Financial Independence Retire Early (FIRE) adherents typically embrace a frugal lifestyle in order to reach their goal of financial independence and early retirement. By making sacrifices they might otherwise not consider important, FIRE adherents can accelerate their journey toward financial freedom and early retirement.
To reach financial independence, it’s essential that you save at least 25 times your annual expenses; this figure is known as your “FIRE number.”
1. Start dreaming and planning for retirement
Many who achieve Financial Independence Retire Early work part-time as consultants to keep their skills sharp. Others take advantage of geographical arbitrage by living in low cost-of-living regions such as South America or Southeast Asia where their money goes further. Others pursue an alternate path by starting photography studios or nonprofit organizations addressing environmental concerns – either way FIRE is achieved.
FIRE participants often save and invest a significant portion of their income, amassing a nest egg that will provide for them long into retirement. All while living an austere lifestyle that allows for budgetary sacrifice and financial discipline.
But FIRE may not be for everyone; it can be difficult to say goodbye to a career you love or that gives you purpose, or to leave one that does not provide fulfillment in return for its perks.
2. Save as much as you can
In order to reach financial independence as quickly as possible, you must save as much as possible. That may involve cutting expenses where possible and taking advantage of employer matching in retirement plans as well as tax-advantaged accounts as well as investing in low-cost index funds with greater long-term returns than cash.
FIRE adherents may make sacrifices in pursuit of their goal; however, many feel it’s worth it to move closer towards living a lifestyle which gives them more time with loved ones and activities that enrich their lives.
FIRE retirees typically supplement their income through part-time work, consulting jobs, writing or other passive sources to maintain savings rates while staying flexible with schedule and in control of their own destiny – whether that means stopping work when desired or continuing for pleasure – making FIRE an enviable position to occupy.
3. Get out of debt
Attaining FIRE requires making sacrifices, such as cutting back spending and living below your means. This could mean downsizing your home, eliminating unnecessary expenses or saving in areas where you spend most time.
FIRE can also help reduce debt. Many members of the FIRE community forgo credit cards and mortgage payments early; instead they strive to build emergency savings of 3-6 months of expenses in an emergency fund. Others may enjoy lower costs of living such as working or retiring in lower tax areas.
FIRE can get a bad reputation for being too restrictive, but in truth it’s about finding balance between spending and enjoying life. The goal is to regain your precious resource: time – so you can say no to meaningless meetings or avoid long commutes during rush hour traffic jams.
4. Start investing
FIRE followers strive to save and invest as much of their incomes, making sacrifices to reach their retirement goals faster and early than planned. The movement has seen considerable popularity during a sustained bull market which boosted investment returns even more than expected. While critics may claim FIRE participants take too much risk, with an efficient plan and savings discipline leading them down a fulfilling path toward financial freedom.
To achieve your financial goal, it is crucial to have a steady source of income while spending less than you earn. A tracking tool will also give you an idea of the amount of savings necessary to reach your goal – FIRE participants typically save about 50%-75% of their income through tax-efficient strategies such as passive index funds or ETFs; it’s never too early to plan for your future!