Ready to begin the path or financial freedom but not sure how to get started? We are excited to announce we’ve put together the FIRE ladder, our step-by-step guide to help you turn dumpster fire finances into freedom FIRE. Below, we walk you through each of the eight rungs on your journey to owning your life, not just your stuff, using examples from our own journey. Check this page for updates as we expand content for each of the steps along the way.
(Not sure what the FIRE movement is? Check out our page on Financial Independence, Retire Early.)
Once you’ve visualized your FIRE. ladder, visit our articles and resources for a deeper dive into all aspects of personal, self-employed, and small business finances to help along your journey.
If you have a good idea of where you’re going but need support along the way, join us at the official The Budget Brigade community page and on Instagram. We offer frequent updates and motivators to keep you going, as well as the power of community, which we’ll discuss below. For individualized support, reach out to us to book a session.
Best of luck, we’re rooting for you! When you reach each rung of the FIRE ladder, share your success in our community so we can help you celebrate.
Visit our resources page for a free one-page quick reference PDF downloadable of the FIRE ladder.
The Budget Brigade Presents: The FIRE Ladder
We are huge believers that having a specific goal in mind will help carry you through the floods and the draughts. This will be your motivation – your purpose – for your climb up the FIRE ladder.
This belief comes from our own journey, which is where we try to derive all our content from. We’ll never tell you to do something we haven’t done or didn’t wish we’d done.
So dream with us here. What goal do you want to reach? Where does your FIRE ladder lead?
Do you want a better life than the one you grew up with?
A better relationship with your spouse with fewer fights about money?
Do you want to sleep at night without worrying about how you’re going to pay for groceries or rent next week?
Are you a travel connoisseur, ready to conquer each continent?
Do you want to buy your first house?
Share your goal in our community to put that energy out into the world.
It was when we started dreaming together that we found momentum in our personal finances. This first rung of setting a goal has been the foundation for most of our success.
We said “I do” to the dream of moving across the country to beautiful red rock country before we even said “I do” to each other. We love hiking and traveling and want to ensure we have the funds and flexibility to see the world. That was our first rung when we sat down and developed the FIRE ladder.
We also discussed the goal of mini retirements that tie in with our two big bucket lists:
- Visit all the US national parks
- Visit all fifty states
Let your goal(s) be lofty. This journey is long. We won’t lie: it takes a lot of patience and persistence. Your reason has to be big enough to carry you through the harder seasons and away from the Amazon shopping cart when your great goal demands it.
Once you know your destination, you need a plan on how to get there. This is your budget. The budget is your GPS to success. It keeps you away from dangerous detours and death by dysentery. It also allows you to stop at the world’s largest yarn ball along the Oregon Trail to Willamette Valley.
Being on a budget doesn’t mean you don’t get to enjoy life. It’s simply a reminder that you’re balancing today’s spending with your goals for tomorrow. The budget’s in place to make sure you don’t run out of bullets or clothes along the trail.
One of the biggest mindset shifts we hope you learn on this journey is that you don’t have to spend a ton of money to enjoy your life or this journey. There are plenty of frugal fun options.
In order to set your freedom FIRE ablaze, you have to put out any counterproductive financial dumpster fires already burning. After setting your goal, take the time to assess your current financial situation. The purpose of this rung isn’t to shame you for your past financial mistakes. Instead, you want to analyze where you are along the journey to freedom FIRE. You might find you’re further along than you thought.
If you’re stuck or don’t know where to begin, reach out so we can help you map out your FIRE ladder and corresponding budget.
No one is perfect with their finances. That’s okay! That you’re here means you want to set yourself up for a better future. We’re here to make sure you don’t spend today and all your tomorrows paying for yesterdays’ decisions. So be honest about your situation, but don’t guilt yourself over where your journey starts. Instead, focus on the person you’re ready to become and the goal you want to reach.
If you aren’t sure how to analyze your current situation, we’ve found that calculating your net worth is a great way to get a broad picture.
Your first budget won’t be perfect. Neither will your third. Don’t give up! It takes a few months to get a feel for the flow of your finances, especially if you have an irregular income. We love this rung here at The Budget Brigade. We plan to add articles and resources continually on how to budget. From how to stay on budget, and where to look to add income and cut expenses, we’ve got your covered to help get you from where you are to where you want to be.
The path to financial freedom is paved in potholes. Or, if you’re a sports fan, the best offense is a good defense.
On the third rung of our FIRE ladder, we focus on defense. (De-FENCE. *clap clap* De-FENCE. Okay, I’ll stop now.)
While winning the lottery is less likely than having a toilet related injury, bad financial days and unexpected expenses are a fact of life.
Your water heater will break once winter finally comes.
Your A/C will need a recharge on the hottest day in July. (Or at any time in Florida.)
The toilet you had your injury on will either clog or overflow.
Having an emergency fund in place helps turn these frustrations into inconveniences. Otherwise, they can become forest fires that fan out of control. How much of an emergency fund you need depends on your situation, so check out our emergency fund related articles to learn more.
