Thursday, June 4, 2020

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FIRE Movement: Financial Independence Retire Early

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The Fire Movement is an exciting movement of people who are dedicated to retiring decades earlier than expected. FIRE stands for Financial Independence Retire Early.

Middle-income earners use the following formula to achieve early retirement:

  • High savings rates (50-70% of their total income)
  • Frugal Living (Minimalism)
  • Low-cost Stock Index Fund Investing

Financial independence is usually achieved within a short period of time. Usually around 10 years. Fire Movement adherents are typically those in their 20s, 30s, and 40s who save as much as 70% of their incomes so that they can stash away up to 25 times their annual living expenses. With early retirement, they take roughly 4% out of their nest eggs each year to live on.

Reaching Financial Independence as a result of money from your investments paying for your expenses in your 30s, 40s, etc. would be an amazing achievement. You can decide to take things easy and not work anymore or work and do something that you love. The main takeaway is that you’ll have the freedom to spend your time and your life on your own terms.

Imagine being a Digital Nomad making a respectable salary and saving even more while living in Bali, Indonesia. Achieving Financial Independence even faster while living abroad would be the “ultimate life hack”.

How Did the Fire Movement Start?

Your Money Or Your Life

Your Money or Your Life was published in 1992 by Vicki Robin and Joe Dominguez. In their book, they popularized the idea of achieving financial independence instead of spending ones best days and years of their life working a 9-5 job to make money. These two authors created a grassroots movement called the New Roots Foundation. Through this movement they educated people on the benefits of living simply and financing their independence.

Their book showed people how to:

• Get out of debt and develop savings
• Save money through mindfulness and good habits, rather than strict budgeting
• Declutter their life and live well for less
• Invest their savings and begin creating wealth
• Save the planet while saving money

The folly of trading time for money is the core concept of this book. Since our time is the most precious resource that we can never “earn back”, this book emphasizes that we shouldn’t trade our life to buy things that don’t matter….such as a big house, new car, etc.

“If you live for having it all, what you have is never enough.”

Vicki Robin

Present-Day Fire Movement Community

25 years after Your Money or Your Life, the Fire Movement came to exist. Out of the Great Recession, many people came to realize that the status quo of living an expensive lifestyle was unsustainable. Consumerism did nothing to help young people dig their way out of student loans and mortgage debt. Social Security as it exists today wouldn’t exist “when we’re older”.

The future looked bleak as consumerism and keeping up with the Joneses ill-prepared young people for their future financial security.

Although the future looked bleak for many, Pete Adeney created a blog called Mr. Money Mustache. In it, he promoted his frugal lifestyle which re-bought his “freedom”. After having saved 60% of his income with his wife, they both retired after their son was born. His readers are known as “Mustachians” who follow his lifestyle suggestions on his blog so that they too can achieve financial independence. Pete Adeney achieved mainstream attention as writers, bloggers, and podcasters pursued the Fire Movement.

A Step by Step Guide to Get You Started

Fire Movement Guide

Here are a few facts to make you think seriously about Financial Independence:

  • 40% of American adults don’t have $400 to cover unexpected expenses
  • 25% of American adults have no retirement savings
  • 65% of Americans save little or have nothing

As a whole, Americans have been mismanaging their money and leaving our future selves vulnerable to life’s unexpected setbacks. Let’s get started and see how we can change this and secure out future with our own power!

Step 1: Make a List of What Makes You Happy

What are the 5-10 things that make you happy on a weekly basis? Compare these things with your loved ones and think about your value system. How does it align with your spending?

Step 2: Calculate How Much You Have

Figure out your net worth. Your net worth will include all of your assets (cash, bank accounts, retirement funds, investments, and items of value) minus your liabilities (consumer debt, student loans, car loans, etc.)

Step 3: Figure Out How Much You Spend & How Much You Save

Where is your hard-earned money going? Most of us are shocked when we realize just how much we spend on daily expenses like food and gas.

