Financially Independent Retire Early (FIRE): 2023 Complete Guide

FIRE movement is intriguing if you are tired of being stuck in the rat race and want to work towards personal pursuits that offer fulfillment. FIRE makes you think beyond the norm – work for 30 years and then retire at 60.

Apart from that, you also likely value health and emotional/mental well-being more now, having accumulated certain level of wealth over the years.

financial independence retire early

Life philosophy standpoint, you may also prefer minimalism instead of bigger houses and bigger cars.

FIRE provides a useful blueprint for planning. A sustainable investment strategy coupled with a good financial plan is the key to growing your net worth to provide passive cashflows in the future

In this Financially Independent Retire Early guide, I am going to pull the curtains back on what I learned from my clients similar like you who have ‘been there done that’, so you:

  • can focus on things that make sense and work for you
  • can safely ignore the things that don’t move the needle, and
  • avoid the mistakes or missteps made by others
wise man learn from other mistakes

FIRE movement Explained

It has nothing to do with lighting up a fire but instead, it’s an acronym for Financial Independence, Retire Early. Embracing the FIRE movements means you live a frugal lifestyle with minimal frivolous purchases.

You aggressively save and invest more than 50% of your income, so you can have the option retire in your late 30s or 40s.

People resonate with to FIRE because they don’t want to wait until they are 60 to live a life of leisure. Attaining FIRE can also mean having the time & location freedom to pursue interests or passion projects without needing to rely on a full-time job.

Read more about the investment options you have here. Practically, your investment returns would come from combination of investment asset classes.

How to Estimate your Number to Attain FIRE

Method 1: The 25 Multiplier Rule

With the simplified rule of 25 multiplier, you are to accumulate 25 times your yearly living expenses and financial commitments.

For example, 5000/month multiply by 12, and you’ll have your yearly expenses of 60,000.

The 60,000 yearly expenditure is then multiplied by 25 to reach your FIRE figure, that is 1.5 million

FIRE Number = Annual Expenses x 25

In other words, your FIRE number is the total amount of investable assets you want to accumulate before you can quit your job before 60 and subsist solely on cashflows from investment portfolio.

Method 2: The 4% Rule

The 4% rule allows a retired active income earner to withdraw 4% of their retirement portfolio per year, adjusted for inflation, without running out of money for 30 years. That is assuming the portfolio generates at least that much percentage in average yearly investment returns.

This way, it is unlikely to diminish the portfolio too soon before the mortality age. If you have reached this level, you can consider yourself financially independent, with any form of employment or work now optional instead of necessary.

For example, your retirement nest egg is 2 mil at the start of your retirement. That means, you cannot deplete more than 80,000 of that in the 1st year.

You start with 1.92 mil in the 2nd year, plus whatever additional investment returns you generate from the 1st year, say 50,000. Let’s assume that is 1.97 million, so now the 4% withdrawal is from that 1.97 million.

However, the downside of this method is that if retirement years or non-active-income-generation years last more than 30 years, this method will very likely be insufficient to meet your financial needs.

Both of the methods above do not account for you paying for big ticket items (planned or unplanned). That is why they are good estimates to start but you cannot take the FIRE figure at face value. Seeking professional advice from an independent financial advisor may help you uncover the financial risk you may have overlooked and how to mitigate them.

Mathematical formulas are great in theory – but we know real life works out differently. Things can start to fall apart when you are faced with unexpected big-ticket expenses, for example-
Suddenly being financially responsible for another dependent – a child, or parent, or when you are retrenched or become incapacitated?

Type of FIRE – Financial Independence Retire Early

Your FIRE number changes based on the FIRE approach that best suits you. See each of the 4 flavors of FIRE in more detail.

  • Fat FIRE: This means you live a typical lifestyle as if you were still on active income. It usually allows for luxuries like fancy meals, holidays and gadgets depending on affordability.
  • Lean FIRE: The opposite of Fat FIRE, means you follow a minimalist lifestyle with little expenditure and extreme savings. You can achieve this when if you have saved and invested 25 times your annual expenses while also spending less than the average person.
  • Barista FIRE: This means you do not work in a regular 9-to-5 job, but do work in some capacity, perhaps on a part-time basis to cover necessary expenses. This delays the need to deplete your FIRE/retirement fund.
  • Cruise FIRE: This means you have a full time or part-time job, but have already saved up enough to fund your retirement and living expenses (thanks to passive dividends, interests, rental etc), enabling you to “cruise” towards retirement.

