, the less we spend, thereby reducing the time required to achieve our financial objectives. Thus, living below our means not only fosters prudent financial habits but also expedites our journey toward financial freedom.

If you wanna FIRe in Germany, feel free to schedule a free meeting with us. We will help you finding the best financial strategy for you.

Increase Your Income & Savings

Our approach to FIRE differs from many others in the community, as we don’t advocate for an overly frugal lifestyle that focuses solely on cutting costs at any expense. Take, for instance, a couple featured in a documentary who scrimped on groceries but splurged on extravagant furniture for their kids. This illustrates a fundamental truth: there are two sides to the financial equation. While cutting small expenses like a daily coffee can contribute to savings, the real game-changer lies in increasing income.

Instead of meticulously tracking every expense or denying oneself simple pleasures like a favorite dish, consider investing that time and energy into advancing your career or starting a side hustle. Elevating your earning potential without inflating your lifestyle is the key to achieving financial freedom. However, if increasing income isn’t feasible, focus on maximizing savings through strategic decisions. For example, switching to a more cost-effective mobile phone provider or leveraging automated savings tools like ING’s Kleingeldsparen can yield significant long-term benefits without sacrificing quality of life. These small adjustments, coupled with a commitment to consistent saving and investing, can propel you closer to your financial goals while still enjoying life’s pleasures.

Reduce High Interest Debt

High-interest debt can be a significant barrier to financial independence, as it drains your resources and stifles wealth-building efforts. Consider the case of an individual burdened with overdraft fees, credit card debt, and personal loans, each accruing exorbitant interest rates of 10% to 15%. These loans, with their steep interest charges, act as anchors, dragging down your financial progress. To achieve true financial freedom, it’s crucial to eliminate these toxic debts as swiftly as possible.

Start by prioritizing the repayment of high-interest debts, such as credit card balances and personal loans. Every dollar spent on interest payments detracts from your ability to save and invest for the future. If feasible, consolidate your debts into a lower-interest personal loan to streamline repayment and reduce overall interest costs. While some financial advisors advocate for a debt-free lifestyle, certain debts, like mortgages for investment properties, can actually accelerate your path to financial freedom.

Consider the case of a client from us who invested €30,000 in a property, yielding a return on equity of over 20%, along with favorable tax benefits. Such investments offer remarkable returns and can serve as powerful wealth-building tools. By strategically managing and leveraging debt, you can optimize your financial journey and expedite your progress towards financial independence. If you need guidance on navigating your financial challenges or crafting a personalized wealth-building strategy, don’t hesitate to reach out for a free meeting.

Build An Emergency Fund

Now that we’ve made strides in living below our means, increasing our income, and eliminating high-interest loans, it’s time to focus on building an emergency fund. This fund serves as a financial safety net, shielding your investments from unexpected expenses that life inevitably throws your way. Whether it’s a broken washing machine or a sudden car repair, having an emergency fund prevents you from dipping into your investments prematurely.

The last thing you want to do during a financial emergency is to sell off your ETFs when the market is down, risking potential losses. Similarly, tapping into your pension prematurely could result in unnecessary taxes and penalties. Moreover, selling off an investment property due to financial strain can have long-term repercussions.

By establishing an emergency fund, you create a buffer against unforeseen circumstances, ensuring that you have the liquidity to weather any financial storm without jeopardizing your long-term financial goals. Aim to build an emergency fund that covers at least three to six months’ worth of living expenses. This fund should be easily accessible, preferably kept in a high-yield savings account or a money market fund. With a robust emergency fund in place, you can face life’s uncertainties with confidence, knowing that your investments remain intact.

Start Investing Now

After diligently following the steps outlined thus far, you’re well on your way to achieving financial independence. Now, it’s time to focus on the final steps: investing your money wisely. By investing strategically, you can amplify your wealth and accelerate your journey towards financial freedom.

One excellent option for investment is ETFs (Exchange-Traded Funds), which offer diversification and potential for long-term growth. Whether held in an investment account for short-term goals or within a pension scheme for tax advantages, ETFs provide an accessible and flexible way to grow your wealth over time.

Additionally, consider real estate investment as part of your portfolio diversification strategy. Real estate assets, when held for the long term, can generate passive income and appreciate in value. Moreover, certain real estate investments, such as properties held for over ten years, qualify for tax-free gains.

By aligning your investment choices with your personalized financial freedom plan, you can ensure that your investment strategy reflects your unique circumstances and goals. Avoid the temptation to blindly follow generic advice from online forums or social media platforms. Instead, leverage your understanding of your financial journey to make informed investment decisions that will propel you closer to your goal of financial independence.

Diversify Your Portfolio

Diversifying your portfolio is essential for long-term investment success. While the internet may advocate for a one-size-fits-all approach, we offer a different perspective. We believe in the power of diversification, spreading your investments across various assets rather than relying on a single ETF or investment vehicle. This strategy mitigates risk and increases the likelihood of achieving consistent returns over time.

In the volatile world of investing, no one can predict the future or pinpoint the best-performing asset. However, by diversifying, you can hedge against market fluctuations and minimize the impact of individual asset underperformance. Rather than gambling everything on a single investment, diversification allows you to spread your risk and potentially enhance your overall portfolio performance.

Whether it’s stocks, bonds, real estate, or alternative assets, diversifying your portfolio ensures that you’re not overly exposed to any single asset class or market sector. By embracing diversification, you can navigate market uncertainties with confidence, knowing that your investments are well-positioned to weather various economic conditions.

In summary, diversification is the cornerstone of prudent investing. By adopting a diversified portfolio approach, you can enhance your investment resilience and increase your chances of long-term financial success.


In conclusion, achieving financial independence is a journey that requires dedication, discipline, and perseverance. It’s not a quick fix or an overnight success story touted by social media. Instead, it’s the culmination of hard work and determination over many years. However, the rewards are immense, and the journey is worth every step.

By understanding your motivations and following a clear plan, you can navigate the path to financial freedom with confidence. Whether you’re just starting or well on your way, knowing the steps to take empowers you to make informed decisions and stay focused on your goals.

We hope this article has provided valuable insights and practical strategies to help you on your financial independence journey. Remember, progress may be gradual, but every step forward brings you closer to your goal. Keep pushing forward, stay committed, and we look forward to seeing you achieve financial freedom. If you need help on your journey, feel free to book a free meeting with us.

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