Sunday, March 29, 2020

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The Power of Frugal FIRE Math

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This post may contain affiliate links or sponsored content. For more info: Disclaimer

Today I would like to try and introduce a new term to our Financial Independence Retire Early (FIRE) community, it’s called Frugal FIRE Math.  It describes how for us FIRE walkers, $1 dollar can actually equal $25.  

On the path to Financial Independence, you will undoubtedly encounter ideas that make you rethink everything.  The first one is the same for everyone, just the concept of financial independence and early retirement (FIRE) itself.  It truly is life-changing once you discover that FIRE is possible and you don’t have to follow the masses into endless consumerism.  

The other ideas will likely differ for everyone but it will help you get to FIRE while changing your perspective on things you thought were solid in your mind.  

Where the ideas come from will also be different, but they will come.  The FIRE community is filled with people with brilliant ideas.  

Some of my favorites are: Mr. Money Moustache, The Mad Fientist, and Go Curry Cracker to name a few.

Another source of valuable information and entertainment is podcasts. 

This is how I was introduced to Frugal FIRE Math, only it wasn’t called that on the podcast. 

One day while listening to a podcast I heard:

“this is a case where $1 dollar equals $25 dollars” 

Frugal FIRE Math: Financial Independence
$1 can equal $25? Yes!

I had to rewind and hear it again. The host was explaining how if someone plans to retire early using the 4% rule, then for every $1 they spend they need to save $25 to achieve financial independence (FI). 

So by frugally looking for expenses to cut, you can actually get to FI faster. This is because, for every $1 dollar of expenses you cut, you actually save yourself from having to accumulate $25 dollars.

If you’re like me and plan to use the 4% rule during early retirement then every dollar not spent on a recurring expense results in not having to save $25.  This made an impact on me and I immediately started to reconsider all of my “necessary expenses”.  

Over the weeks that followed, I managed to cut expenses that I felt weren’t absolutely necessary.  I changed the settings of my thermostat to shave a few dollars off the electric bill, changed to a higher deductible health plan, and finally, I learned some new recipes to cook at home more often.  

I ended up saving about $100 dollars/month or $1,200/year with those changes.  Using the 4% rule this translates into $1,200 x 25 = $30,000/Year less that I will have to save up to reach FIRE.

This is a powerful tool that anyone with the goal of FI can apply to their lives and I call it Frugal FIRE Math!  

For some, applying this might result in becoming too frugal (if that even exists).  Just remember to practice balance and enjoy the moment as well.

If you are feeling inspired by this article and would like to read more about Financial Independence you can read all of my posts at www.inspiretofire.com. You can also find helpful tools like my FIRE spreadsheet to calculate your FI Number and Date and my Roth Conversion Ladder Tool. All available for free.

I am also very active on Instagram @inspire.to.fire

How much were you able to save using Frugal FIRE Math?

Does cutting back your expenses feel different after reading this article?

Share your experiences and thoughts in the comments sections

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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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