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Creating My Universal FIRE Equation

FIRE is a diverse concept. It applies to each individual differently. It means something different to each individual who meets it. So, can a universal, unified FIRE equation be created?

I say yes!

And that’s just what I set out to do here.

A FIRE equation to get you to FIRE

FIRE equation
Oh yeah…this should be easy

This is the ultimate goal here. And, as you can imagine, this could get pretty complicated, pretty quickly.

I mean, what percentage of index funds goes into this FIRE equation? Where does real estate fit in? What’s the imaginary number mean again?

At first, I thought that I’d have to go back and brush up on my high school algebra…maybe even pre-calculus I feared!

But then I remembered the rental tenant of my FIRE philosophy…

Keep. It. Simple. Stupid.

We can make anything in our lives complicated and confusing and downright overwhelming.

However, I’ve made an observation in life that I find applies to most everything. It’s this: the people who seem to understand a concept the best are often those able to make it as simple as possible by breaking it down to its component parts.

This is true in medicine. In the operating room. And in finance.

In the OR, I’ve always gravitated towards mentors who follow the K.I.S.S. principles. They always got the best results and seemed to understand the problem and solution the best.

Once I started my financial education, I quickly realized the same thing. Simple rules supreme – like these simple habits to build wealth.

Just look at stock market investing as an example! You have two choices:

So, why then do people make things so complicated?

In my mind, there are two reasons:

  • They don’t fully understand the problem and/or solution so they can’t articulate either, or
  • They want to make it seem so difficult, so complicated that only they can do it, this intimidating you to either avoid it completely or overpay them to do it for you

Well, I’ve gone off on one of my tangents so let’s focus back in on the issue at hand…

Creating a universal FIRE equation

The first step for me in thinking about this was to identify the variables. Again, at first I felt a bit overwhelmed, there are just so many possibilities. How could I possibly include all of them in the right way?

But then, K.I.S.S. kicked in as I mentioned above. There are infinite variables in FIRE. And some will mean a lot for some people while others will mean nothing. And so on and so on. I love real estate. But you can easily reach FIRE while never investing in it. And vice versa with many other investment strategies.

But, there is one variable that no one can escape…in life…in FIRE…in anything. It’s the only thing that we can’t fix or create more of…


Time is the biggest and most important variable in the FIRE equation. We all face it and must manage it appropriately to reach FIRE.

But the beautiful thing is that it doesn’t really matter how much of it we have when we start. Of course, more is better. But it’s not the end. The best day to start is yesterday. The next best is today. [Insert more aphorisms about time.]

Time is the universal equalizer, opportunity, opponent, helper etc.

So, time became my main variable in my universal FIRE equation. And I broke it up into 3 components…

Past. Present. Future.

The three main variables that will determine your path to FIRE are:

  • How you managed you finance in the past
  • How you managed your finances in the present
  • And how you will manage your finances in the future

All of the other perceived variables – stock investing, how quickly to pay debt, index fund versus active management, bonds, annuities, active versus passive real estate, 529s, etc. – fall away when the scope of time is introduced.

Sure, you have to choose your strategies wisely. But, none of that matters is time is not accounted for correctly.

Time can erase mistakes. Time will reward patience. And time will punish excess or folly.

How should we weight these variables?

Now that I had my three variables – past, present, and future – I needed to figure out how to weigh and relate them together.

This was a tricky proposition.

I thought about each in turn and their influence on FIRE, often thinking to my own journey on its path.

So, this is what I came up with:

  • The present is most important. What we do today will have the greatest influence on our FIRE journey.
  • The future is also important. We can erase or multiply gains, enhance or obliterate mistakes based on our future actions. It’s important, but less important than the present I argue.
  • The past is a tricky thing. It’s important. If you invest wisely, you can harness compound interest for a long time. If you don’t – like me – you end up in tons of debt with no wealth building assets. But…but…the past is much easier to overcome than the present or future. I am walking proof of that. So I confidently put forth that the past has the least impact of the 3 variables. And that’s a good thing!

Putting the FIRE equation together

And now the final step…combining all of this…here we go:

FIRE = Future + (Present)2 + Past/2

A few quick rules about using the equation:

  • What do you enter for the variables?
    • Whatever you want! That’s the beauty. Enter your past, present, and estimated future net worth. That works! Enter arbitrary values for how good you think you are doing – use a scale from 1 to 10. It’s universal.
  • Should you add or divide?
    • If your net worth or actions or whatever variable you use are positive, then you add the numbers.
    • If your net worth of actions or whatever are negative, then you subtract.
  • Who is the judge of how well you are doing?
    • You!

You can see that all other potential personal finance variables fit nicely into this universal equation.

Paid off your debt within 5 years after training and are debt free? I bet your present value is really high! Didn’t do that? Your past may be quite negative, but worse your present value (whatever you chose) will likely be diminished.

And so on and so on with investing habits, spending decision, etc…

Let’s practice with an example…

Let’s test this puppy out using a guinea pig…me!

Remember, I’m right on the same journey as you. I’m not at the finish line shouting back instructions!

I’m going to choose to use my net worth as my variables. So, my new worth in the past when I first checked it was about -$520,000. My present net worth is approximately +$500,000. (This is a recent net worth update of mine.) And on this path, our expected net worth in 10 years is $3-5 million using this formula. So let’s call it an even $4M.

For me:

FIRE = 4,000,000 + 500,0002 – 520,000/2 = 250 billion

So what does this mean?

Does it mean I’ll make $250 billion?! I wish! But unfortunately no. Notice there are no units in my equation. Just arbitrary numbers. But it means that I’m doing a 250 billion star shaped sticker job on following my financial plan and reaching financial freedom.

My past wasn’t great. But it really didn’t burn me much at all. Because I am taking care of business in the present. And by continuing to do so, my future will be good too.

But, if I wasn’t doing well in the present, my overall FIRE outcome would take a HUGE hit, almost regardless of my future wealth-building habits.

The earlier you start, the easier the future can be. The further along you are, the more the past can hurt.

But, regardless, the present will always have the biggest impact

And I think that is the most important message in this whole FIRE equation!

If you are looking to move beyond your past, rock your present, and set up your future, these resources are for you!

What do you think? What’s your universal FIRE equation? How has time helped or hurt your financial freedom journey? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

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