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Five Assumptions You Should Clarify Before Running Any FIRE Calculation
Introduction
When people first discover FIRE, they often ask a simple question:
“How much money do I need to be financially independent?”
The next step is usually opening a calculator and expecting a definitive answer.
But what truly determines that answer is not the tool itself— it’s the assumptions behind it.
Why FIRE Calculations Are Often Misleading
Calculation results can appear precise, yet hide many underlying assumptions.
When those assumptions go unexamined, the numbers may create false confidence or unnecessary anxiety.
That’s why clarifying assumptions matters more than chasing exact results.
Assumption 1: Are Your Expenses Really Stable Long-Term?
Most models assume current expenses remain constant.
In reality, expenses shift with life stages:
- Single vs family life
- Renting vs homeownership
- Health and care needs
Ignoring these changes oversimplifies the future.
Assumption 2: Is Your Return Rate a Goal or a Scenario Variable?
Return rates shouldn’t be treated as promises.
They are tools for exploring:
- Conservative outcomes
- Optimistic possibilities
- Risk tolerance over time
The value lies in comparison, not prediction.
Assumption 3: Does Inflation Reflect Real-Life Impact?
Inflation is more than a percentage.
It affects:
- Healthcare costs
- Housing expenses
- Lifestyle flexibility
Abstract assumptions can distort real planning.
Assumption 4: Is Your Life Path Truly Linear?
Many models assume stable income and uninterrupted investing.
Most lives include:
- Career changes
- Income volatility
- Temporary pauses
Planning should accommodate imperfection.
Assumption 5: Can the Model Be Updated Over Time?
A useful FIRE model should allow you to:
- Update inputs
- Adjust assumptions
- Re-evaluate plans periodically
One-time answers rarely survive real life.
Why Assumptions Come First
FIRE isn’t about finding a perfect number.
It’s about building a framework that can evolve with your life.
Final Thoughts
The real purpose of FIRE calculations is not certainty, but clarity.
Understanding assumptions gives you that clarity— numbers alone do not.
Tools & Resources
This article introduces concepts and logic; actual results vary by individual conditions. To understand how to apply these methods to your personal situation, please see the guide below.