Have you ever thought about what you will be doing after you retire? Maybe traveling the world and getting to know the places you always wanted to. Or maybe buying a beach house to enjoy the sun, the waves, and a cold drink. Any plan sounds nice, but all of them still sound like a distant fantasy. It really doesn’t have to be that way. If you follow the principles of the FIRE movement, chances are you will be able to retire before you know it and live all those experiences while you are still young.
What is the FIRE movement?
The FIRE acronym stands for Financial Independence, Retire Early. It is a lifestyle philosophy based on a savings and investment plan to follow if you’re looking to retire before turning 50 years of age.
Amazing, right? The idea behind this movement is to pursue financial independence to retire at a young age and be able to enjoy any experience without having to worry about working anymore.
Sounds like a tempting idea, but…
How to live out the FIRE movement?
To implement the FIRE movement in your life, you should prioritize two basic pillars: savings and investments.
How to save to Retire Early?
The amount of money you need to save if you’re looking to live out the FIRE movement is relative. You should analyze your finances with all your income sources, expenses, debt, etc. so you can figure out how much money you will need to retire and keep a nice standard of living.
Some experts recommend setting apart 70% of your income to a savings account. To achieve that, it is advised to implement some tips to save money and follow these simple principles:
- First and foremost, to adopt the FIRE movement, you need to get rid of all your debt. Think of any debt as a leak spilling the money you’re trying to save.
- Avoid getting into more debt. You will never get out of the debt hole if you keep digging deeper.
- Cut some expenses. Be intentional about being a more responsible and sustainable consumer to save money at home. Use the money you save not to spend it on fancy stuff, but to direct it toward your savings.
These principles are the basis of the FIRE movement, but for the savings side. Now, let’s check a little about investments.
Investing towards Financial Independence
Once you have some money saved (or even while you’re working on it), you may wonder what to invest in.
Besides protecting your money from inflation, investing will allow you to generate a source of income to provide for yourself when you quit working.
Just keep in mind that to be able to retire before the average, you should invest with the goal of generating sources of passive income. In that way, you will keep earning an income without having to exchange your precious time for it.
The investing strategy to use depends on you. You can opt for several financial vehicles:
- Dividend stocks: These are stocks from companies that repay shareholders with quarterly or annual dividends. If you feel comfortable with the unpredictable behavior of the market, these are a perfect option to generate a source of passive income.
- ETFs: Exchange-Traded Funds are bundles of stocks from different companies and industries. These are a good alternative to diversify your investment portfolio in case you’re trying to play it safe.
- Index funds: These are investment funds that try to replicate the performance of the market instead of beating it. They may not pay dividends, but they are a great choice to let your money gain value over time with the minimum effort involved.
Before choosing between these and other investment opportunities, make sure to analyze your situation and go for what suits you best. Think about the amount of money available you have to invest now and in the future and the time in which you are expecting to retire.
FIRE movement variants
If the FIRE movement sounds like a lifestyle you would like to adopt, you should know there are four variants for you to choose from:
- Lean FIRE: To follow this variant you need to be more disciplined. You should keep a tight budget and a frugal lifestyle.
- Fat FIRE: This trend allows you to be a little more luxurious. Here you’ll aim at retiring with a higher income than the average person.
- Barista FIRE: This is a variant adopted by people who left their 9-to-5 to find a part-time job that provides medical coverage and delay investing retirement funds.
- Coast FIRE: Similar to the Barista FIRE, with the difference that it has greater coverage of expenses.
If you are the kind of person who likes to take advantage of time and live life to the fullest, the FIRE movement could be a great choice for you.
Depending on the lifestyle you would like to keep in your future, just pick the variant that suits you best. The point is to manage your finances in a very strategic way so you can live a comfortable life free of risks and worries.
Make sure to learn more about how to make early retirement possible for you and all the different strategies to save and invest by checking out the rest of our articles. In that way, you’ll be ready to begin being part of the FIRE movement and achieve retirement before you even imagined.
