How to be financially independent by age 45?


Let’s say you have no idea what your future expenses or income will be, but you’re still interested and/or determined to reach financial independence by age 45.  You might be thinking, is it even possible to retire that early? If so, how? Can I make it happen with my current income?

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What if something unforeseen happens and all my savings vanish just like that? What do I do then? If this sounds like your situation, you can find answers to all your questions in this article that focuses on:

  • TheFIRE movement - how does it work?;
  • Find out how much you need to retire by your desired FIRE number (we assume it’s 45);
  • How to reach FIRE sooner using the Rule of 25, alongside the 4% Rule; and
  • Tips for reaching early retirement.

So, let’s get to it!

What is F.I.R.E, exactly?

When it comes to a hot discussion around what’s the ideal retirement age, you most likely will think of someone in their late 50s or 60s, right? And there’s an obvious reason for this: it’s the norm. Because normally this is the STANDARD age in which most people start thinking about retirement. At least that's how the trend used to be in the past and if you think about it,  it is still true for the majority of people today. except for those who strive for FIRE, who prefer to retire much earlier than the conservative style, usually in their 40s, 30, and sometimes even in their 20s, this is called the FIRE age/number.

Which brings us to the next question, what does FIRE actually mean? — Financial Independence, Retire Early (or as some people prefer to call it, FIOR — Financial Independence, Optional Retirement). That's the amount of money you’ll need to save now before you can stop working and consider yourself financially free, forever.

What are the different approaches to FIRE sooner?

Here are the  Four pillars that are important for you to understand so you can optimise your FIRE strategy:


The average Australian household spends about $74,301 per year, according to Moneysmart.

Lean FIRE is when someone has saved up 25 times their annual expenses — the traditional benchmark for financial independence — and spends less each year than the average Australian.


Fat FIRE is when someone who has reached financial independence spends more than average Australians. It's financial wellness for high-income earners such as entrepreneurs or people in the very top income threshold that choose not to fully embrace frugality or give up certain creature comforts that have become customary.

Barista FIRE

Barista Fire is a hybrid between Lean FIRE and Fat FIRE and it is when you plan to retire early with enough money invested where the 4% rule (see next section) still covers part of your early expenses even if it means you leave full-time work for a more enjoyable, low-stress, part-time work.

Coast FIRE

Coast FIRE is when you have enough money invested at an early enough age that you no longer need to invest any more to achieve financial independence by age 45  (or whatever age you define as a retirement age). This approach is technically for people who do not usually worry about saving money for retirement, as they will still have enough money by the time they retire.

Why is it important to calculate the FIRE number?

If you’re thinking of retiring early, which in this case is by age 45, these are all questions you need to start asking now: What lifestyle do you want to live in retirement? A cosy retirement, a modest retirement, or an ok lifestyle? Do you have a large house or are you planning to buy one in your retirement? Will you travel often to see family or friends? Or, are  you planning to travel around the world when you retire? Are you a member of a country club? Or, are you going to join one in the future? Simply put, what is your FIRE goal?

You can then look at your current income and see whether it needs to stay the same or be increased to meet those scenarios. In other words, it is important to calculate your FIRE number that you would like to achieve based on your specific monetary goals. That is why, for people working towards financial independence, the FIRE number is EVERYTHING.

FIRE Calculator: Multiply by 25 and the 4% Rule

The common outcome of the FIRE movement is to have 25x your annual living expenses amount invested in a diversified portfolio, with a safe annual withdrawal rate of 4%.

Here’s a detailed look at these two rules and how they work.

The Multiply by 25 Rule

A rule of thumb to determine how much money you'll need to save for your retirement, multiply your annual expense amount (not your annual income) by 25, which gives you:

                                                                         Annual Cost of Living x 25 = FIRE number  

For example: if your living expenses are $3,000 per month, your annual expenses would total $36,000. Therefore your FIRE number is $36,000 times 25 which is equal to $900,000.

Note: Be mindful of the type of account the money is withdrawn from as it may impact whether or not you need to pay income or capital gains tax.

The 4% Rule

How can we determine how much we can safely spend in retirement without depleting our portfolio? Try using the 4% rule, which is the rule you follow after retirement.This rule states that your savings should last through 30 years of retirement if you withdraw 4% of your nest egg during the first year of retirement and then adjust each year thereafter for inflation (Berger, 2021).

To figure out how big a nest egg you’ll need, you have to match that 4% to your anticipated expenses. Say you have $1.2million saved for retirement. In your first year of retirement, you should withdraw no more than $48,000.

Or, if you don’t want to do the math you may use this calculator here.

To sum up:

  • “Financial Independence” for FIRE followers is defined as having a portfolio worth 25 times your annual expenses.
  • You will withdraw the inflation-adjusted equivalent of 4% of your nest egg each year once you achieve financial freedom and retire.

