Lifestyle

The Financial Independence Movement

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There has been a sweeping financial movement as of late. Short for financial independence, retire early, the FIRE movement has gained traction among those who want to escape the daily grind of work life early on. The FIRE movement is built upon the principles of heavy saving, downsizing your lifestyle, and investing aggressively to secure your future.

Previously, retirement was a concept only thought to be accomplished around the age of late 50s – early 60s. However, with FIRE, people hope to achieve retirement as early as their 30s. So how is this done? The formula is simple. As stated above, FIRE requires saving a large amount of your income, downsizing your lifestyle, and investing your money. Once you have reached a total net worth you are comfortable with, you can retire, and withdraw from your savings at a percentage that matched your gains in the market, without ever having to touch your principal investments.

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Financial independence depends on your overall annual expenses and is typically achieved when your net worth tops 25x your annual expenses. So for example, if your annual expenses are $40,000, then you would be financially independent when your total net worth is $1,000,000.

FIRE has become exceptionally popular with people who work extremely tough jobs that pay well but result in a lower level of happiness. People from all walks of life have become involved with the FIRE movement. However, not everyone decides to retire early when they reach financial independence. Achieving this means that you have opened the door to new opportunities that don’t require a typical 40-hour work week. Not having to be chained to a 5-day work week allows you to pursue any passion you may have, or live a lifestyle you were previously unable to due to having a job.

FIRE sounds pretty good, so you may be wondering why everyone isn’t doing it. Well, financial independence requires extensive discipline to achieve. You will need to become educated on investing, and understand how you can grow your money to meet your goals. It also requires a fierce dedication to saving your money and adopting a life of frugality to do so. Achieving FIRE boils to down fine-tuning your behavior towards money, and finding the fine balance between living a minimalist lifestyle without depriving yourself too much.

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If FIRE seems like something you’d interested in pursuing, the first step is putting together a plan for the next 5, 10, and 20 years of your life. Ask yourself why you want to pursue financial independence, and be sure to bring in your family or partner into the decision-making process, because this journey can be tough to take on alone.

Once you have this, begin tracking your expenses religiously. Most people don’t fully understand where all their money goes, so getting that under control will allow you to better track your progress.

Next, look at your net income and compare your expenses. Subtract any mandatory expenses from your income, and then begin to adjust your discretionary expenses from there. Now comes the fun part – saving. Find a system of saving that works for you, and begin researching low-risk investment methods to make your money begin working for you. The road to FIRE can be a tough one, but the end result can justify the means tenfold if done properly.

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