This past week I have listened to various thought leaders on a topic called the “F.I.R.E. Movement”. No the house is not burning down, nor does the acronym imply a state of urgency. But for those of you who hadn’t heard of it previously, let this be the first. Financially Independent, Retire Early. And for those of you that have heard of it – here’s some of my thoughts on it.
“Financial independence” is something that many strive for but too few persons manage to accomplish. One of the top goals of those striving for financial success is early retirement. But this goal is not something that is easily accomplished without a bullet proof plan of action, and a proven financial strategy that is executable. The FIRE movement is such a plan of action that is designed to help you achieve financial independence and early retirement during the process. Here’s my interpretation and explanation of it, and how some may achieve it:
Financial Independence is the state reached when you have sufficient wealth that you no longer need to work. In other words, you have achieved financial independence when your money is working for you rather than you working for money. It is usually at this point that early retirement is possible. Achieving financial independence is not easy but it is entirely possible and is an achievable goal if approached strategically. With that said, here are some tips for getting started towards financial independence:
- Budgeting – Budgeting is one of the main cornerstones of financial independence. It is the small things that we do on a consistent basis that have the biggest impact on our financial success and on our ability to be financially independent. If we are to become financially independent, we must have the discipline to create and to work with a budget to guide all our financial decisions. We must be prepared to stick to the plan to spend according to the budget that we have created.
- Saving – Saving is another cornerstone of financial independence. In fact, it is near impossible to achieve financial independence without developing the habit of saving. Savings are the building blocks that create true financial independence. No matter how small, if done consistently and at a moderate rate of return, savings can grow and multiply exponentially. If you want to achieve financial independence and to retire early, you must start saving early and do so consistently over a long period of time. There is no time like the present to start contributing to a 401k or opening an IRA.
- Investing – Saving and investing go hand in hand when it comes to achieving financial independence. Investing is putting your money to work for you. If done correctly, investing should result in wealth accumulation and should set the pace towards financial independence. There are several investment options available and it is always a good idea to work with an experienced and qualified financial advisor to help you choose the best options for you. Your investment choices should be based on your level of risk aversion, your age and your specific financial goals. In other words, not every investment option is appropriate for everyone. And unless you know what you are doing, it might be best to work with a professional.
The above steps are not easy, but they are certainly necessary. I will also go as far as saying that if you are not saving at least 20% of your income each year…your F.I.R.E. may not come for a long time. Your first may blow out, so-to-speak. I have seen people retire in their 40s and 50s…but they were also saving anywhere from 40-50% of their income. One gentleman lived on every other paycheck – in other words he deposited one paycheck in his everyday checking, then saved the next one directly into an investment account. Now that’s DISCIPLINE!
In my opinion, I don’t know why anyone would not try and become a F.I.R.E. success story. Regardless of job satisfaction, longevity expectations, and current situation…wouldn’t most people want to be in a position to be less dependent on a regular paycheck? I don’t think we necessarily have to give up a good life today in order to have one in 40 years, but I do think that most can benefit from some balance!
The FIRE movement is strategically designed to help you to easily and efficiently achieve financial independence. It’s not too late to get started, but the sooner…the better. So get FIRED up in 2019!