FIRE – Financial Independence, Retire Early

FIRE – Financial Independence, Retire Early

The FIRE community is a group of individuals who want to retire early, to achieve financial freedom and follow a certain way of life. 

The FIRE movement is a lifestyle system, followed largely by millennials, that’s focused on the goal of achieving financial independence and retiring early. 

Some also call it a cult.

The FIRE lifestyle has intrigued many, who are more interested in the simplicity of life, and spending time with family, than being over exhausted with work. They aren’t interested in gaining more wealth in order to have more to spend; it’s quite the opposite. They are intent on living their best lives for less. And it starts by rethinking their relationship with money, with an eye to achieving financial independence. 

The protagonists of this movement believe that the real luxury is time, and this is the ideology that makes FIRE a way of life. People who follow the FIRE movement are looking to compromise the present to have a more balanced future. It may not be a more comfortable or luxurious choice, but a lifestyle, which will give you more time with your family, friends and yourself, and to follow your non-work related interests, early on in life. 

So if this is the kind of life that you are looking for, start saving and have the back up to be happily retired at 40.

The FIRE tsunami originated with the classic,”Your Money or Your Life,” by Vicki Robin and Joe Dominguez. The book inspires millennials to change their relationship with money, live deliberately, spend mindfully, eliminate debt, save early and build wealth.

One of the early pioneers of FIRE movement was Mr. Money Moustache, who in real life, goes by the name Peter Adeney and is based at Longmont, Colorado. While Adeney remains an important leader in the FIRE community, the movement has spread beyond him. FIRE devotees are known to gather in multiple forums, camps and retreats, and, of course, they write blogs.  

There is also a growing FIRE subreddit called /r/financialindependence that now has close to 5,00,000 subscribers. There, followers discuss strategies, techniques and lifestyles with the goal of simplifying and redesigning how they live, so they can reduce their overall spending and instead save and invest their money for the future. Community acceptance among like-minded people seems to be another reason the subreddit thrives. 

While many have found success with the FIRE movement, the truth is that most people would never be happy living such a lean lifestyle, even if they could sustain it at all. Those who adhere to a “financial independence, retire early” philosophy sometimes struggle finding partners who share their values and approach to money. They are often misunderstood by family members, who conflate the idea of not wanting to work until a traditional retirement date, with being “lazy” or “unambitious.” 

Before embarking on your FIRE journey, define what financial independence means to you.  Decide if financial independence means that you don’t have to work at all or does it simply mean, to take charge of your financial life, get out of the rat race and live according to your own rules.

Understand your goals, values and what motivates you toward financial independence and early retirement. Retiring early because you hate your job isn’t a sustainable goal. In fact, many FIRE devotees have a calling – something that they want to do – after hitting financial independence.

FIRE aficionados estimate that “once your net worth is 25 times your annual expenses, you’ve achieved financial independence.” Many in the FIRE community use the 4 percent withdrawal rule to decide what they can safely afford to take from savings each year without running out of funds.

One financial instrument that needs to be on the top of your priority list before you decide to retire early has to be a term insurance and Health Insurance cover. This security net would protect your family if something untoward happens to you. 

As Housing contributes to a major part of living expense, it is imperative that you have your own arrangement or enough to take care of this expense. Though the norm is of minimalist living under the FIRE movement, we still feel own housing is a better alternative, as it provides the comfort and also the hedge against any eventuality.

Other investments, like rental properties and passive income streams, are a big part of achieving financial independence, too. And so is frugality. The less money you need to live, the less money you need to save in order to fund the rest of your years.

To highlight the value of cutting expenses; for every Rs 10,000 per month you can trim, it means you need Rs 48,00,000 less to achieve Financial Independence at 40. (1,20,000 yearly expense x 40 = 48,00,000)

How to achieve the goal?

FIRE movement’s original concept is not “Retiring early with enough, but retiring early with just enough.” The basic math behind FIRE is ridiculously simple: spend less than you earn and save the difference in high return investments and allow compounding to do the rest. 

To make FIRE work, you need to combine both aggressive savings with extreme frugality. It is probably the most difficult part of FIRE for most people with a middle-class income. So while the rules are simple, getting there is, of course, another story. 

However we feel it is definitely possible to retire early with enough. 

There are three basic elements to FIRE: time, expenses, and income. While there are many who consider seriously opting for this lifestyle, investing in the right instruments is key to live a stress-free retired life in your 40s. 

FIRE – A most notable goal to aim for. But, the goal should be not to actually retire early, but to have the financial flexibility to lead and enjoy the life that you want at a relatively ‘younger’ age. 

The goal should be, to follow your passion and to satisfy your creative side apart from the mundane. 

It should be the time to create your dream, follow your passion. 

It should be to satisfy your entrepreneurial dream or to take a sabbatical, or Plan your Start up at the age of 40 or the house that you had always dreamed of.  

It should be to satisfy your travel bug, to visualize yourself with family in an Alpine Chalet or enjoying the Sunset at a pristine idyllic beach house. 

All of this can be achieved through some aggressive investment plans during your younger years.

With a proper financial back up, and investments that give attractive returns, living a life away from the corporate offices, can become a reality. 

Consult your financial advisor and start your aggressive investment plan to achieve your goal.

Stay Blessed Forever!

Happy Investing!

Sandeep Sahni

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