What does your financial future look like?
You've worked hard for most of your life, yet you can't seem to pay off your debt to attain the financial independence you want. Each time you receive your paycheck, it looks as if you've spent the money even before you received it. Still, you want to achieve financial freedom to live your dream life. While seeking solutions to your financial woes, you come across the term FIRE. And you're wondering if FIRE is right for you.
Look no further. In this article, we will discuss the benefits of FIRE, the best FIRE books to read, the best FIRE podcasts to follow, and the best investment options to get FIRED up.
What is the Meaning of FIRE?
FIRE is the short form of financial independence, retiring early. It is a financial freedom movement that is founded on the ideology of excessive savings and investments to retire earlier than the traditional age for retirement. Supporters of the FIRE principles achieve this lofty goal of saving funds for retiring early by frugal spending and aggressive savings.
The inception of the movement is from the famous finance book, Your Money, or Your Life, and it has become widely acceptable amongst millennials.
Benefits of FIRE
Imagine attaining the financial freedom which allows you to live your dream life after retirement, at a young age. This is exactly what you obtain from subscribing to the FIRE principles. Although some financial experts consider the movement a facade with stringent ideologies, if practiced you can improve your financial situation in a short time.
Not minding the somewhat disadvantages of the principles the movement supports, here are some great reasons why FIRE is right for you.
The major goal of people who adhere to FIRE is to become financially free. To attain financial freedom with FIRE, it is necessary that you save and invest at least 25x of your annual expense. Your savings are then distributed across several investment options to create a viable portfolio that provides moderate to high returns on investments.
Also, attaining financial freedom allows you to live your dream life while still actively working. And as a result, you can take on more growth and life-enhancing opportunities without worrying about bills anymore. Just like other FIRE adherents, you could decide to continue working or retire once you have reached your desired amount to pursue other life goals.
The second aspect of FIRE is retiring early. After attaining their FIRE number, some adherents of the movement may retire early to live off the interests accruing from their savings and investments. For people who joined FIRE early, the retirement age ranges from 30 to 40 years. And because of the adherents' early retirement, they have ample time and opportunities to engage in activities they love.
After attaining financial independence people can withdraw up to 4% of their investments and savings to help them maintain their current lifestyle.
The Debt-Free Lifestyle
Another benefit of FIRE is that it helps you to maintain a debt-free lifestyle. Although debt is good for business growth, on a personal level it impedes financial growth. This is because when you incur debt it reduces your purchasing power. Plus, access to debt fosters the growth of consumerism. But if you are financially disciplined, you are likely to buy things that you need and not items you want. Thus, living a debt-free life.
To further improve your lifestyle, there are many online money making skills you can easily learn to supplement your income
For you to achieve FIRE you must be disciplined enough to delay gratification, especially when you can afford it. You should be willing to let go of the many pleasurable things you buy and go for the essential items only. When practiced over a long time, you begin to notice positive changes in other aspects of life.
For instance, in the area of food, you can begin eating more healthy foods and completely cut out junk foods. And this aids you in saving extra bucks to achieve your desired goals.
As a result of committing to attaining FIRE, you must begin frugal living to enable you to live within your means. This doesn't mean that you have to forgo the basic things you require to live an enhanced life, but you must be willing to make decisions that have positive impacts on your financial goals. For example, you can cook healthy meals at home and take them to work, instead of buying an expensive lunch. Likewise, you can watch local football games with your family, instead of buying expensive movie tickets. The goal here is to seek cheap alternatives for every item you buy or the services you subscribe to.
The Freedom to Change Jobs
Most people love changing their jobs for better opportunities elsewhere. With the achievement of FIRE, it becomes much easier to change jobs. This is because you are financially independent and can comfortably pay your bills even without having a job. And as a result of this, you have more negotiating power to ask for the compensation and benefits you deserve.
Also, when you have attained financial freedom, you can easily start jobs or businesses that are related to your passion without minding the paycheck.