The Problems with most Financially Independent Retire Early guides in Malaysia

Don’t get me wrong, those are really good write-ups to heighten the awareness and on the importance of good personal finance management to achieve financial freedom or early retirement.

The issues though, is the lack of actionable information or advice you can use, for the reasons below:

Problem #1: Over-emphasizing on investing to get there

It is not about getting that big wins (like spotting multibagger stocks or invest in property using loan compression) –
it is about building assets that generate consistent income to sustain your desired lifestyle.

The keyword here is consistent – the fact is, finding consistent income amidst a volatile economic landscape means you must be knowledgeable and flexible enough to re-allocate your investment portfolio (assets) from time to time.
It is about adapting to new norms or economic trends, otherwise, your income will not stay forever consistent in the next decade.

the only constant is change

After all, the only constant is change.

And know this – income generating asset(s) does not necessarily have to be constrained to a stocks/bonds/property portfolio.
You, yourself is a potent income generating asset more than any other asset class.

Problem #2: Your circumstances are unique & different.

Some people may achieve FI/RE faster because they are in traditionally high-earning industry like tech or oil & gas.

First step to achieve F.I.R.E – Getting OUT of Middle Class (Watch below:)

Some people may also enjoy these privileges which you do not:

  • Staying with parents in his/her family home (zero rent)
  • Single and/or no plan to have children if married
  • Parents are not financially dependent on him/her
  • No need to provide financial support to younger siblings
  • Have zero financial commitment (no mortgages, car loan etc)
  • Has got great head start in life via a huge inheritance or windfall

There is no need to be enchanted by stories of some random dude born with privileges you don’t possess and beat yourself out of it.

Moreover, it is just ludicrous to feel like you are lagging behind when some single 35 years old dude living with his parents, shows how his 1 mil stocks portfolio generates RM 50k passive dividend income.

You are likely doing already your best with what you have now and are ahead in life in your own way.

Give yourself a pat on the back when you are already working hard to support your own family and maybe your parents (aka sandwich generation). You know your priorities; that achieving Financially Independent, Retire Early goal is just something you must put off for now to be revisited later.

Stop comparing your Chapter 5 with the other guy’s Chapter 7 when you are not even reading the same book.
You could be in Chapter 5 but 200 pages done compared to the other guy’s Chapter 7 but only has gotten 80 pages completed.

In my opinion, you cannot get to a point where you declare Financially Independent, Retire Early victory without having the life experience of raising children with your spouse* or owning and paying off a home or tried out any ventures that tickles your interest.

Depriving ourselves of these unique life experience just doesn’t strike a chord with me – it is depressing to think about achieving financial freedom at age 35 but then you die at age 38 (like Brunei’s Prince Azim), without experiencing the joy of becoming a father or mother.

*[although I respect couples who consciously decided not to become parents]

Life is also too short to force yourself to work in a job you hate just for the sake of achieving Financially Independent, Retire Early (FIRE).

Financial independence to full experience life
Live in the Present but Plan for the Future

After all, no one ever said on their deathbed ‘I wish I’d work harder to achieve FIRE.’ agree?
People on the brink of passing away thinks about what are the things they thought they could have done but did not go all the way doing it.
My advice is this: ensure your endeavor to achieve Financially Independent Retire Early does not come at the expenses of accumulating regrets along the way!

Money, after all, is a mean to an end. You cannot enjoy having money by itself – after all, it cannot make you full or give you warmth or shelter you from harm.
But you can definitely satisfy yourself with the best food, warmth, comfort and luxurious shelter to fully experience what life has to offer by exchanging the money you have with those.

Problem #3: Sample size of one

From my experience as independent financial adviser, people who truly become Financially Free, Retire Early (like some of my clients here) don’t go around telling people how they did it.

They either keep to themselves or still working in their career or business because they enjoy doing that (not because they have to) instead of just sitting at home watching the grass grow or binging on Netflix.

Even if they are willing to share with you in person the steps they took to achieve FI/RE, you are likely to discard most of the ‘tips and tricks’ because it is not relevant to you.

However, after consulting for and listening from hundreds of my clients, I reckon I have a sizeable database of strategies that could work in favor for my future clients.


Here’s an analogy.

Imagine I am the person between you and the herbs storage in a Chinese medical hall.
The more you shared with me what is your current condition and what you want to do, the better I can come up with a concoction that is suited to make you better.

And no, you don’t have to be critically ill, that’s why I did not use the pharmacist and drug analogy as traditional medicine is also about improving well being and make a healthy you even healthier.