Step 4: Reduce the “Big 3”

Reorganize your life to meet your new goals! In order to save money, you can start with reducing the big 3 expenses in your life: Housing, Car, and Food. You can downsize your home or find roommates, buy a used car or utilize public transportation, and cook all of your food at home. Ditch the Starbucks and make your own coffee that’s just as delicious! By doing all of these things, you can increase your savings rate by at least 30%!

Step 5: Make Your Savings Work While You Sleep

Every minute that your money is sitting in your savings account is a missed opportunity for making additional money. Money in an index fund, real estate, etc. will make you money while you sleep. It’s a much better decision than leaving it in a savings account!

Step 6: Increase Your Income

Extra income means that you can FIRE faster. There are many ways in which you can make extra money: Blogging is one of the best ways to make extra income. Especially if you create your own website and use affiliate marketing to reach thousands of people. When you increase your savings, finding ways to make additional income will only help you.

Step 7: Find Others Who Adhere to the FIRE Movement

There are numerous groups such as [FIRE] Financial Independence & Retire Early on Facebook where members share tips on how to achieve financial independence. When you surround yourself with like-minded people, your chances of success are much higher.

Benefits of the Fire Movement

Although it’s not easy to achieve financial independence with the Fire Movement as it’s a long road that requires a decade of dedication, you can enjoy the many benefits of retiring early if you start today.

Work In Something You’re Passionate About

With the Fire Movement, you’ll have the ability to choose work that you are passionate about and enjoy doing. There’s no more working a job that you hate and the best thing is that you’ll be working for yourself. You can choose a hobby that pays you for doing what you love like photography. You can make passive income by uploading stock pictures or working with clients of YOUR choosing. You can volunteer your time at a non-profit and help others in need. All of the things that you thought you’d be doing in your 60s you can do much sooner and make an impact sooner in life. You’ll feel much more fulfilled knowing that you gave back to your community.

Spend Time With Those That Matter Most

When we are young, it feels like it would take forever to become adults…only to realize how fast life goes. Our parents age, “babies” are suddenly young adults in the blink of an eye, etc. It’s a fact of life that we never get our time back… and when it’s too late we lament that we wish we had more time to spend with those that we love the most. It is only during those times that we regret having let our bosses dictate our time off. We regret giving the power to spend our time with our loved ones to them.

Location Independence and Traveling

FIRE Movement: Travel Wherever Your Heart Desires
FIRE will give you the freedom to travel while you’re still young

On average, for those of us in the private sector, we get around 10 days of paid vacation after one year of employment. It’s almost never enough to do the things that we want to do such as traveling to an exotic location or visiting our loved ones that live far away. Once you reach Financial Independence however, you can travel as much as you want and spend time with your loved ones indefinitely. No more begging your boss to approve your Paid Time Off request!

Imagine the opportunities that arise when you have the freedom to choose where you want to live and travel. Taking a month-long vacation is a possibility. You can fully explore another country and enjoy authentic street food without having to worry about project deadlines. No more dealing with an overbearing boss and duplicitous co-workers. You’ll be living life stress-free!

Even better, is making the most of geo arbitrage: the difference in the cost of living between two areas. Imagine taking that 4% yearly payout from your investments and spending a year in a low cost of living area like Manilla, Philippines or Bangkok, Thailand. You can stretch your money even further! You can travel full-time and explore what this wonderful world has to offer…and you don’t have to be a retired 65-year old to do it!

Can You Actually Achieve Financial Independence With the Fire Movement?

The answer is a resounding YES! For those of us that can deal with sacrifices and live frugally, achieving financial independence in our 30s and 40s is totally doable, especially if you have a High-Income Skill. Adhering to the Fire Movement is not complicated and relatively simple to accomplish if you have the discipline to save and make the necessary lifestyle changes required. I hope that this information was of some value to you. Let me know in the comments what you are doing to achieve financial independence! Good luck!

Digital Nomad Sagehttps://www.digitalnomadsage.com/
Remote Worker | Millennial | Entrepreneur Mission: To provide informational value to fellow digital nomads & remote workers while helping them to achieve financial freedom by ditching the 9-to-5!

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Remote Worker | Millennial | Entrepreneur Mission: To provide informational value to fellow digital nomads & remote workers while helping them to achieve financial freedom by ditching the 9-to-5!
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