Learn how to achieve financial freedom and retire early with the F.I.R.E. movement. Discover three tips to save more, reduce expenses, and increase your income.
TL;DR: Discover the F.I.R.E (Financial Independence, Retire Early) movement and learn three tips to achieve financial freedom and early retirement. Keep costs low, kick up your savings, and increase your income.
When it comes to retirement, most people imagine they would need a big money sum to live comfortably in their sunset years. In fact, according to a 2023 Northwestern Mutual study, Americans, across the board, believe at least $1.27 million is the magic figure they need to retire well. That amount fluctuates according to age groups, with people in their 50s believing they need $1.56 million, while those in their 60s and 70s think $968K and $936K will do the trick respectively.
Unfortunately, most peopleâs savings fall far short of these retirement goals, with respondents in that survey saying they had only managed to save an average of just $89,300.
No doubt your retirement number may differ, but handling your money super-efficiently can help you meet whatever goals you have in mind. After all, thatâs what the F.I.R.E (Financial Independence, Retire Early) movement is all about.
Todayâs edition of our newsletter will:
- Introduce you to the F.I.R.E movement
- Discuss three tips to help you reach financial freedom earlier
All About FIREđ„
The F.I.R.E movement represents the belief that you donât have to wait till youâre in your sixties to retire. Instead, by managing your wealth in an efficient manner, you get to attain financial freedom at a younger age and can retire comfortably.
Basically, if you have a higher saving rate on your income, (and find ways to increase said income and/or decrease expenses) it becomes faster to reach financial independence. An example of the FIRE application in real life is Grant Sabatier, who wrote the book âFinancial Freedom,â and saved $1.25 million by the age of 30.
Like any other movement or financial advice, FIRE has its criticismâ and you should always apply caution. But weâre going to focus on the positive side of the movement. Namely, tips to help you save more, reduce your cost of living and increase your income in order to reach your early retirement goals.
Keep costs lowđ°
Reducing your cost of living is one sure way to achieve a high savings rate. A higher cost of living means you have to pay more by way of expenses. This means higher rent, higher commodity prices (gas, groceries, etc), higher property taxes, and even higher prescription costs.
While a higher cost of living can be synonymous with better living conditions, sometimes, it really doesnât. You could live well, without breaking the bank. The key is to choose necessity and comfort over luxury.
For example, you donât need to buy a new carâ used ones serve the same purpose of moving you from point A to B, and they donât even need to mean youâre compromising on class. You could also save up on rent by searching for lower-cost areas over highbrow ones, so long as youâre not moving into areas that cause danger to your safety.
Working with a budget could also help you identify leakages in your income, and you could plug those holes just by focusing on needs over wants.
Kick up your savingsđž
The average savings rate in the United States today stands at 4.10%. While it is higher than last yearâs average of 3.60%, itâs a rate that indicates the difficulty of people achieving financial independence and meeting their retirement goals. All that can change if youâre able to save about 50% of what you earn.
As Grant Sabatier (mentioned earlier) puts it, he ended up with more money than he ever imagined or eventually need, after saving 82% of his income between 2010 and 2015. He also put his savings in a market index fund, which grew and compounded his earnings.
Check out our article on tips for budgeting, saving, and investing!
Get your âbagâ upđŒ
There is a relationship between what you need to live on per year, your annual income, and how much you can saveâ which just means it would be so much easier to save more with a higher income. The average cost of living for a single person in the USA is $38,266 per year, but on an annual salary of more than $100,000 per year, your savings start to add up very quickly.
Sounds like a high-income ceiling right? But itâs achievable, at the very least. To get to that income level, you could add a variety of side hustles or start up an online business. Some people build websites, some run Google ad campaigns, while others start writing online. With so many different ways to make money online nowadays, the possibilities are endless.
Are you looking to make some extra money in 2023? Check out some of the best online side hustles!
Is Being On FIRE The Right Stepâ
Adopting the FIRE lifestyle has many positive sides that can take you from level 1 to 100, but it definitely comes with plenty of sacrifices and of course, risks. As is the case with any financial advice, you need to ensure it aligns with your goals and is something that you are comfortable with. Especially when it comes to everything you may need to trade-off.
One thing about FIRE is that it doesnât have to be something you see through to the end. Some people stick with it for a 5 to 10-year period and then bounce. The outcome, however, remains that you end up with more money than you previously would have.
Ready to take control of your financial future? Take the first step by creating a budget, increasing your savings rate, and exploring income-boosting opportunities. Your future self will thank you!