The other problem is the consumerism distractions you face everyday on your path to financial independence, retire early.

The truth is – we live in a world of spending and instant gratification. Buying the latest iPhone or joining that gym membership all cost money. Not everyone can stand grinding 7 days a week and put a hold on spending.

Moreover, FIRE can be unattainable for people living in countries with a stark wealth inequality. Achieving even modest financial goals can be impractical if you are earning a low or below middle-income salary level.

Saving & Investing is often misunderstood in Financially Independent Retire Early (FIRE) movement

Say you earn RM 4,000 now in a job with little career progression

…and you spend all your time and energy reducing your expenses (like maximizing your credit card cash rebates) and learning the ropes of investing in stocks or property.

However, if you are earning RM 4,000 gross salary as a single income family, staying and working in the middle of KL, how much can you realistically save and invest?

You get my point.

If your salary is relatively low, you should NOT focus on saving and investing.

A 20% saving rate (which is very commendable already) is circa RM 800 but that is less than 10k per year.

On the other hand, if you are actively seeking for industry and positions with better prospects of fast career progression trajectory, you could be on fast track to be Financially Independent, Retire Early.

Sometimes that could mean using currency arbitrage strategy, which really is nothing complicated. A lot of Malaysians are already doing it by working in neighboring Singapore. You could get paid SGD 4,000 doing the same job scope in Malaysia for MYR 4,000.

If your income is 3 times more, in this example, RM 12,000, even a 10% saving rate gets your more mileage (RM 1,200). That is 50% more than RM 800.

For the ambitious, they will also attempt to use Borrowings to get to their Financially Independent Retire Early goals faster. But just like a double-edged sword, it could hurt help you or hurt you.

…which is why you see more younger people who took dumb risk to fast track to FIRE end up like what mentioned in the article below.

Do not get me wrong, loans are good, after all, loans are assets in banks’ balance sheet.

The main hurdle is whether you can use ‘other people’s money’ (like bank’s borrowings) effectively to generate return which exceed the interests charged by the lender.

FIRE warms and consumes

For instance, people say credit card or personal loan is bad. It is NOT if you can confidently and consistently generate more than 18% per year return on the amount borrowed – which is most likely from business profits.

You will be hard pressed to obtain that kind of return from stocks investing – it does happen (like how I get 600% return from this stocks, below) but it is rare.

See how different is my perspective from other FIRE guides you read?

Related: how to solve loan rejection issues due to credit rating (CCRIS)

Don’t use leverage (aka borrow money) to invest if you don’t know how to master it, otherwise that is like knowing how to start a car engine but have not learned how to actually drive a car.

Truth be told, using the investing approach alone to stay in a perpetual financial independence state means you need to always be monitoring:

  • The income generated from your assets is keeping pace or growing
  • The valuation of that assets should not be depreciating

It is definitely not as passive as people thought…

…and furthermore, financial independence or early retirement is just a milestone, not the end destination.

Obsessing over lifestyle expenses will NOT get you anywhere near your Financially Independent Retire Early (FIRE) goal

Cutting back is easiest to do but has its limit because you can only cut down to zero, aka not spending a single cent from your income ~ which is ridiculous.

Furthermore, cutting back psychologically put you in a scarcity mindset. (can you imagine how depressing it is for a Starbucks lover to skimp on Starbucks for the sake of FI/RE?)

Plus, unexpected expenses can easily offset or negate your planned savings. After all, life always has ways to throw you a curveball.

I wholeheartedly agree with Mr Stingy over here that

Life is not meant to be lived in extreme frugality and suppressing desires

Instead of focusing your energy on ways to cut corners in every aspect of your life (which may lead to lower quality of life),

Focus on making more money via part time side business or gig without letting it detracts you from your main income generating activity.

In an increasingly online and connected world, this is not hard at all if you think outside the box.

I will give you not one, not two but 8 ideas where and how to start – and these can be done from home without investment or even initial capital.

Watch the video below.

In the process, you may even discover your IKIGAI – and that, in my opinion, is the highest level of life fulfillment that is even better than FIRE yet realistically achievable for most people

ikigai financial independence FIRE

Why Earning ability is under-rated in Financially Independent Retire Early (FIRE) movement

Frankly I have not encounter anyone so far who has achieved financial independence or retired early or both with a meager income.

On the contrary, everyone I know whom had achieved some level of financial independence used to earn or is still earning at least 5 figures monthly income.

That is the main ingredient that most people don’t talk about; even financial planners are unable to tell you this because they don’t know how to teach you to earn more.

