Build an Emergency Fund Before You Start Aggressively Saving for FIRE

An emergency fund is cash set aside — usually in a high-yield savings account rather than invested in the market — to cover unexpected expenses like a job loss, medical bill, or major car repair, without having to sell investments at a bad time.

A common starting target is 3 to 6 months of essential living expenses, though the right number depends on your job stability, health, dependents, and other income sources.

The reason this matters for FIRE specifically is sequence-of-returns risk in reverse: if a market downturn coincides with a personal financial emergency and you're forced to sell investments while prices are down, you lock in a permanent loss that a cash buffer would have avoided.

Once your emergency fund is in place, the more aggressive part of your FIRE plan — high savings rate, consistent index fund investing — can proceed with one less risk of being derailed by short-term surprises.