- What is F.I.R.E
- I.R.E stands for Financial Independence, Retire Early
- I.R.E was inspired by the 1992 book, Your Money or Your Life
- It’s a financial movement defined by extreme savings & investments
- How F.I.R.E Works
- By saving 70% or more of annual income, F.I.R.E aims to retire early and live off small withdrawals from their accumulated funds
- I.R.E practitioners aim to save 25x their annual expenses. This strategy is based on two common retirement strategies: The 25x Ruleand the 4% Rule, each of which help people set up “safe” rates of withdrawal from their retirement savings.
- Maximize your income while minimizing expenses
- 3 types of broad approaches to FIRE:
- Fat F.I.R.E-Being able to retire without altering your current standard of living. This requires the most aggressive saving and investment strategies
- Lean F.I.R.E-Being willing to live a minimalist lifestyle to cut expenses to bone in retirement. Lean FIRE individuals aim to survive on say, $25,000 annually.
- Barista F.I.R.E-This is between the two extremes of Fat and Lean F.I.R.E. Maintain more than a minimalist lifestyle in retirement through a combination of savings and part-time or gig work.
- How to get started with F.I.R.E
- Planning-Having a comprehensive, detailed plan is key to this. Understanding how much you realistically need to save versus how much you can comfortably decrease your expenses.
- Increase revenue-You may also have to be willing to increase your income whether that be by getting a second job, getting a promotion, or creating additional revenue streams to achieve your goals.
- Discipline-After you have a detailed financial plan, you need to have the economic discipline to stick to your budget.
- Investing-Investing is one of the core values of F.I.R.E. Set aside a set percentage of income every month for investment to allow you to grow retirement savings to a point where they can reach financial stability in your later years.
- Risks of F.I.R.E
- You don’t save enough & outline your savings
- Sequence ore turns risk
- You’re miserable changing your lifestyle so drastically
- If you’re planning on F.I.R.E to retire early (30’s-40’s), you may not be able to take full advantage of employer-sponsored retirement plans such as a 401(k).