The FIRE Movement is big among millennials, but anyone can get on board. FIRE stands for Financial Independence Retire Early. It basically started with the younger generation looking to retire while they were still young enough to enjoy life. The movement caught on with stories of 30- and 40-somethings retiring early. Guess what? Anyone can join the FIRE movement! It doesn’t matter your age, your health, your income. If you choose to live your life the right way, you can retire when you want.
- FIRE stands for Financial Independence Retire Early
- The key to retiring early is by supercharging your savings
- Anyone can get on board the FIRE movement!
What Exactly is the FIRE Movement?
The whole concept is saving as much as you can (at least HALF your salary) and invest aggressively. Obviously, the more money you make, the more you can save. However, you don’t need to earn $100,000 annually, to think big. One thing the movement has done is get younger people to start thinking about retirement at a young age. How many 20 year olds do you know that are saving for retirement? If they are, they may be a part of the FIRE movement, without even knowing it.
Saving money is just one part. The other involves making the most out of the money you do spend. This may mean forgoing luxuries that many enjoy without care. That brand new smart phone, the latest Tesla, a trip to Europe? All luxuries that will eat at your savings and keep you working well into your golden years. Owning a home earlier in life has also gone by the wayside. More and more professionals stick with low-cost rentals that are not in their ideal neighborhood. All in an effort to put aside more money.
Remember, FIRE isn’t for everyone. It takes lots of dedication and sacrifice. However, everyone can take some pointers from these savers and apply it to their situation. Let’s discuss how everyone can use the FIRE movement as a blueprint for your financial success.
What Can You Do?
Save for Retirement
First and foremost is to start saving for retirement, if you haven’t yet. One of the best ways to guarantee a good return on your contribution is to take advantage of an employer match. Therefore, if your workplace plan offers a match, you must contribute enough to receive the whole thing. Don’t leave free money on the table! Next, look at an IRA. You’re limited to what you can invest in with a workplace plan. However, you are in control of your personal IRA investments. Here at IRA Financial, we recommend looking into a Self-Directed IRA. This allows you to invest in just about anything you want to. This includes real estate, precious metals, private businesses and cryptocurrencies (to name a few).
Also, you should consider a Roth IRA which allows for tax-free distributions during retirement. Max out your IRA, and then look to max out your 401(k) plan. For 2020, the IRA contribution limit is $6,000 (plus $1,000 if you are at least age 50). The 401(k) limit is $19,500 (plus $6,500 if you are 50+). While $25,000 may seem like a lot of money to put away for retirement (It is!), contributing as much as you can will only help. Moreover, if you are self-employed, you can look into a Solo 401(k), which more than doubles the traditional 401(k) limits.
Live More Frugally
Getting the best deal on everything is key to the FIRE movement. Never overspend. Again, this means renting an apartment, buying a used car, and cutting coupons. Further, credit cards are generally a bad idea! Unnecessary debt will not help you retire early. The consensus goal for FIRE users is to save 25x the amount you spend annually. Map out your spending habits for the week, month and year. See where you can save some money and figure out your end goal.
If you spend $30,000 per year, look at a goal of $750,000. Bear in mind, that should be your base minimum. Of course, your expenses may rise as you get older. Of course, once you reach your goal, you should continue to live within your means. This is especially true for those who wish to quit working. Although, not everyone in the FIRE movement wants to actually quit working. The idea is to have choices. You can choose to work because you want to, not because you need to.
Make More Money!
You may be thinking, “I’m already earning as much as I can at my job.” Your main job is important of course, but there are plenty of other ways to earn some extra cash on the side. Gig jobs are becoming more and more popular. This is thanks to app-based companies like Uber, DoorDash and GrubHub. Night and weekends can be used to earn money, instead of spending it. You may have a specific talent that can be used to earn some money. eBay, Etsy, tutoring, landscaping and dog-walking are just a few things that can put more money in your pocket.
The extra cash can be used to pay off your debt, save for your children’s college expenses and create an emergency fund. Of course, just because you have some extra cash on hand doesn’t mean you should spend it. If you really want to retire in the next ten or twenty years, you need to save as much as you can, and continue to do so.
FIRE Movement at Any Age
Yes, the FIRE movement was started by the younger generation. However, anyone can do it! If you have the desire to retire before you are 65-70 years old, utilizing the tips above will help. Even a 50 year old can retire in ten years even with nothing saved for retirement. By utilizing the catch-up contributions in both IRAs and 401(k) plans, you can save even more. By saving more and investing aggressively, you can reach your goal in no time.
Of course, living in turbulent times right now, you have to choose your investments wisely. Real estate and precious metals have shown to maintain value during global crises. In fact, prices might skyrocket as well. You must work with an experienced financial advisor to put you on the right track. If you are firm in your convictions, you can achieve your goals despite tough financial times.
As we mentioned earlier, you don’t need to earn six figures to save more for retirement. Yes, it’s more difficult because you can’t save tens of thousands of dollars each year. Again, you just need to be careful with your money. Put aside as much as you can and let time grow your nest egg for you.
Achieving Financial Independence
The FIRE movement is all about achieving financial independence as soon as possible. It’s not simply about retiring early. It’s about controlling your fate. The more you can save, the more you can do without, the sooner you will reach financial independence. Don’t let you age or income deter your dreams. It’s nice to be able to choose when to retire, however you must work for those dreams to come to fruition.
The first step is deciding if this is right for you. It’s okay if it’s not. The FIRE movement is not for everyone. On the other hand, everyone can do more to prepare for retirement. I would guess 99% of the population wishes they didn’t have to go to work on Monday. If you’re one of them, it’s time to be proactive with your financial goals!