The FIRE movement (Financial Independence- Retire Early) of the 1990s is still on fire. The FIRE storm originated with the classic book, "Your Money or Your Life," by Vicki Robin and Joe Dominguez, first published in 1992. The movement has remained relevant and now there is a new updated 2018 edition. The book has inspired millennials to change their relationship with money, live deliberately, spend mindfully, eliminate debt, save early and aggressively, and build wealth.
Do a web search for "FIRE financial movement" to learn more about the concept. Also, check out “Dave Ramsey” for advice on how to get out of debt and attain financial freedom. There are lots of good, solid financial books; read them all. You don't need to pay to learn how to reach financial independence; use your public library's resources. Do some research and learn for yourself; it's not rocket science.
Although I wasn't familiar with the FIRE movement at the time, I was inadvertently practicing its concepts from an early age by just following financial advice from my parents and grandparents and reading a large variety of books including the Bible, which has a lot of common-sense financial advice, such as a “the borrower is a slave to the lender.” I lived frugally, stayed debt-free, and saved. In my late thirties, I turned up the heat and saved super aggressively. As a result, I reached my own FIRE goal in my late forties and haven't worked since.
The ‘retire early’ part of the FIRE movement is not the traditional retirement most people think of; it means having the financial resources to do what you want to do, not what you have to do or what others think you should do. It means you now have a choice in how you live your life.
To reach financial independence and retire early, some tips are to:
- Start with a goal. This is the spark that ignites the FIRE in your gut. Think about what financial independence means to you. What is your goal at the end of the journey? Does it mean you don't have to work at all, does it mean you can work at what makes you happy even if it doesn't pay well, or does it mean something else to you? Knowing your drive, determination, personality, strengths, weakness, skills, talents, etc., what is it you want out of being financially independent and being able to retire early. Also, consider that over the journey toward that end that your needs and wants may change.
- Develop a strategy. This is the wind that fans the FIRE. Now that you know what you want to do with your life, you must calculate the amount of money you will need to achieve this goal. That amount will vary widely depending on what you want to do with your time, where you live, other sources of income, and how long you expect to live after retirement. You should also consider the effects of inflation. Some think that you should have a net worth that is 25 times your annual expenses, but this is just a starting point for your calculations.
- Get rid of debt and never go into debt. Debt is what quenches the FIRE. Carrying debt circumvents all other wealth-building strategies. Self-made millionaires will tell you that you cannot borrow your way into wealth, but you can borrow your way into poverty.
- Make saving your life's work. Extreme saving and cutting cost is what fuels the FIRE. You should strive to save 40 to 60 percent of your income. Collect money as a hobby. Become a hoarder of money. Have your savings and investments automatically taken from your pay each month so you are not tempted to use the money for something else. Take advantage of free money wherever you can, such as 401K matching at your job. Saving increasingly more should make you feel good. When you look at your neighbors' things you may feel bad about your situation, but when you think about their crushing debt, it makes you feel sorry for them. Then you look at your investment account and your progress toward the FIRE and you feel good about yourself. It is not what you have that makes you wealthy; it’s your net worth—your assets minus your liabilities.
- Learn to live a life of sacrifice. Sacrifice is the core of FIRE. You live well below your means. Housing is typically your greatest expense. You don't need to live in a dump, but you also don't need to impress others. You live simply and frugally so that to others you never seem to need anything, but you also don't appear to be wealthy. Your life of leisure will come when you reach your goal of financial freedom.
- Save as if your life depends on it. Aggressive investing fuels fans the FIRE. Don't try to get rich quick. Invest in low-cost stock and bond mutual funds (preferably index funds) with a good long-term record of return, choose your asset allocations carefully, and stay invested through all the ups and downs of the stock market, except for periodic adjustments to your asset allocations as needed. Have all the investment gains automatically reinvested. Compound interest is like magic; over time, a small investment grows into a huge investment.
- Earn more money. Add more fuel to the FIRE with extra income. Work extra jobs, Work overtime. Remember you are working hard during your younger years so you will not have to work later.
- Tipping Point. This is when you have a positive net worth.
- Crossover Point. This is when your passive income from investments equals your expenses. When you reach that point – you are financially independent. However, if you have long-term goals, such as retirement living in a CCRC you cannot stop here, You maintain a modest lifestyle so you build your net worth to the level needed to live in a CCRC.
Once you get the FIRE in your belly, the dream of CCRC living can become a reality.
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