Financial Independence, Retire Early (FIRE)

Financial Independence, Retire Early (FIRE) Explained

Building true wealth is not just about making money. At some point, you have seen happy poor people and miserable rich people. According to research, the relationship between happiness and money is small.  The following ten principles will help you attain true wealth, personally and financially. Become Deeply Motivated – Money cannot be considered a deep motivator.

Financial wealth has external benefits. With money, you can have big bank accounts, fancy houses, etc. but you cannot buy happiness. Since external goals have inherent limits, they will limit your motivation. Come up with deep internal goals such as: Freedom, Leadership, Growth, and Charity. The value you offer should be more than the value you take. If you aspire to give more value, everyone will be a winner. And that is how true wealth is built. By improving the lives of others, you improve your own. There are many examples of people who exploited the environment or other people to build wealth for themselves.

But that does not bring fulfillment and happiness. 100% Integrity – Before you say or do anything, ask yourself if it would make your father or mother proud. Do not cheat, insult, harm the environment, encroach on someone else’s property, or hurt someone just so you can be rich. Always do the right thing—that which you would be comfortable telling your parents, children, or spouse about. Be Courageous – It is not easy for humans to go out independently because they are social in nature. But following the crowd will not build you wealth. Do what others are afraid of. Being self-responsible takes courage.

So, does acquiring new skills and walking less traveled paths. Be Disciplined – Wealth comes because of many small things compounded over the long term. Those daily habits you consider insignificant can either break or make your success. You need to acquire financial knowledge, invest, and save consistently and persistently. All these things can only happen if you are disciplined.

Stay away from conspicuous consumption – Consumerism will direct whatever wealth you have away from wealth building and toward lifestyle. Think of wealth as delayed gratification. Live a modest life and spend less than you can afford. This applies to energy and time, just as much as money. Invest the difference in your future. Create a Supportive Environment – Anyone can come up with a plan to attain wealth. The difference between those who achieve it and those who do not is focused, persistent and consistent action. Avoid distractions and build a support system that will enable you to stay focused.

Apply Leverage -With these principles of leverage, you will be working smarter and not harder: Knowledge leverage, Network leverage, Marketing leverage, Systems and technology leverage, Time leverage, and Financial leverage. In short, make use of other people’s resources, not just your own. Your Wealth Is a Business – You need a plan to build wealth, just like you need a business plan. Find proven business principles and incorporate them into your plan. Examples of these principles include accountability, accurate record keeping, leverage and competitive advantage.

Steward Your Wealth – With money, comes responsibility on how to use it. Let your wealth do good when you are alive and even after you pass. When someone mentions retirement, you automatically think of people aged 50 0r 60. This is what you are used to. People striving for FIRE, however, retire earlier; in their 40s, 30s, or even 20s. It is easy to dismiss FIRE, especially if you do not make much money. Take the example of someone making about 35k a year. Also, assume that they have huge student loan debt. How can someone like this retire early?

Financial Independence, Retire Early (FIRE)

Well, be patient. You will know shortly. The FIRE movement is mainly about retirement. But there is more. When you look deeper into its principles, you will realize that it is about flexibility. Once you attain financial independence, you can make life choices without considering money. Most people must take finances into account every time they plan something. But with financial independence comes freedom. 

FIRE is also not about quitting your job. It is a movement that supports being free to go after your ambitions and dreams. You can decide to continue working or not. Who Is Eligible for FIRE? Did you become interested in FIRE because your job pays well but makes you miserable? This may not be a good idea. An expert says that you should not retire early just because you hate your job. When you finally retire, you will be aimless and boring. FIRE takes determination and focus. It is not for you if you just hate your job or want a get-rich-quick scheme. 

If your job sucks the life out of you, get into a different path or position. That said, thousands of people believe that any person can achieve FIRE. They argue that, if you cannot it is your fault—you need to cut back more expenses or save more. But wage stagnation is a problem for many people. To be honest, a decent income is necessary for FIRE. The math is simple: earn more than you spend then save the difference. You can invest the savings in index funds and other low-fee investments. Frugality is also important.

With time, you can get into other investments such as rental properties. The rules seem simple but carrying them out can be challenging. You must train yourself. The first step to reaching FIRE is asking yourself why you want to do it. This will be your motivation. Next, track your spending. Make sure you spend mindfully. To help you, here are 10 financial independence pillars: Reduce your housing cost. Buy used cars. Eliminate cable. Reduce your tax liability (max out tax deferred vehicles). Find a cheap cell phone service. Utilize credit card rewards. Lower grocery bills. Raise your income. Invest in low-fee index funds.

Adhere to the 4% rule. It takes time and self-discipline to retire early. Your goal should be to save/invest 25-30% of your annual expenses, depending on what you want your retirement lifestyle will be. Regardless of how you want to spend yearly, you will find yourself in one of the three FIRE categories: FIRE, fatFIRE, and leanFIRE. To achieve your goal, you need to maximize your income, spend less than what you are making and make the most of your retirement accounts. Pay all high-interest debts before you retire including early pay off the mortgage. Planning your retirement is not easy.

You must give your effort and self-discipline to maximize your earnings, savings, and investments the most you can while you are still young. Early retirement can be seen in a lot of ways. How you visualize your retirement will determine how you can get there. We have listed the steps you must take to get there: How do you define early retirement? Early retirement does not mean you will not earn any more.

A lot of early retirees interpret it as having financial independence or not having to work to support a living. Some describe it as leaving their corporate jobs to do what they want or be their own boss. While some explain it as focusing on non-income generating activities or traveling in between works, or even working just whenever you want to.

Knowing what early retirement means for you is the first step you need to do. Once you have visualized what your early retirement looks like, you can easily make plans to achieve your goal. However, be adaptive to changes as your plan may evolve.

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