The Difference Between FIRE and FILE (and Which Is Right for You)

The FIRE (Financial Independence, Retire Early) movement has gained significant traction in recent years, inspiring many to double down on saving and investing with the goal of being able to retire decades before the traditional retirement age. However, an alternative approach called FILE (Financial Independence, Live Early) has now emerged for those who don’t necessarily want to retire completely, but still crave more flexibility and freedom in their lives.

Understanding FIRE

At its core, FIRE is about aggressively saving and investing as much as possible, often upwards of 50-70% of income, to be able to leave the workforce and maintain your lifestyle through investment returns alone. FIRE adherents typically aim to reach financial independence and have the option to retire by their 40s or 50s.

The FIRE mindset treats work sort of like an on/off switch—you either continue on the daily grind of full-time employment to fund your lifestyle, or you yank that ripcord and retire once you’ve amassed enough investments to cover your living expenses for life. Many are drawn to FIRE as an escape from the daily 9-to-5 and ability to pursue other interests and passions.

What is FILE?

FILE shares the same fundamental goal as FIRE: Reach a point of financial independence where your investment income can cover your desired lifestyle expenses. However, instead of fully retiring, the focus is on creating more flexibility and breathing room in your life.

Rather than an on/off switch of working or not working, FILE treats work more like a dimmer switch. The idea is to scale back to part-time work, transition to your own business or consulting, or simply have a financial runway to take extended career breaks without being tethered to a job for the paycheck.

Proponents of FILE still save and invest diligently, but may have lower “financial independence” target number than FIRE adherents, since they plan to continue earning some income. The “Live Early” aspect refers to having the ability to live more freely on your own terms well before traditional retirement age, rather than having to entirely retire.

Which approach is right for you?

Both FIRE and FILE require upfront sacrifice through reducing expenses and boosting savings rates in your wealth-accumulating years. Your savings target and investing horizon will ultimately determine which path makes more sense.

FIRE may be a better fit if you truly have a strong desire to fully retire from the workforce as soon as possible. But if you still want to stay engaged in some form of work or entrepreneurial pursuits, just with more flexibility and optionality, then FILE could be a good middle ground.

There’s also a range of variation within each approach. Some may use FIRE principles to retire from corporate life by 50, but keep earning income through freelance projects or small businesses. Others may use FILE to slowly transition from full-time to “coasting” on a very modest lifestyle.

The commonality is prioritizing financial independence to live life more on your terms, with or without a traditional paycheck. Your personal lifestyle, interests, and savings discipline will help guide you towards which path is most suitable.