Me? I can. Which is why you should watch the video below.

The other revelation I want to share with you is this:

If you ask people who had become Financially Independent, Retired Early, what’s next after financial independence or early retirement, they would tell you something along this:

I am now striving for Financial Confidence to ensure Financial Security for my family is as Indestructible as possible no matter what happens in the future.

That for me, is not unlike building sufficient Moat or Margin of Safety in Value Investing.

Even if you have stopped working for someone or in your business, my advice is – do not let your honed skills rot away.
Most of the time, if you look hard enough, you can pivot your high income skills or relearn a new skill to build a side or additional income stream. It also keeps your mind and body active and occupied. Besides, you can really look for opportunities to diversify into passive income stream too. Watch a lesson on Passive Income below.

Another point why you should focus on acquiring or developing high income skill is this – let me ask you:

Is it easier to build up a 500k investment portfolio that that generates RM 40,000 of annual dividend passive income OR
Is it easier to horn a skill that make you an extra RM 40,000 per year or RM 3,300 per month?

Once you are a high earner, then it is just a matter of keeping your expenses under control and maintain a decent savings plus investing rate. Keep the momentum going until it becomes like a second habit. See how most people got it the other way round (which is wrong)?

Watch the video below on High Income Skill.

Just don’t end up as HENRYhigh earner, not rich yet, a new age acronym for high earning individuals with high spending, zero savings and possibly in debt.

If you are a HENRY living in metropolitan cities like KL, know that you are the most vulnerable, prime target for most products and services out there.
I will not be surprised if your bank account is just a transit point for your money and you don’t meaningful growth – because you are bombarded by the many temptations out there which is designed to make you happy today at the expenses of your future Financially Independent Retire Early goals in the future.

Marketers believe that HENRYs are more likely to be aspirational buyers, meaning that they are starting to purchase the trappings of the lifestyle they one day hope to be able to fully afford.

Many professionals, including lawyers, doctors, dentists and so on, have the potential to be HENRYs due to the income range for their professions. The fact that much of their future wealth is projected off of a six-figure income rather than income generating assets makes the HENRYs the “working rich”, meaning they won’t be as rich if they stop working.

More of a HENRYs income go into living costs than go into wealth building investments, leaving them feeling like they are more like regular people slaving for a paycheck like the B40 or M40 in Malaysia despite the fact they are in the T20 income bracket.

The Math of Financially Independent Retire Early (FIRE) is over-simplified

I am generally skeptical of this high-end-side of the FI/RE’s ‘rule of thumb’ to officially declare you are financially independent:

Net Worth = 25x or 30x of your annual expenses.

Rather, I agree more with the low side of this FI/RE’s ‘rule of thumb’ – passive income that is sufficient to cover your monthly expenses.

The numbers as you can see here make sense but…

The truth is – your spending needs and wants needs to be reviewed every year or when there is major change in your financial situation.

The second revelation you must know is that you do NOT need to tick both milestones above to feel financially free.

Case in point, have you ever meet a civil servant pensioner in Malaysia with low net worth feeling more carefree than a retired professional having 2 million net worth?
I have. So that is why I am more supportive of the low-end spectrum of FIRE’s rule of thumb – cash flows that is continuously able to cover your sustenance expenses.

From practical experience as an independent financial advisor, there’s no “one size fits all” number because the question of ‘how much is enough’ never remains static in different stages of life.

And that is amidst the lower risk-free rate (fixed deposit, government bond coupons) and change in global economic and political landscape, which could upend even traditionally resilient business, literally overnight (like the 2020 pandemic).

In short, there are so many variables at play here. And those variables are moving targets.

Even if we were to observe households with similar income, their financial goals are vastly different when it comes to big ticket items like children’s education, home purchase or dream vacations. These costs have not been accounted for in the the calculation of “annual expenses to be a FIRE achiever”.

What’s more, if you only possess once source of income (active or passive, regardless of how high it is), you are one step away from poverty.

Financially Independent Retire Early (FIRE): 2023 Complete Guide by CF Lieu - Certified Financial Planner Malaysia

If you stop generating active income but solely dependent on your investment income to maintain your financial independence status,

…then you are also in a very dangerous place because you are solely dependent on something that is dynamic to give you something that is fixed.

What’s dynamic: the market that changes daily

What you need that’s fixed: Living expenses (it even increases in long term due to inflation).

