✅ Do you want to transform from employee to Entrepreneur but unable to take that bold step due to lack of financial stability?
✅ Are you looking to quit your job and enjoy stress-free life? 🧘♂️
✅ Do you want to pursue your hobby or passion but not sure how to manage your finances?
Introducing Financial Independence and Retire Early (FIRE)
You might be doing some investments and have FIRE in mind but still there is some confusion on what you are doing is right, whether you will be able to retire comfortably, will the kitty accumulated will last long for late years of your life and so on…
You might be confused with technical terms like: Financial Planning, Retirement Planning, Saving, Investments along with FIRE
With all these terms, you want to have a secured future with money, Right? Well in fact who doesn’t but a secure future.
There are various strategies and one must understand that saving and investment plays an important role in becoming financially independent. a replacement set of term introduced to the present world to those who want to be Financially Independent and quit working is coined as FIRE (Financial Independence and Retire Early)
Financial Independence and Retire Early (FIRE) is a lifestyle moment which come with focus on attaining financial independence by aggressive savings and investment that permit the Individual to retire far before traditional budgets and retirement plans would allow.
By investing more than 60%-70% of income towards savings and investments💰, followers of the FIRE movement should get ready to quit their jobs and live solely through passive income by taking withdrawals from their investment portfolios decades before the traditional retirement age of 60-65.
Now, by retiring at young age and to cover living expenses after retirement, FIRE enthusiasts could take withdrawals from their investment kitty, typically around 3% to 4% yearly to sustain their lifestyle and also ensure kitty grows every year after offsetting to withdrawals.
Considering the dimensions of the savings and desired lifestyle, extreme diligence is required to keep an eye on expenses, inflation and continued maintenance and re-balancing of your investments.
FIRE can be achieved through aggressive investing, much more than typical 15–20% average investment percentage of individual income. Assuming income and expenses are constant, and ignoring investment returns, observe the following:
⚠️With savings rate of 10%, 9 years of effort is needed to save for 1 year of living expenses.
⚠️At a savings rate of 25%, it takes 3 years of effort to save for 1 year of living expenses.
⚠️ At a savings rate of 50%, it takes 1 year of labor to save for 1 year of living expenses.
💸 At a savings rate of 75%, it takes only 0.33 years of effort to save for 1 year of living expenses.
From above data points, we can judge that as savings rate increases time to retire decreases substantially. For this reason, it is highly suggested to those pursuing FIRE to save more than 60% of their income.
At you can see at 75% savings rate, you will need to work around 10 years to accumulate 25 times the typical annual living expenses by ‘the 4% safe withdrawal’ rule of FIRE.
We can broadly categorize FIRE movement based on Individual Lifestyle and retirement corpus one has accumulated as follows:
Advantages of FIRE
Recognizing your Personal Finances: FIRE forces you to confront your spending and your saving. It also keeps your attention focused on your assets, liabilities, and your net worth.
Once you’re trained (analyzed) and ready with weapons (money to invest) and have clear picture of target (FIRE), you’ll start to reflect on what’s more important to you. If you recognize what proportion is your worth, you’re more likely find yourself managing your finances quite well.
Flexibility together with your Goals: In every stage of your life, there’ll be sure goals and demands of yours. FIRE helps you to be flexible together with your goals. People can achieve financial independence by investing while they are still working in their regular jobs.
FIRE Supports Living longer Happily: People working day and night are having high stress levels at home and at work. Achieving FIRE helps people lower these stress levels and having a peaceful life forever. Having less stress is not only good for you but it will also strengthen your personal and family relationships
The biggest benefit of adopting the FIRE movement is to find time to spend on what matters the most and to live more kind heartedly. Another generous way of living the FIRE life is by making charitable contributions to the needy and ensure we support others by giving to the most privileged
Drawbacks of FIRE
Many people have different understanding of what exactly financial independence retire early means. However, most of the people within the FIRE community understand that the definition is personal.
So depending upon when a person attains FIRE and the amount of kitty he/she has accumulated few people in FIRE don’t work at all where as few others take up side hustles, part time jobs, monetize blogs, or generate income from other hobbies.
Who Can pursue FIRE : Misconception about FIRE is that, it is only for people earning in Lakhs a month but in reality that was not the case. Even those who earned thousands a month achieved financial nirvana of FIRE.
In fact, the FIRE popularity is increasing every passing day with diversified people. It doesn’t distinguish between poor and rich, but it helps build wisdom of financially independence.
Not a sure shot rule: If you don’t setup a foolproof strategy for your FIRE kitty, it could face bottlenecks due to circumstances like recession, pandemics like corona virus. Individuals aspiring for FIRE should consider for worst case scenarios that one could face in life and have a plan in place so you don’t have to worry.
Rushing to Financial Independence Too Fast: Another problem with those who try to pursue FIRE is that folks might face initial hiccups when getting started and quit the FIRE moment while few others try to reach FIRE too fast but face difficult challenges during the journey.
One should understand that FIRE takes time and patience and Financial independence is not about living a joyless life.
Ways to achieve Financial Independence and Retire Early
1️⃣ Set your goal for Financial Independence using the 4% Rule: Knowing how much you need to save and how much is the safe withdrawal rate is the first step to learn to become Financially Independent. So to find out how much to save, the ratio depends upon individual life style and capacity.
Find out how much you spend This includes everything that you simply might possibly spend during a year including rent, utilities, groceries, gas, bills, fees, fuel, medical expenses, etc.
Multiply it by 25 or 50 depending upon how many years you would have to live during retirement
Then apply the formula to generate the figure: Saving / Withdraw-able amount
This will offer you enough expenses to withdraw 4% for years and years during retirement life.
2️⃣ Choose your FIRE lifestyle: The goal of Financial independence can be better and practically implemented and achieved by knowing your lifestyle first.
For instance, If you love to live your life lavishly and spend more then you can choose Fat FIRE style or if you manage with minimal spending, you may choose Lean FIRE style. Every individual is different, one must understand his/ her individual capacity
3️⃣ Earn more corpus : One has to earn considerable amount to save for future. It will take lot of time to save that big required amount to fulfill your current lifestyle in future as well.
So, finding alternate income source can lessen the saving time and fasten the saving. these alternate income sources can be investments, trading, side business, freelancing and so on.
4️⃣ Cut unwanted costs: One must cut spending cost and raise savings. Cutting living costs mercilessly might scare people, but one should focus on conscious spending, and thus extra expenditure can be automatically controlled.
5️⃣ Others: Paying all the debts before retiring, having proper insurances and having a back up plan will help one to retire peacefully
Time and discipline are all you would need to execute your plan. Keep saving and investing, but don’t forget to live in the present while you can.
Conclusion 👍: FIRE is a way to achieve your financial freedom and by just investing early you can achieve it.
Start Investing early, Invest wisely and Retire Early
If you need personal consulting on how to plan your savings and investments to achieve Financial Independence and Retire Early (FIRE), I’m just a call away, ring me up on +91+ 9963678795
