Not a fan of work? Joining the FIRE movement might be right for you

(Stephon Walters)

FIRE movement – which means “Financial independence, early retirementβ€œ- encourages people to deliberately take the financial steps needed to achieve financial independence at a young age. While most FIRE enthusiasts aim to do so in their forties, many do so in their thirties or early fifties.” FIRE is knowing what is perfect for you.

FIRE is also about figuring out what financial independence is like for you. For most practitioners, this has reached the point where they can do whatever they want in life without having to rely on their employer for the money.

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How much is right for you?

Telling someone how much to save can be difficult because retirement expenses vary based on many different factors. A person retiring in South Beach, Miami will likely have a higher cost of living than a person retiring in Cleveland, Ohio. A person planning to travel the world will likely need more than one who wants to enjoy retirement by relaxing as much as possible.

If you are not sure how much annual income you will need, the rule of thumb is to have at least 80% of your annual income to maintain your current lifestyle. So, if you are currently earning $80,000, you will need $64,000 annually. If you plan to be more economical, you can lower the ratio and vice versa.

Once you know your annual goal, you can find your total savings goal using 4% base. The 4% rule encourages people to save at least 25 times their ideal annual income. For example, if you need $64,000 per year to live your life the way you want to, aim to save at least $1.6 million.

reach your goal

The best way to reach your FIRE goal is to use all available resources and go at it from multiple angles. To get started, you should make a plan to get rid of expensive debt such as credit cards, as this debt will reduce your cash flow and possibly offset your investment gains. Paying more debt interest than you earn on an investment is counterproductive.

In terms of investing, you don’t need huge returns. With discipline and consistency, all you need is low cost index funds To ensure that you do not overpay for expensive mutual funds, compared to Standard & Poor’s 500It often performs poorly in the long run.

difference in Expense ratios (Charged as a percentage of the value of your investment) It may not seem like much on paper, but over time the slightest difference can easily run into the thousands.

It also helps build a strong stake in dividend stock Because that can turn into constant passive income – especially if you invest in it Distributed Aristocratswhich are companies that have increased their annual profits for at least 25 consecutive years.

Dividends probably aren’t the bulk of your income, but they can be a great complement. For perspective, if you accumulate $100,000 in dividend stocks that average a 2.5% dividend yield, that means an additional $2,500 in annual income. Anything is better than nothing.

Not all, no play

There are undoubtedly sacrifices to be made in the FIRE movement, but that doesn’t mean giving up everything doesn’t bring you closer to your financial goals. You don’t want to rob yourself of any and all satisfaction or pleasure along the way.

A lot of what the FIRE movement is all about is being very deliberate in your spending; When your income comes in, every dollar of it counts, and you have a “job.” This job can be investment, billing, charity, entertainment, or whatever you choose.

Assigning a job to each dollar makes you more reflective about your spending and makes it easier to ensure it aligns with your values ​​and goals.

It’s more than retirement

A very important thing to note about the FIRE movement is that the “early retirement” part doesn’t mean you have to quit work jobs entirely and do nothing. It might mean good to you if you want to, but it isn’t You have to mean it.

The end goal is not just to retire early and never touch a job again; The goal is to retire “in” a lifestyle, job, or career to your liking. For example, you may have a passion for teaching children but cannot do it as a profession because of the pay. If you are able to get to the point where money is no longer a factor, you may finally be able to follow through. FIRE aims to get more people in a position to do such things.

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