As I said, the next level, after achieving Financial Independence, is to keep on building that Financial Confidence and Financial Security by having multiple streams of income.

passive income in USD from affiliate marketing
Example of one of my Passive Income in USD

Do not over-analyze the math to be Financially Independent Retire Early; instead over-emphasize on how to generate diversified income streams that is aligned to your skills, interests and values, income streams which are not correlated with each other or swayed to the extremes by the ever-changing economic & political landscape (yes, it is quite a mouthful, but do digest this)

What really is and matters to achieve the Financial Independence Retire Early (FIRE) Hall of Fame

1) It is all hard work and no shortcut to get there

There are no exceptions (and no shame ) to working your ass off (blood, sweat and tears) in the beginning to earn active income,

…then know your Big Why so that that you get that persistent motivation, willpower and discipline to stick to your Early Retirement, Financial Freedom plan…

jocko willink discipline equals freedom
JOCKO WILLINK is a decorated retired Navy SEAL officer, author of the book Extreme Ownership: How U.S. Navy SEALs Lead and Win

…at the same having the wisdom to know that some things cannot be rushed – like having the patience to let time does its magic compounding power in investing.

buffett baby in one month by nine women pregnant

2) Things do not suddenly become rosy once you become Financially Independent

Irony is, after you get to the first part of FI/RE, which is FI (Financially Independent) but you don’t really want to RE (Retire Early).

Personal experience.

For people who are stuck in 9 to 5 rut, they may turn green with envy when I tell them I used to go to my regular movie session on Wednesday afternoons without needing to answer to anyone.

Do that a few more times and you realize the feeling is meh, some more you feel unproductive (sometimes guilty) and you realize you find more pleasure working (because I love what I do).

You thought you will feel ‘liberated’ but that feeling is fleeting, which is true because my mentor told me this before:

goals never feel the same when you achieve it

Once you reach your destination, it isn’t always what you think you’d feel.

The exact same reason billionaires like Zuck, Gates and Bezos, who are technically Ultra Financially Independent and Retired Early by any measure, never just sit around watching the grass grows.

Human beings are purposeful creatures. The only people who wants to achieve Financial Independence Retire Early for the sake of achieving it with nothing in mind what to do next, are the ones who hate their jobs and have (not) figured out their purpose in life. Watch as I explain below.

Purposeful Financially Independent, Retire Early people keep their skill and income generating asset (be it business or investment) at tip top shape.

Another irony – people who are desperately chasing after Financially Independent Retire Early (FIRE) are the people who will never achieve it.

Think of FI/RE like butterfly in the happiness analogy below. You keep your Financially Independent Retire Early goal at the back of your head in everything you do, but do not obsess over it. In no time, if you make more right moves than the wrong ones*, you will attract FI/RE to come to you.

happiness and FIRE like butterfly

*avoiding major financial mistakes is one of the main reason our clients first engaged us for fee-based advisory sessions. See our clients’ testimonials here.

Because our clients came to realize, in the journey of attaining Financial Independence or Early retirement in a world of information overload, data and knowledge alone can only get you so far.

Financially Independent Retire Early (FIRE): 2023 Complete Guide by CF Lieu - Certified Financial Planner Malaysia

3) You Work Harder to Maintain FIRE as long as you could

The truth is – people who truly achieved Financial Independence never brags about it or seek validation by showing the world “I’ve done it”.

Rather, you start to think –

“how can I become even more ‘FIRE’ by building extra layers of Financial Security for myself and dependents, if any?”

If you think getting to a state where you feel Financially Independent, Retire Early is hard, wait until you actually got there.

You will soon discover the more you know, the more you don’t know.

The more you achieved, the more you got to protect and preserve it.

Financially Independent Retire Early (FIRE): 2023 Complete Guide by CF Lieu - Certified Financial Planner Malaysia

Maintaining and keeping in order all the assets that gets you to FIRE has more moving parts than you think.

This also has to do with psychology. Let me explain why is this so –

When you are getting to that Financially Independent Retire Early (FIRE) target, you have everything to gain.
However, when FIRE is already in your hands, you have everything to lose, so you will take more time and effort to stay there…
…because it just plain sucks if you make one blunder that cause you to lose your attained financial independence.
(Even as times passes, you vividly remembers the long arduous journey to get where you are, so you don’t want to go through that again – the feeling of NOT Financially Independent)

Lastly, if really irreversible shit happens, that made you feel less financially free (after achieving financial independence, that is), you can still use currency arbitrage strategy to maintain your desired lifestyle by moving to a city or country with lower living expenses or weaker currency.

Make sense?


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