Note:  You’ll only get your FIRE number when you combine the rule of 25  with the 4% Rule because together it helps you to figure out not only how much you will need to save and invest in order to retire, but also how much can be withdrawn annually from your retirement portfolio so that you don’t run out of money and go broke in retirement.


Berger, R. (2021). How the 25x Rule Can Help You Save for Retirement. Retrieved 07. May. 2021 from

What are the top three tips to reach FIRE sooner?

While it is true that the FIRE movement has gained traction over the years, has anyone ever wondered what it involves and how accessible are its aims?

Nobody ever got rich just by saving money

As mentioned above, no matter how conservative we are in our goals to retire faster, something unforeseen may happen. It would be great if it didn't. But what if it did? Maybe you have a natural disaster that wiped out your house or unexpected medical bills.. Who knows what the future holds. Make no mistake, it is important to both save and invest. Each has an important role to play. Let’s find out how each contributes to a better retirement future.

In terms of SAVING perspective,  you might want to consider using the 50/20/30 saving rule (or budgeting method), which states that you should spend up to 50% of your after-tax income on ‘needs’ and the remaining half should be split up between 20% for ‘savings’ and 30% for your ‘wants’. Ok, but why not the 80/20 or the 70/20/10 methods?

Well, it really depends on person to person and what works the best for your individual needs. As for the 80/20 saving rule, honestly, it's just a simplified version of the 50/30/20 method. For example, you don’t have to do any expense tracking and you don't have to discern between "wants" and "needs." You simply take your savings off the top and spend the rest. However, some might find that the 80/20 rule of thumb leaves too much wiggle room for discretionary spending. If you prefer structure, the 50/30/20 rule of thumb could be a better fit. As for 70/20/10, definitely the other two rules might be a wiser choice considering our goal here is to retire early, with this 70/20/10 rule, only 10% goes to savings. So logically, the other two rules make more sense in the case of aspiring for early retirement.

So, is putting aside 20% to a savings account sufficient to retire by age 45?

Again, it depends on many factors like your age, income, expenditure, super, desired age to retire and so much more. However, if you can consistently put aside 20% of your after-tax pay each month, it can help to build a smart savings plan during your retirement such as an emergency fund, a comprehensive, long-term personal financial plan, holiday plans or even a downpayment for a house.

Suppose if  you can bring home $5000 after tax each month, you could put $1000 towards your savings goals. In just a year, you’ll have saved close to $12,000! If you have 20 years time to become 45, then multiplying $12,000 times 20 years will give you a total savings of $240,000 (without considering interest earned or the impact of inflation).  But whether this amount is good enough or not also depends on what retirement lifestyle you want to live. So again, it comes down to YOU.

As from the INVESTMENT perspective,

If you can do it regularly,  you might be able to turn $10,000 per year into more than a million dollars over 30 years. How?

Let’s assume, you can grow the money you invest by an annual rate of anywhere from 7% — 10% over the long term. This means, even if you invest $10,000 in the stock market today and it earns roughly 7% per year, that $10,000will become close to $20,000 in just 10 years.  Your returns will vary depending on how you choose to invest.

Imagine 10 years ago you put $10,000 into an account, invested it in some stocks, made some trades, and now 10 years later you have your original $10,000 plus another $10,000 you made from investing. Or, imagine a longer-term example where you’re both a good saver and a smart investor. Imagine you invest $10,000 of your savings into the market every year for 30 years. That’s $10,000 this year, another $10,000 next year, another $10,000 the year after that, and so on for 30 years. So in total, you will have invested $300,000 in stocks over 30 years ($10,000 per year x 30 years).

Main takeaway:

What are the benefits of saving money?

  • Saving for an emergency fund (rainy day savings) in the case of unexpected events can give you peace of mind by having quick access to cash
  • An emergency fund can cushion against sudden job loss: COVID as an example.
  • Helps to finance the down payment for a mortgage.

What are the benefits of investing?

  • The potential for healthy long term returns.
  • Investing money rather than putting it into a savings account can help you to beat inflation.
  • You can use compound interest to your advantage to earn good annual returns.
  • Earn additional income from dividend payments

Keep earning extra income through side hustle

So, you want to become financially independent by the age of 45? To do that, you’re starting to cut your expenses and now… want to maximise your income so you can boost your savings rate, but you also realised that your regular salary alone will not be sufficient. So, what is a reliable way to generate more income? For many, the answer is simple: Side hustle.  

