Thinking of joining the FIRE movement?

FIRE is an acronym for Financial Independence, Retire Early and describes a lifestyle of frugal living, investing and intense saving in order to kick up your heels as early as your 30s or 40s.

According to Investopedia, the idea stemmed from the 1992 book Your Money or Your Life in the US, with the movement also generating a steady following in Australia.

There are websites like Aussie Firebug and FI Explorer where the bloggers detail their journey to financial independence.

Aussie Firebugs definition of Financial Independence is having assets that produce an income which you can live off.

It involves investing, whether thats in low-risk options like index funds or in shares and real estate. And it means growing your assets as early as you can and letting compound interest the 8th wonder of the world as per Albert Einstein work its magic.

Other elements of financial independence include saving around 25 times your annual expenses and only withdrawing small amounts of money around 3% to 4% a year.

The Retire Early aspect doesnt always mean hanging up your work boots altogether by the time youre in your 40s. For the Aussie Firebug, it means youre no longer chained to the rat race and are instead free to pursue what youre truly passionate about regardless of being paid.

One of the key elements of the FIRE lifestyle is to have your money work for you and not the other way around. Its designed to give you the freedom to spend your time and money how you would like to.

While some may see the elements of extreme saving as something that reduces the fun and leisure activities you have, Michelle Ives, founder of the blog That Girl On Fire, believes its about being smart and intentional with your finances.

The ideas in the FIRE movement can help you with budgeting, curbing your spending and getting control of your finances.

While you may develop a system for saving and investing, there could be unexpected expenses you get hit with down the track. Plus, your investments may not give you the best returns.

There are also debts you may have to take care of when going on this journey so its important to have a plan.

If you stop working cold turkey and retire, you may be left with questions around what to do with all the extra time you have. But if you decide to reenter the workforce later down the track, you may have to consider ways to retrain or upskill if needed.

Then theres the element of extreme saving which could affect the kind of life you want to live now. You may have to forgo some of the things you like, whether its a holiday trip or a new pair of shoes, for the kind of life you want in the future.

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Should you join the FIRE movement? Heres what's involved in the intense saving lifestyle - Business Insider Australia