FIRE Movement

Financial Independence & Retire Early (FIRE):

What It Is:

A financial lifestyle strategy aimed at achieving early retirement by saving and investing a high percentage of income to gain financial freedom.

Key Terms:

Concept: A lifestyle movement focused on achieving financial independence early through aggressive saving, investing, and frugal living
Savings Rate: Typically 50–70% of income saved and invested to accelerate wealth accumulation
Investment Strategy: Prioritizes low-cost index funds, passive income sources, and diversified portfolios for long-term growth
Withdrawal Rule: The “4% rule” is commonly used; withdraw 4% of portfolio annually to cover living expenses post-retirement
Goal: Achieve a self-sustaining investment corpus that covers expenses indefinitely, enabling early retirement or flexible work

Key Features:

Focus on financial discipline, minimalism, passive income generation, and compound growth
Challenges conventional work-retirement norms
Focuses on intentional spending, mindful consumption, and aligning expenses with personal values

Benefits:

Early control over time and career
Freedom from financial stress
Flexibility to pursue personal goals and passions
Encourages smart money management, budgeting, and investment discipline
Enables location flexibility, part-time work, or passion projects without financial stress

Limitations:

Requires extreme savings and delayed gratification
Vulnerable to market volatility
Healthcare and inflation risks if retiring too early
Strict budgeting and high savings can reduce social activities and quality of life in early years
Market downturns, inflation, or rising living costs can disrupt withdrawal plans

Types Of FIRE:

Lean FIRE
Fat FIRE
Barista FIRE
Coast FIRE
Slow FIRE

Best For:

Individuals with strong financial discipline and high savings potential seeking time freedom and independence from traditional employment.

Historical Note:

The FIRE movement gained traction after the 1992 book “Your Money or Your Life” by Joe Dominguez and Vicki Robin, which inspired a generation to rethink traditional retirement.

Types of Fire – Comparison:

Feature	Lean	Barista	Fat	Coast	Slow
What It Is	Financial independence with minimal expenses and frugal living	Partial independence; part-time or low-stress work covers expenses	Financial freedom with a comfortable or luxury lifestyle	Save and invest early, then let compounding grow wealth	Gradual path to FIRE with moderate pace
Lifestyle	Minimalist; focuses on cutting costs and needs	Balanced — part-time work adds flexibility	Comfortable lifestyle with higher spending	Moderate lifestyle — work choice becomes flexible	Steady and balanced approach without extremes
Savings Rate	High (60–70% of income)	Moderate (20–40%) as part-time work continues	Flexible (40–60%), with focus on income growth	High early, minimal later	Moderate; steady savings
Ideal Income Level	Suits low-to-mid earners practicing strict budgeting	Fits mid earners seeking balance	Best for high earners maintaining luxury lifestyle	Works for early savers with stable income	For steady earners preferring patience
Retirement Age	30s–40s through aggressive saving	Flexible — semi-retire in 40s–50s	40s–50s with large corpus	Traditional or slightly early (50s)	50s–60s
Risk Level	High — minimal buffer for shocks	Low–moderate — ongoing income helps	Moderate — larger corpus cushion	Moderate — early returns reduce strain	Low — gradual path
Best For	Frugal individuals, conservative savers valuing freedom	People seeking work-life balance	High earners wanting comfort early	Early planners confident in compounding	Individuals preferring steady growth

TAX LOSS HARVESTING

What It Is:

A strategy where investors sell loss-making securities to offset capital gains and reduce tax liability.

Key Terms:

1. Capital Gains Offset: Losses can offset short- and long-term gains, lowering taxable income
2. Reinvestment: Proceeds are reinvested in similar assets to maintain portfolio balance
3. Wash Sale Rule: Disallows tax benefit if the same or similar security is repurchased within 30 days
4. Carry Forward: Unused losses can be carried forward to offset future gains
5. Timing: Most effective towards year-end for tax planning and portfolio rebalancing

Key Features:

Realizes intentional losses to offset gains
Helps in tax optimization and rebalancing
Governed by capital gains tax rules
Subject to wash sale restrictions

Benefits:

Reduces tax burden
Enhances post-tax returns
Maintains investment exposure through reinvestment
Allows carry forward of losses for future years

Limitations:

Requires careful tracking and documentation
Subject to wash sale rules
Not effective in tax-exempt accounts
Short-term reinvestment risks due to market timing

Types:

Can be applied to stocks, mutual funds, ETFs, and bonds held in taxable accounts

Best For:

Active or high-income investors with significant capital gains seeking tax-efficient portfolio management without altering core investments

Tax Strategy:

Indian investors often use this strategy before March 31 to reduce capital gains tax on stocks and mutual funds.