Jump to our list of 18 best side hustles to achieve financial freedom faster:

  1. Invest in stocks, bonds, and/or real estate/property.
  2. Launch an online resource such as writing e-books, videos, podcasts, to generate extra income.
  3. Look out for PTC sites. Paid to Click Jobs (PTC sites) help you earn money for clicking on advertisements.There are some websites on the internet that offer this business model with free investment but guaranteed payments.
  4. Tutoring. If you love teaching and are an expert on a particular topic why not consider tutoring to make extra cash with an hourly rate.
  5. Leverage the power of Amazon. You could sell a product and develop a presence directly on Amazon without the need to take on so many roles.
  6. Join the sharing economy. You can rent out your car, or various equipment you may have lying around your house.
  7. Host an event (or even a virtual event), charge for it with a reputable guest speaker.
  8. Get paid to do what you love to do. For instance, people who love skydiving can get certified to teach and do jumps on the weekend. Or if you like designing, you can simply freelance as a “web and graphic designer”. In this circumstance the choices are endless.
  9. Write blog reviews and paid posts. If you already have a successful blog, you can reach out to potential advertisers who might be interested in buying a review on your blog, for which they may pay you an hourly rate depending on the quality of the content plus the relevancy of the topic.
  10. Participate in paid online surveys. If you want to utilise your free time to earn some extra money, you can participate in an online survey that pays. Join a market research company or site that conducts online surveys to earn a regular income of about $300 to $800 per month.
  1. Rent out a spare room or even your garage. If you have a spare bedroom(s), then you could make some extra cash by renting it out. Otherwise, if you live in a busy neighbourhood and in a house, you can rent out your garage.
  2. Become an affiliate marketer. Earning money with affiliate marketing depends on what product you’re selling and what affiliate network you use.
  3. Be part of the Gig Economy. You could make a considerable amount depending on the side gigs you take on and the platform you use. For example, you might create T-shirt mockups for a client one week and help someone build their social media following the next via freelancing platforms.
  4. Do mystery shopping. Companies of all kinds are looking for mystery shoppers. Mystery shoppers buy in secret and document their experiences with the retailer. This can be done at a physical store or an online store.
  5. Drive for Uber, Ola or Lyft. One of the most widely available ways to make money is by driving for a ride share company. . The sharing economy has quite truly exploded, and both Uber and Ola are at the forefront of this movement. The best part? You can turn on and off your availability through these networks with the simple click of a button, effectively allowing you to make money, at your discretion, no matter what time of day or night it is.
  6. Download cash back apps: If you’re looking for rebates, discounts, points and/or cash back, here are your go to apps:

           Likewise, these apps often offer sign-up bonuses.

  1. Take full advantage of your memberships: Find everything you need to know about various reward programs in Australia in this all-in-one blog here.
  2. Become a house sitter: If you want to live rent-free, house sitting is a great way to cut down on your accommodation expenses and experience how a local lives. If you're lucky, you can completely avoid buying any food while house sitting if their fridge and pantry are well-stocked. So no rent, no mortgage, and no bills means financial freedom for full-time house sitters. How cool is that?! Plus, you could be house sitting in a luxurious mansion with a beach view. You never know.

Understand that retirement isn’t always easy and here’s what you need to know

Sure, FIRE is rewarding, but there are a few challenges you might come across so look beyond the smoke and mirrors if you want to better prepare for your own early retirement.

You might suffer an *identity crisis* for an unknown period. Imagine going from being a marketing expert, an investment professional, or the management consultant who can figure out how to optimise a business to an unemployed person who sits at home doing almost nothing productive. Job titles can be incredibly addictive and your identity crisis may last as short as three to four months or it might last for years depending on how you handle it.

You might feel lonely. It’s nice to have all the time in the world to do whatever you want. But, if your friends and loved ones are busy working all day, they can’t join you on your midday hike or adventure to Bora Bora. They may also have a family to tend to during the evenings and on weekends. If you’ve ever taken a staycation by yourself, you’ll soon realise how lonely it can be if others are busy leading their own lives.

Oops, what if you change your mind? Imagine retiring at 45 after 18 years of work, you spend the next 2 to 3 years traveling the world, living a leisure lifestyle and experiencing  exciting things. At age 48, you realise the reason why travel and play is so fun is because of work! You have the urge to get back into the game, but who’s going to risk hiring a 48 year old with a 3 year employment gap? The employer may suspect you are rusty, and that you may just bolt after a year. As a result, the employer simply chooses to hire someone with no gap in their employment, or someone else from another firm.

Realise that your life may change dramatically once you retire. It could be good, bad, or it may be both.

That is why early retirement is often a combination of both excitement and anxiety as people approach retirement. The excitement comes from having more free time, but the anxiety comes from figuring out how much I can afford to spend? And what will I do with all that time?–Kevin Reardon

Thanks for reading this blog!.If you have any questions on this topic, feel free to reach out to us across our socials and we would be more than happy to help.

WeMoney can help you achieve your FIRE goal sooner

You can set goals and keep track of your progress in the WeMoney app as you work towards achieving FIRE. If you’re keen to explore our goal setting feature, you can download the app via the link at the bottom of this page and check it out.

Extra resources to help you achieve your FIRE sooner

9 tips to get financially fit in 2021

Is it really possible to become debt free? Where Do i start?

5 Easy Tips To Develop Good Financial Habits

Captain Fi's reading list for financial independence

Common FIRE misconceptions that you might not know about

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

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