(DailyAnswer.org) – Do you dream of attaining financial independence and retiring from your 9 to 5 in your 30s or 40s? Well, it is possible and practical. You can achieve this by joining the F.I.R.E. (Financial Independence, Retire Early) movement, which entails maximizing your saving and investing aggressively to achieve financial freedom and retire early.
Financial independence means attaining a level where you don’t have to work if you don’t feel like it but still have enough to keep you going. Let’s take a closer look at the origin of the FIRE movement, types of FIRE methods, and the steps to attain FIRE.
Origin of the FIRE Movement
The FIRE movement traces its roots from two books, “Your Money or Your Life” by Vicki Robin and Joe Dominguez and “Early Retirement Extreme” by Jacob Lund Fisker. The books stress the principles of simple living and investing aggressively. Millennials popularized the concepts and made it a movement. Their goal is to prove they could retire early if they plan for their retirement at the onset of their careers. The FIRE movement has gained much traction recently, attracting many followers.
There is a wide misconception that FIRE is meant for people with considerably high incomes. Unfortunately, this is not the case. Anyone can join the FIRE movement, depending on their retirement plans. The FIRE movement encourages people to do what they love rather than what they have to do by creating financial freedom.
Types of FIRE Movement Methods
Depending on their income and retirement plans, FIRE followers can apply different FIRE methods to attain financial liberation. The major FIRE methods include:
Lean FIRE – This strategy demands strict adherence to a minimalist lifestyle to plan for a modest lifestyle during retirement. It entails spending on basic needs and saving the rest. Lean FIRE followers save up to 25 times their annual expenses, thus achieving financial independence early.
Fat FIRE – This FIRE strategy is for people who aim at achieving financial independence and retiring early without reducing their current standard of living. It mainly works for people earning huge salaries such that they can maintain their current lifestyles and still manage to save aggressively. Persons who adopt this FIRE method aim at extravagant spending in their retirement, such as traveling and shopping. For this, they must save significantly more than other FIRE followers.
Barista FIRE – It is a combination of Lean and Fat strategies. It entails saving enough money to allow you to retire from full-time employment. However, one has to get a part-time job and combine it with their savings to live a less-than-minimalist lifestyle. This method has fewer sacrifices compared to the other FIRE methods.
Steps to Attain FIRE Early
Aspiring FIRE followers should understand that there is no shortcut to attaining financial independence and retiring early. It takes commitment, dedication, and utmost sacrifice. The following tips can guide you on your journey to attaining financial freedom and early retirement:
- Consult a financial advisor to help you choose the best FIRE method
- Live below your means to allow you to save more money
- Explore avenues that can help you make more money, such as side hustles or freelancing
- Invest 15% of your income into taxed-advantaged retirement accounts
- Limit your debts and establish an emergency fund
- Invest part of your money to increase your income stream
Benefits of a FIRE Lifestyle
The long-term benefits of a FIRE lifestyle make its sacrifices worthwhile. Some of the significant benefits of a FIRE lifestyle include:
- It eases the stress associated with full-time employment, especially at an advanced age.
- It increases one’s flexibility and frees up more time for personal development.
- An individual develops healthy financial habits.
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