CAPITAL GAINS

What It Is:

Profit realized when a capital asset is sold at a price higher than its purchase cost.

Key Terms:

Definition: Profit earned from the sale of a capital asset such as equity, mutual funds, real estate, or bonds
Types: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) based on the holding period of the asset
Holding Period: Equity >12 months; Debt funds – taxed as per slab (no LTCG benefit); Real estate >24 months
Taxation: STCG on equity @15%; LTCG on equity @12.5% above ₹1.25 lakh (no indexation); Debt funds – as per slab; Real estate – 20% with indexation
Exemptions: Available under Sections 54, 54EC, and 54F for reinvestment in specified assets
Reporting: Must be disclosed in ITR under ‘Capital Gains’ schedule

Key Features:

Classified as short-term or long-term based on holding period
Taxable under Income Tax Act with specific rates
Eligible for indexation benefit to adjust for inflation
Arises across multiple asset classes—equity, property, mutual funds, bonds

Benefits:

Enables long-term wealth accumulation through asset appreciation
Tax exemptions under Sections 54/54EC/54F reduce liability
Encourages reinvestment into productive assets
Promotes financial discipline and portfolio growth

Limitations:

Subject to market and price volatility
Tax payable only on realization, impacting liquidity
Requires detailed documentation and ITR compliance
Limited exemption avenues and changing tax laws may affect returns

Types:

Short-Term Capital Gains (STCG)
Long-Term Capital Gains (LTCG)

Best For:

Investors aiming for capital appreciation and willing to manage tax implications efficiently

Tax-Saving Tip:

If you invest your capital gains in government-specified bonds (Section 54EC) within 6 months of sale, you can save up to ₹50 lakh in taxes — a smart move for conservative investors!

Capital Gains Tax Limits for STCG and LTCG:

Asset Type	Short-Term Capital Gains (STCG)	Long-Term Capital Gains (LTCG)	Condition
Equity Shares & Mutual Funds	20% under Section 111A if STT paid; holding ≤ 12 months	12.5% on gains > ₹1.25 lakh; holding > 12 months	No STT must be paid at purchase and sale; LTCG up to ₹1.25 lakh exempt per FY
Debt Mutual Funds / Bonds	Taxed as per individual’s income slab; holding ≤ 36 months	12.5% (no indexation) if holding > 36 months under Section 112	Indexation benefit removed from FY 2024–25
Real Estate / Property	Taxed as per income slab; holding ≤ 24 months	Lower of 20% with indexation / 12.5% without indexation if acquired before 23 Jul 2024; else 12.5% no indexation	Exemptions under Sections 54, 54EC, 54F available for reinvestment
Gold / Jewellery	Taxed as per income slab; holding ≤ 36 months	12.5% (no indexation) if sold after 23 Jul 2024; else 20% with indexation (old regime)	Treated as capital asset; proof of acquisition value important
Unlisted Shares	Taxed as per income slab; holding ≤ 24 months	12.5% without indexation if holding > 24 months	For non-residents, 12.5% applies without considering foreign exchange fluctuation

FIRE Movement

Financial Independence & Retire Early (FIRE):

What It Is:

Key Terms:

Key Features:

Benefits:

Limitations:

Types Of FIRE:

Best For:

Historical Note:

Types of Fire – Comparison:

TAX LOSS HARVESTING

What It Is:

Key Terms:

Key Features:

Benefits:

Limitations:

Types:

Best For:

Tax Strategy:

CAPITAL GAINS

What It Is:

Key Terms:

Key Features:

Benefits:

Limitations:

Types:

Best For:

Tax-Saving Tip:

Capital Gains Tax Limits for STCG and LTCG:

Famli

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FIRE Movement

Financial Independence & Retire Early (FIRE):

What It Is:

Key Terms:

Key Features:

Benefits:

Limitations:

Types Of FIRE:

Best For:

Historical Note:

Types of Fire – Comparison:

TAX LOSS HARVESTING

What It Is:

Key Terms:

Key Features:

Benefits:

Limitations:

Types:

Best For:

Tax Strategy:

CAPITAL GAINS

What It Is:

Key Terms:

Key Features:

Benefits:

Limitations:

Types:

Best For:

Tax-Saving Tip:

Capital Gains Tax Limits for STCG and LTCG:

Famli

We are launching for beta customers soon and would love your feedback.

Quick Links

Glossary

Contact Info