Insurance can also help safeguard your path to freedom FIRE. While gimmicky insurance is a waste of your money resources (do not buy insurance for your water heater or your toilet), there are certain types of insurance you need. These policies help protect the wealth you’re going to accumulate, as well as your livelihood. Visit our insurance articles to learn more, but key insurances to focus on include:
- Auto insurance
- Disability insurance (depending on your situation)
- Health insurance
- Homeowners insurance (or renters)
- Life insurance (until self-insured)
- Umbrella insurance (once you’ve amassed significant net worth)
When Murphy comes thundering into town and drop-kicks your goals and budget, community can be key. On bad days, whether you overspent on your budget without realizing it or when life just gets hard, you need someone in your corner to shove your mouthpiece back in. Having someone who understands and supports your goals helps you deal with rough patches and gives you motivation to keep climbing the ladder instead of falling off. (Falling off a ladder is a key example where health insurance is important.)
We understand talking about money and personal finances is taboo in today’s culture. The topic can shut down a family function faster than bringing up politics. We’re on a mission to tear down this stigma. We aren’t suggesting you shout your entire debt obligations and dreams out over the congealed cranberry sauce at your Thanksgiving dinner, but we do want you to find a trusted community to share your journey with. Part of the reason Americans are so terrible at handling their finances is we never learn how to. Not at school and, thank to this stigma, not at home or from friends. Let’s work together to change that.
In-person community is great, and I will always prioritize this. We understand, however, if you don’t always have that support available, which is why we created The Budget Brigade’s Facebook community. You’re always welcome to stop by and share your successes and struggles or ask questions. We are here to see you up every rung.
You have your destination. You have your GPS. Defenses are armed and ready. It’s time to shift to the offensive and hit the dumpster fire hard so we can clear the path to freedom FIRE.
We are a huge proponent of a debt-free lifestyle as we’ve lived firsthand the emotional weight lifted when we don’t owe anyone anything. It gives us so much more freedom and flexibility in our actions and decisions.
We don’t think you need to pay off every single debt you have at this stage. We want you to get investing to save for the future, especially if you have a lot of YOLO past you’re still paying for.
On this rung, focus on paying off all high-interest debt. There are different methods, such as the snowball method and the avalanche method, to help tackle debt systematically. We didn’t know about either when we started our FIRE journey, so we used a combination of both. We’ve learned the methods and the benefits of each since, so visit our debt-free section to learn more about which might be the best fit for you.
“High-interest” can be vague and can shift depending on your age, circumstances, and the current economic climate. For instance, I would typically say 8% is high-interest because it’s close to average returns (post-taxes) on investment opportunities. But current 30-yr fixed mortgage rates at the time of this writing are above 8.5%. Paying off your mortgage before you’ve begun any investing is a great way to lose out on a decade or more of compounding growth.
Credit cards, however, are a no brainer. If you are carrying any balance, that debt is gone on this rung of the ladder. You should prioritize high-interest car loans and personal loans here too.
High-income earner will have the luxury of being able to multitask. With more disposable income, they can invest and pay off debt at the same time. Smaller income households will need to focus on one rung at a time. We still want you to start investing before hitting lower interest, high balance debts like mortgages and potentially student loans though.
Debt isn’t the sole focus on this rung. Intentionality is a big part of what we do because it’s allowed us to succeed. In this step, we want you to peel away the obligations in your life that don’t serve your financial or personal goals. This can include a job that doesn’t align with your morals or values and family or friends that don’t support your dreams.
We realize how hard this step is. For some, we also see how it might not be possible in your current situation. Working second shift in hospitality did not serve my career or personal aspirations, but I had bills and debt to pay after graduating college. A girl’s gotta eat, so I did what I needed to in order to survive.
If it’s not financially possible yet, at least strategize your game plan once you’ve tackled some of your debt. The more income you get to keep, the more freedom you have in your choices. And the sooner you can tune out or turn off the toxic or distracting noise, the faster you’ll believe in your own potential for success.
Note on low-interest debt: for debt you are going to tackle further up the ladder on Rung 6 when fueling your future, make sure in the present your minimum payments at least cover the interest accruing. If your minimum payment on any debt is less than the interest amount charged, up the amount you define in your budget to at least shave off some of the principle. Otherwise, your debt will continue to grow and you’ll never make a dent in it.
Congratulations! Once you’ve paid off all your high-interest debt, you have officially shifted from dumpster fire fighting to freedom FIRE building.
The first step of building the future you want is to decide what that future looks like.
Are you sensing a theme? You need at least a general idea of what you want your retirement destination to be so you can build the GPS to get you there.
Do you want to work until Medicare and Social Security benefits kick in?
Do you prefer to retire at 45?
What does retirement actually look like for you? Do you plan not to work at all? Work part time? Volunteer? Work full time but for whatever company or endeavor excites you the most?
When we first started climbing our FIRE ladder, I wanted to be retired at 45 to write full time.
After I took my work sabbatical for my DIY MFA, I quickly learned that spending all day talking to imaginary people in my head was no bueno for my mental health. Now, our freedom FIRE is being able to drop to about $40,000 of household income a year by the time we reach 45. This will give us the flexibility to take mini retirements and chase career opportunities that interest us.
