Financially Independent Retiring Early, or FIRE, isn’t a new lifestyle by any means, but the concept and ideals are getting more and more popular as time goes on. There are several reasons for this, though I won’t go into too much detail here. What’s important is the journey and the result of FIRE.
Essentially, FIRE is about maximizing your long term income savings rate in order to maximize the amount of compound interest you receive. People who are FIRE are able to live off their savings due to the amount of interest their accounts accrue. This type of lifestyle is passive income at its core.
Maximizing Your Current Income To Become Financially Independent Retiring Early
How do you maximize your savings rate? By reducing the amount of money you spend on survival and sustenance.
Cut off your cable. Downgrade from a smartphone with a data plan to a prepaid dumbphone. Instead of eating out, cook healthy meals at home.
FIRE is not about extreme frugality. Some people like to cut corners with their physical and mental health, but I want to make one thing incredibly clear.
How to Become Financially Independent Retiring Early
The basic idea is to simplify your lifestyle by cutting out frivolous expenses that tend to add up month by month, year by year. That extra money you save can be worth huge gains over time due to compound interest.
In addition to your regular working income, you can work side jobs or gigs in order to speed up the journey towards becoming financially independent and retiring early.
People who are following the FIRE lifestyle usually recommend to save up to 50% of your income. More is, of course, better, but 50% is a good start for the average person living in a median cost of living area.
YOUR MIND AND BODY ARE YOUR MOST PRECIOUS ASSETS
Don’t cheap out on diet, as it will have massive repercussions over time. Also, spend time with your friends and family. Don’t become a workaholic. Humans need social connection in order to be healthy. Isolation leads to depression and other illnesses.
I’ve met people, and know people in my family who were extremely frugal. My own grandmother went on a diet of two rice cakes, and one tea bag a day in her last few years of independence. The lack of a proper diet drove her into hospice care, where she slowly withered away mentally and physically. I know you can’t stop the aging process (at least for now), but you should not do things that actively harm your mind and body, and diet is one of the most important facets of health.
“Build Your Life, And Then Save For It”
It’s a mantra everyone should remember. You need to have a life first, otherwise, you will be saving for no purpose. Too many people get caught in the trap of extreme frugality. They spend their time and mental real estate worrying about money and the optimal use of everything, but money is just paper. You need to live your life enjoyably, otherwise, what’s the point?Money should never be the end goal. Money is simply a means to an end, and your time on this planet is limited. Use it wisely.
Money should never be the end goal. Money is simply a means to an end, and your time on this planet is limited. Use it wisely.
How I became Financially Independent Retiring Early
When I was 25 years old I was working a dead end job with no prospects. I wanted a way out. No, scratch that, I needed a way out. My way out turned out to be running my own business working from home online. It took me a while but once I was stable, I began to save money. Lots of it. I reinvested some back into the business, of course, but for the most part, I squirreled it away.
I’m pretty risk averse, so I decided to put most of my money in savings account. The rest, I used to outsource all the time-consuming tasks of my business. That business makes me a healthy living every month, and I consider it to be fully passive income. It’s not the most common route to becoming financially independent retiring early, but for me, it was the only way.
Now I’m 30 and I spend all my time doing the things I enjoy, like writing or fiddling with RPG Maker. I’m not really the type for lying on a beach, even though I do live in a beach town.
Running your own online business is hard work and very stressful. More stressful than most jobs, however, I believe the payoff to be worth it.
Financially Independent Retiring Early Roadmap
It’s not an easy thing to do, otherwise everyone would do it, but for those willing to cut out needless expenses, work hard, save, and invest, it’s entirely within reach. Like with anything in life, you need to want it bad to get it.
Finally, to be FIREd, you need to:
- Earn a good income
- Save 50% or More
- Cut Out Expenses
- Invest Wisely
Starting off younger is also a good thing. The earlier you learn to carefully manage your finances, the better off you’ll be in the long term. When I was in my twenties, my friends were off getting drunk and chasing girls while I was plugging away at my business. I saw what was on the horizon and I prepared for it.