FIRE stands for Financial Independence, Retire Early. People aggressively save and invest to accumulate enough wealth to retire far earlier than the traditional retirement age. The goal is to live off investment returns rather than a salary.

The 4% Rule suggests you can safely withdraw 4% of your portfolio each year in retirement without running out of money, based on 30 years of historical market data. To calculate your FIRE number, multiply your annual expenses by 25.

Compound interest is when your earned interest itself earns more interest over time, creating an exponential snowball effect. The longer your money is invested, the faster it grows — which is why starting early matters so much.

Inflation is the gradual rise in prices over time, which erodes the purchasing power of money. At 3% annual inflation, something that costs $100 today will cost about $134 in 10 years. It is a critical factor to account for in long-term financial planning.

The Rule of 72 is a quick mental-math shortcut to estimate how long it takes to double your money at a fixed return rate. Divide 72 by the annual return rate — at 6% returns, your money doubles in approximately 12 years.

Amortization means repaying a loan through fixed regular payments that each cover both interest and principal. In early years most of the payment goes toward interest; as the loan matures, progressively more reduces the principal balance.

A Cash Cushion is liquid cash held separately from your investment portfolio at retirement, used to cover living expenses during market downturns — so you never have to sell investments at a loss. It grows with inflation to maintain its real purchasing power.