Why is it important to define the rough outline of your freedom FIRE here? Your goals will determine your asset allocation. For us, we want the ability to draw from our savings in our 40s and 50s, well before we’ll be able to touch the vast majority of our retirement assets. This means we have to focus a significant amount of our investing into a taxable brokerage account, outside of retirement plans. It also means we have to save more now than someone planning to work into their 60s or 70s.
For those wanting to work until they receive Social Security and Medicare, tax-advantaged retirement accounts are the name of the game.
Drawing from tax-advantaged accounts such as your 401(K) or IRAs before the defined retirement age can have huge tax implications and carry hefty penalties, so it’s worth the mental exercise to plan ahead before you set your retirement investing and asset allocation strategy.
Once you have an idea where you want your FIRE ladder to extend to, it’s time to save. Different seasons of your life will look different in this avenue. The sooner you put money into retirement, the more opportunity it has to grow with the power of compounding growth. The less time you have to save, the more vigilant you have to be in the amount you’re saving.
Regardless of your particular retirement savings plan, one feature is key across all budgets – consistency. Paying yourself first can help you put most of your saving on autopilot. We’ve seen huge success in our personal finances using this strategy. A 401(K) is a great way to do this if you have an employer-sponsored plan. So is an HSA. Like us, you can have your IRA contributions and your minimum brokerage investing auto draft via ACH at the same time each month, like your retirement is sending you a bill.
The final amount we invest in the brokerage account fluctuates with my irregular self-employed income, so I finalize it on the last day of each month or the first day of the next month. Then I draft it from our bank account. It’s a standard part of our monthly budgeting process, which automates this last part as much as possible.
This is also the time to start considering paying down some of your low-interest debt. Once you’re comfortable with the amount your investing in your retirement accounts, based off your specific vision for retirement, use additional space in your budget to chip away at the higher-interest debt. You don’t want to go into retirement with liabilities dragging you down. For our FIRE ladder, you can’t reach freedom FIRE until you’re free of all payments, regardless of the interest rates.
As you climb closer to freedom FIRE, it’s important to reassess your unaligned obligations we discussed on the fourth rung, particularly as they relate to your career. The sooner you can align your career with your future goals, the sooner you’ll own your time, which is one of the fundamentals of freedom.
My husband did a career shift into an entirely new field and industry. It was an enormous change that offered him more career growth than his previous career. Even better, this shift removed a restriction of where we could live, which aligned more with our goal to move outlined under the first rung. We also decided together on short-term sacrifices to align his current position with our goal of moving so he wouldn’t have to job hunt during this huge life change. I also made a similar career shift.
Five or ten years previously, these weren’t moves we necessarily would have made. We were leaning heavily into paying off debt and building up our financial foundation. But on this rung, while we are saving vigorously for our goals and our freedom FIRE, we have more buffer in our budget to allow us to chase opportunities that align that with our goals.
So will you. Sit with your goals and your values on this rung. Assess how your current career aligns with them. If it doesn’t, it’s time to change that.
You’re well on your way to freedom now. One of the biggest factors we’ve found in our success is accountability. This is especially important for single people on the journey.
It’s a long road. Ten years into our journey, we were still a minimum of seven months out from reaching the first of our FIRE ladder goals. And we were at least a decade from true freedom FIRE. In this race, you’re the tortoise, not the hare. Unless you happen to come into a windfall of money, in which case you’re Turbo and should take a stab at the Indy 500.
Accountability buddies, along with your significant other and/or close family members, can help you gain perspective and help you remember that saying no to opportunities now isn’t a no forever, it’s just a no for now. You can have it all, but you usually can’t have it all at once. If you prioritize your main goals and stay focused, you’ll reach them.
It’s a lot harder to keep climbing when you go it alone. A road trip is always more fun when you have someone to share it with. So invite others into your journey.
This is more than just the community and support we mentioned on the third rung. This is the select few people who you give permission to speak into your life. These are the people who have similar goals they are also working toward. You’re on the same journey and understand deeply where each other are coming from. You only need one or two people here – your significant other, your best friend, your sibling, your parents, your children – you get to pick. Just make sure you have someone who is climbing the ladder with you, so you don’t end up in a Between a Rock and a Hard Place/127 Hours situation.
You’ve made it. Congratulations!!! Drop your pack, take a seat, and breathe in the fresh, open air at the top. You now not only own your stuff, you own your life. It is a powerful position to be in and one you’ll maintain for the rest of your life if you stay mindful of the FIRE ladder and remember the principles that got you here.
We are so proud of you and happy for your success. We know you’re going to sleep better. You’ll even work better, knowing you’re working because you want to, not because you have to.
It might take a moment to sink in. That’s okay. Just make sure you celebrate this monumental accomplishment. And then make sure to set new goals to keep you focused in this stage of life.
We can’t wait to hear all about each goal you reach. Please post them in our Facebook community or send us an email. We love to watch our friends reach their goals. We’ll certainly be sharing ours and all the lessons we’ve learned along the way.