How to Calculate FIRE
To calculate your FIRE amount, there are several factors that you should take into consideration. These factors range from annual income, age, savings, investments, debts, dividends, amongst other components of your finance. The focal point for attaining financial independence under the movement is to save and invest at least 25x your annual expense.
There are different calculators you can use to get the amount you need to achieve FIRE. These calculators have different elements to help you arrive at the amount you want. Here are the best calculators to use:
Endeavor to test the various calculators to see which one of them works best for you. Although these calculators are different in terms of layouts and factors included, you will arrive at an amount that will help you get fired up.
Best FIRE Books to Read
To increase your knowledge and understanding of FIRE, you need to read up on other people's experiences. And what better way to get the right information about FIRE than reading books with good strategies. Plus, you will gain first-hand experiences from people who have successfully achieved FIRE. Not only that, but you will also learn from their mistakes and how best to navigate through the challenges you might face on your financial freedom journey. These are the best books to read.
- Your Money or Your Life by Joe Dominguez and Vicki Robin
- The Intelligent Investor by Benjamin Graham
- The Little Book of Common Sense Investing by John C. Bogle
- Set For Life by Grant Sabaiter
- The Millionaire Next Door by Thomas J. Stanley
- The Bogleheads Guide to Investing by Mel Lindauer, Taylor Larimore, and Michael LeBoeuf
You can purchase these books in audio formats and listen to them on the go or while doing chores at home.
Best FIRE Podcasts
You can know more about FIRE by listening to podcasts of individuals who have successfully attained FIRE. This is a great way to get vital and relevant information from people who are fired up. Also, you can join the various podcast shows to ask questions and share your experience as well. Here are the best podcasts you can listen to.
- Mad Fientist
- BiggerPockets Money
- Afford Anything
- Money Matters
- Mister Money Mustache
- FIRE the Family Podcast
Be sure to check out these podcast shows and know which best suits your goals. Also, there are communities on Reddit, Quora, Facebook, and Twitter where you can connect and share ideas with like-minded people on your FIRE journey.
Best Investments to Attain FIRE
Aggressive savings is needed if you want to attain FIRE. But this is only half of the coin. The other aspect of achieving FIRE is to put your funds in secured and profitable investments. When you invest your funds in interest-yielding assets, you prevent your money from losing its value because of inflation. There are numerous profitable investment options available to you. As a rule of thumb, it is important to learn extensively about each opportunity before making financial commitments. Here are some investment options to consider for reaching your FIRE number.
- Real Estate
- Exchange-Traded Funds (ETFs)
- Index Funds
- Mutual Funds
- Passive Business (Blog, eCommerce)
If you are new to FIRE, it is advisable to put your funds in low-risk investments to let the value increase as opposed to leaving it in your bank account. And after you have gained more investment knowledge and experience, you can then invest in portfolios with higher returns.
Can I join FIRE with kids?
Yes, it is possible to join the movement and attain financial independence even with kids. Many people became aware of FIRE after they've had kids, and they were able to reach their goals. You can achieve financial freedom even if you've got kids. Listening to the FIRE the Family Podcast can help you learn how others achieved their goals while raising children.
Do I need multiple sources of income to reach FIRE faster?
Yes. You may need to have additional streams of income to attain FIRE, especially if you joined the movement late into your career. Even as a means of gaining financial freedom, it is necessary to have extra sources of income as this gives you a chance to enjoy a more quality life. Check out these 50 side hustle ideas to help you get started in reaching your desired amount of money faster.
Whether you are just starting your career or you have been working for a while, adhering to FIRE can help you attain financial freedom, even if you do not want to retire early.
Although it's a bit difficult to adhere to these principles, attaining financial freedom is highly rewarding. And as you have read about the various aspects of FIRE, the next step is to take action.
As summed up by Roy T. Bennett, "Dreams don't work unless you take action. The surest way to make your dreams come true is to live them."
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