Fire Movement (Where to start and how to succeed)

FIRE stands for financial independence, retire early. FIRE is a relatively new lifestyle concept that is gaining traction among the millennial generation. The FIRE lifestyle provides an alternative way to escape what many consider the nine to five rat race.

What is FIRE movement?

As stated above, FIRE stands for financial independence and retire early. There is a growing realization, especially among the millennial generation that the nine to five routine that we follow for the greater part of our lives, in order to make our dreams come true is not really as efficient as we believe.

We start working early in our twenties, till mid or late sixties before retiring for the remainder of our lives. These forty or fifty years of active employment drain us out and do not allow individuals to live up to their true potential. Consider this for an example, an average person wakes up early in the morning, gets their cup of coffee or tea for that morning kick and then leaves for work. The whole day is spent doing dull drudgery and then the average person goes back home in the evening, completely tired and drained of all energy.

This is how the days and weeks in our lives go by, this rat race as some call it, is seen as unproductive for individuals as it does not allow us to follow our passions in life. The problem here however is that we are forced to be a part of this rat race in order to become financially stable. Financial stability for most people however, comes when they are close to their age of retirement, by that time there hardly enough time and energy left to pursue dreams and passions.

It is this thought process, that gave rise to the concept of financial independence and retire early. The idea of FIRE movement is to aim at becoming financially stable, quite early in life so that one can retire early and follow their passions. It must be noted here that retirement, does not mean that a person following the FIRE lifestyle will not have to work after retirement. No, retirement here refers to retirement from the 9-5 routine.

How to FIRE?

FIRE lifestyle requires a change of perspective to begin with. The conventional or prevalent perspective that we all have is not compatible with the FIRE lifestyle. We are trapped in the 9 - 5 routine and only become financially stable quite late in life. FIRE lifestyle is the exact opposite of this. FIRE lifestyle requires some extensive planning and lifestyle changes to start off with.

The first aim for any FIRE enthusiast is to attain financial stability and independence. Financial independence in this context does not simply mean having enough money to fulfill your needs and wants. This is only one side of the picture. For a FIRE enthusiast, financial independence means being financially independent for the rest of their life and not just the present time. What does this mean?

Consider this for example. A person who does not follow the FIRE lifestyle, maybe financially stable and independent for the time being, but if they retire right now, will they be financially independent ten years down the line? Probably not because the way we live, does not allow us to plan that far ahead into the future.

FIRE enthusiasts on the other hand, try to beat the system by adopting personal financial management strategies aimed at making them financially stable and independent early on in life, allowing them to pursue their interests and passions in life.

So, first things first. What do you need to start the pursuit of FIRE lifestyle? It would be better to start off with some calculations first. One should start off by calculating the money they need for a month, a year, five years, a decade and so on. In the beginning this is going to be an arbitrary calculation to give you an idea of how much you will need to earn, spend, save and invest in order to become financially independent. The key here is to create budgets and stick to them.

For instance if an average person earns roughly $5500 per month, then this takes their annual income to $66000. The average saving rate in the U.S is around 7.6%, so if an individual earning $66000 annually saves at the rate of 7.6% then they would save roughly around $5000 annually. Loosely this would translate to $200,000 over 40 years. $200,000 is not enough to last a lifetime and there are many factors that we haven`t considered yet.

However, this simple calculation can be a good starting point for beginners, as it will help FIRE enthusiasts determine where they stand what strategies they need to adopt to attain their goal of financial independence.

It has been seen that most FIRE enthusiasts aim to become financially independent by their mid forties. That`s almost two decades of earning, saving and investing their income strategically. Roughly two decades to save around a million dollars or a bit above it, in order to not only become financially independent but also retire early.

Once the basic calculations have been carried out, it is important to adopt a completely different lifestyle. Earning and saving roughly $1 million in two decades is easier said than done, especially considering the current economic conditions due to the pandemic. This cannot be done unless proper personal financial management strategies on earning, saving and investing are followed.

FIRE Earning.

FIRE enthusiasts do not simply rely on their active income. Active income is the income driven from the main source of income such as your day job. FIRE enthusiasts look to create multiple income streams, these passive income streams keep generating income with very little or no effort. Passive income may include investment income from investment in stocks, ETFs and bonds etc. It may also include income in the form of royalties, blog income or any other passive income stream.

It is absolutely vital for FIRE enthusiasts to maximize their income streams because more income streams will translate into more income and thus a higher savings rate.

FIRE Savings

Saving rate is perhaps the most important factor for any FIRE enthusiast. An average person saves around 7.6% and during the pandemic induced lockdowns, this savings rate went up to as high as 33% for many households in the US. FIRE enthusiasts start at this base savings rate and then slowly change their lifestyle to take their savings rate as high as 40% to 60%. This means that if an individual earns $66000 annually then they end up saving $33000 at 50% savings rate if they are a FIRE enthusiast. With $33000 they will be able to save up to $660,000 over two decades, without accounting for investment income and compounding.

The key to increasing the savings rate is to adopt a frugal lifestyle. FIRE philosophy says that a few years of hard work and frugal lifestyle are worth it if one looks at the rewards, which come in the form of financial independence and the freedom to follow your passions and interests in life. Many FIRE enthusiasts, therefore go minimalist and adopt frugal lifestyle to cut down their expenses as much as possible.

FIRE Investing

Investing the savings is yet another crucial aspect of FIRE lifestyle. It is evident that two or three decades are not enough to earn and save enough money to become financially independent. The key here is to invest the savings so that they can create income on their own. FIRE enthusiasts, therefore adopt investment strategies that maximize the rate of return in order to create exponentially increasing savings.

It can thus be said that FIRE lifestyle, is in fact a completely different lifestyle that requires commitment most of all. It is however not some vague concept or a fad, many individuals have attained their goal of financial independence and early retirement, which proves that it is possible.

FIRE enthusiasts not only need commitment but also some sound personal financial advice before they can begin their FIRE journey. As you may have understood, having the right strategies is the key here. Many FIRE lifestyle enthusiasts have documented their FIRE journey and written accounts of what they did and what worked for them. These blogs and vlogs can serve as good starting point for the beginners.

So What Is Next

  1. First like and share this article with a friend so that you can work together.

  2. Believe it can be done and set a budget to stick to.

  3. Now that you are sticking to your budget lets find some additional income, there are many articles to assist you on this site.

  4. Now use the money saved from budget and begin to slowly knockout debt without going back into debt and create an emergency fund.

  5. Use the money from your side hustle to invest there are many articles on this site to help you find high yield savings accounts and open brokerage accounts.

  6. Let us know how things are going by joining our forum.

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