The 3 Stages of Financial Independence

By: Brandon Clark, CPA

Financial Independence Retire Early (FIRE) is a lifestyle movement that inspires people to seek more financial and lifestyle freedom – creating more of what you truly value. No matter where you are on your FIRE journey (skeptical about it, beginner, or retired), learning about the principles of FIRE has something to offer you. 

Lets start with the basics: what is FIRE? Traditionally, pursuers of FIRE set the goal of retiring long before traditional retirement age. They do this by saving and investing well beyond traditional rates and reducing spending well below traditional needs and wants. There are dozens of articles and perspectives detailing more about FIRE – what it is, the many paths to achieve it, and when to start. It’s different for everyone but at the core is about gaining control over your life and not taking the default path. It’s about creating a life by your own design, and making conscious choices over how you use your resources (human capital, social capital, assets, and time). With this broader definition in mind, each person will approach FIRE differently – so ask yourself: “Just how financially independent do you want to be?”, and “Do you even want to retire early?”. In the end, you get to choose. 

It’s the creation of your own unique path to FIRE that a Financial Advisor or Coach is helpful. We’ve all heard the stories in the media of people who’ve gone through every extreme possibility to reach early retirement (lived in a closet of a home they’ve rented to 5 other roommates, worked 2 jobs and 3 side hustles, never eat out and have ramen noodles and beans for every meal, no vacations, etc.). FIRE doesn’t have to look like this. A more gradual path with fun and freedom along the way is possible. At first glance, the benefit of FIRE appears to be the destination (early retirement), but the benefits start accruing from the beginning and continue throughout the journey.

I’ve created the Three Stages of FIRE to show how building financial independence gradually can look. The pursuit of more freedom compels you to consider a sustainable lifestyle from the start.

FIRE: The 3 Stages of Financial Independence

Beginning Stage: Learning About FIRE

The FIRE learning stage is focused on gaining financial knowledge to make some early changes in your personal finances. Imaging the freedom you could have!

  • No credit card debt
  • Savings and investments happen automatically 
  • Spending is clear
With these basics under control, you’re able to think about things like – What experiences are best for you and your family? How can you use your money to facilitate more time to spend with your family or pursuing interests? What new interests or parts of the world you want to travel to?
The Learning Stage frees up your mental space away from paying bills and shuffling money around to focusing on what your money can do for you. A financial advisor can help you simplify and put your finances on auto-pilot. 

Financial Goals

  • Eliminating and avoiding consumer debt (i.e., credit card debt that carries over more than one month)
  • Tracking spending through software like Mint, YNAB or spreadsheet.
  • Spend less than you earn.
  • Build savings through retirement accounts (workplace 401k, 403b, 457b, TSP or personal Traditional and Roth IRAs).
  • Identifying ways to earn additional income: passive income, side-hustles, etc. 
  • Identifying ideal ways to reduce expenses: meal prepping, credit card and travel hacking, coupons, biking, roommates, etc.)

Mindset Goals

  • A sense of control of your spending. Many beginners are inspired by FIRE to get their finances in order. They pay themselves first in the form of savings and debt paydown (they make payment directly from paychecks to debt paydown and savings BEFORE discretionary spending).
  • Understanding how compound growth of investments work overtime and recognizing that this principle works “in reverse” for debt as well to accelerate your debt balances. 
  • A growing belief that you are capable of living your life by your design. You’re not stuck in “the rat race” or a job or life you don’t like until your 60s. 
  • Clarifying your values, and making shifts to align how you spend your time and money according to those values.. 

Middle Stage: Experimenting With FIRE

Congratulations! You’re a regular saver, you have defined your goals and are working towards them. You can now start to implement more significant freedom into your life. Want to take a few years off with your children? Or maybe scale back a fun but stressful job?  Perhaps even make a career change to a lower paying more fulfilling job? These all become possible with a solid financial foundation in place! Most people want to balance the type of work they are doing now, with how long they will need to work – we help people to pave these paths everyday as Financial Planners.

Financial Goals

  • You consistently max out retirement savings
  • You are saving into invested reserves (non-retirement accounts)
  • Perhaps you are investing in a passive income source like real estate (through renting rooms or a portion of your home or separate unit(s))
  • You have basic understanding and comfort with investing in mutual funds, index funds, stocks
  • You understand the basic of calculating your personal FIRE numbers and the 4% rule

Mindset Goals

  • Confidence over finances: belief that you are in control of income, savings, and expenses
  • Confidence in earning potential: Increasing your earning potential through education, side hustles, seeking out better positions etc.
  • Freedom to experiment with non-traditional lifestyle: entrepreneurship, sabbatical, extended or slow travel, leaves of absence from work, nomadic lifestyle, etc.
  • More flexibility to try career areas of interest, curiosity, or dreams.
  • Increased time to focus on passions outside of work.

Final Stage: Freedom (FIRE)

You’ve arrived at your definition of financial freedom. For some this means never working again, but for others it doesn’t. Whatever this stage looks like for you, you’ve arrived at financial independence.  You have full freedom to experiment. You’re physically, mentally, and financially free to design your life as you wish.  This is where possibilities can really unfold for you.

Most people who reach FIRE go on to have a far greater impact than they ever imagined possible. With money sorted out, they can explore what a meaningful life looks like – filled with purpose, meaning and connection. Some people in FIRE go on to have more money than they ever thought possible. A financial advisor can help you develop a financial plan for your life and understand how to make the most impact possible with your money.


  • You have reached the point where you have assets that can support your estimated expenses each year for the rest of your life, or you have a combination of assets and ideal work with income, flexibility, and enough security that allow you to live your desired lifestyle.
  • You can fund your dreams. Whatever your dreams and purpose are, you have the financial and non-financial assets to make them a reality.


  • Belief that you are in control over your time and results in life
  • Understanding of money scripts and the role they play in your life.
  • Understanding and awareness of common money biases.
  • Abundance mindset
  • You can be generous with your time and resources

There’s no end to the paths you can take in creating your version of Financial Independence. I hope you’re encouraged to start or are re-energized to continue your journey to financial freedom because wherever you are, it’s worthwhile. We love helping people see the options in front of them and create unimaginable possibilities for their lives using FIRE. Early retirement, just like the first two stages of FIRE, is just the one of many more new beginnings.