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Are you ready to bring some heat in your life?
If Yes, then get started with the FIRE Movement today.
FIRE stands for “Financial Independence, Retire Early” The main goal is to save and invest aggressively so you can retire early, in your 30s or 40s.
FIRE movement was first introduced in 1992 in the book “Your Money Or Your Life” which was written by Vicki Robin and Joe Dominguez.
The album sold a lot of copies, making this one of the great books for personal finance.
In the past few years, this trend is popular among many Millennials.
Millennials have embraced the FIRE movement with the sole intention of retiring early than the majority and not worrying about money ever again.
FIRE movement believers say it’s possible to retire in their 30s or 40s if they follow the FIRE principles religiously.
No, I didn’t make a mistake; you read it right! If you follow FIRE, you may be able to retire in your 30s or early 40s.
How does the Fire Movement work?
Financial Independence Retire Early is a movement solely focusing on saving most of your income (somewhere around 60-80%) so that you can retire earlier than most who retire at 60 years or so.
FIRE is dedicated to hard-core saving and investments without any flexibility to splurge on wants for those intending to quit their jobs and life happily decades before the average retirement age of 60-65.
How much should you save?
The general norm, followed by many FIRE movement people, is saving 70% of your income. But it’s said that if your lifestyle does not include a whole lot of expenses and you can live with 10-20% of your income, you should save the rest.
How to save money for FIRE
FIRE followers use two ways to save around 70% of the yearly income.
- They reduce their expenses.
For this, you need to start budgeting. Budgeting means jotting down your income and expenses systemically so that you know what you spend on, thus cutting off unnecessary costs altogether. You can use my Free Budget Template to note your income and expenses or use a budgeting app.
- They Increase their income.
When you increase your income and keep your expenses the same, you save more. E.g., In 2017 you made Rs 10 lakhs, spent 3.5 lakhs and saved Rs 6.5 lakhs. In 2018, you got a hike in salary and earned Rs 12 lakhs, ensuring your expenses don’t increase, you collected Rs 8.5 lakhs. In 2017, you saved 65% of your income, and in 2018 you save 71% of your income. You can also add new income streams by taking on side hustles or part-time jobs.
How to begin your FIRE Journey?
Getting success in your FIRE journey is merely dependent on your mindset. Only if you’re ready to live frugally, till you reach a stage where you can retire early, you can successfully follow the FIRE movement.
The first step is to save at least 70% of your yearly income. If possible, try saving more than 70% for better results.
Once you accumulate 30 times your yearly expenses, you can quit your job or retire entirely from anything which you hate doing.
(Eg -Monthly expenses = Rs 20,000
Yearly expenses(x12)= Rs 2,40,000
FIRE amount (x30)= Rs 72,00,000)
It doesn’t stop there. You need to grow your money too. For that investing in money multiplying instruments like stocks, bonds, forex is quite essential during your day job and also once you retire due to FIRE. Investing ensures your money keeps making more money itself and taking care of your expenses.
What we must learn from the FIRE movement?
Financial Independence, Retire Early is not for everyone. It’s extremely tough, may not suit your lifestyle and saving 70% or so isn’t that easy. I won’t tell you to follow this religiously, but there are a few things you can learn from FIRE movement that will surely help you in your journey to Financial Freedom.
1. Start planning for retirement.
If there is just one thing you can learn from FIRE, then be it to start a retirement plan. Due to this strategy, millennials and the younger generation are beginning to think about retirement right now. Imagine what your retirement looks like, what all would you need.
Then decide on a number you need to save for your retirement, make a good plan to get to this number and start your path. You don’t need to have a foolproof plan from the beginning. Change the layout as and when required but start today.
Don’t treat this money like your other savings account, save and invest this money separately. Now call yourself “Awesome” because having a retirement plan puts you way ahead of everyone else.
2. Put your best foot to reduce your expenses.
FIRE believers know that to achieve financial independence, they need to look at their Budget and start cutting off expenses severely. One by one till they’ve got only those urgent need-based expenses they cannot forgo.
Anything which doesn’t make sense in your budget, cross it and don’t spend on that expense. Savin a few pennies may not be as much, but it’s undoubtedly better than not saving those pennies.
3. Make investing a priority.
Investing is the way you ensure your money grows. Don’t say you can’t invest, or it’s too risky. Anything which pays you more than your savings account is an investment. Start investing small portions of your income, maybe 20% of the amount you save for retirement is a good start. Learn about investment instruments like stocks, bonds, forex debentures, commodities, etc. By doing that, you’re letting compound interest do it’s magic to get you to FIRE.
4. Seek out ways to boost your income
All roads lead back to making money. Why? Because it’s the easiest way to retire early. Saving is crucial, but you can only save to an extent, after that your savings flatten. That’s not the case with boosting your income. You can do this in 4 ways:
- Take up a part-time job
- Start a side hustle
- Ask for a raise
- Build a business
Whatever it may be, having some additional source of income will put you in a better position.
Sage Tip: Double your income, and you’re twice as fast to retire.
FIRE and Credit Cards
A new strategy to save more is using credit cards. The points you get from credit cards can help you save some more cash.
While this is true, I’m going to be brutally honest with you – Don’t Use a Credit Card. Time and again, it’s proven that credit cards are nothing but machines designed to suck out all the cash we have and excess. Even if you may try your best not to overspend, you surely will.
What’s the primary use of a credit card again? – It’s to spend more money than you currently have.
This one-line definition is so against anyone who wants to be financially independent. There’s a reason why so many people all over the globe suffer from debt. If you’re one of them, I strongly suggest you read the article I’ve written on two ways to get rid of debt – Debt Snowball Vs Debt Avalanche?
It will help you tackle your debt faster.
Why the FIRE movement may not be for you?
Although FIRE movement emphasises extreme frugality, you must not save so much that you hate following your FIRE journey. FIRE is a long term effective strategy to Financial Freedom. Following FIRE for a year and then giving up because it’s too hard won’t get you any closer to retirement.
Even though the primary goal of the FIRE movement is to retire, you need to ask yourself – “What will I do the whole day when I retire?”
Most often, you won’t get any great ideas to do. Maybe for a month or two, you might be happy retiring, but you’ll most probably get bored with it. At this moment you can take up a part-time job to make sure you don’t get bored and also make some more cash.
The Bottom Line
Okay now before you get too excited and start your FIRE journey, make a plan. For that, you need to know how much you’ll need to save, to retire when you want to and how much you need to save each month from reaching the desired goal within the specific time.
Don’t get tensed up if your plan fails, make a new one, even better one and continue making, saving and investing money to be financially independent successfully.
Will you join the FIRE movement? Let me know down in the comments. Even if you don’t, make sure you implement the four things to learn from FIRE.
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