What is F.I.R.E.?
F.I.R.E. stands for Financial Independence, Retire Early.
The basic philosophy of FIRE is that if you aggressively reduce your expenses and save 50% to 70% of your income, you can invest those savings and retire in your 30s or 40s (depending on when you retire).
One formula used to explain the example is saving $750,000 and earning an average of 7% each year on this money. If you spend 4% of this money annually, you will be able to live (retired) on an income of $30,000.
You will not only not touch your $750,000 principal, but you will also increase your nest egg by $22,500 each year.
Other objectives of FIRE include increasing your income through side hustles, reducing or eliminating interest-bearing debt and looking for freebies to reduce your spending even more.
Many people involved in FIRE also seem to be heavily into and knowledgeable about investment strategies.
People who try FIRE often soon realize it’s too difficult or mathematically impossible, based on their incomes and expenses. However, following the basic tenets of controlling your spending and increasing your saving and investing can help you to at least retire on time and with adequate retirement income.
Even if you are not interested in drastically changing your lifestyle, it’s a good idea to navigate this website to learn how to really improve your personal finances.
If you’re single, for example, you might be waiting until you’re in your 30s to start working on your retirement savings because you’re income is too low right now and you have lots of debt. However, waiting 10 years to start investing can decrease your potential retirement nest egg by $250,000 or more due to the loss of 10 years’ worth of compound interested.
Additionally, once you hit your 30s, you might have children, credit card debt, a mortgage and other expenses.
Learn to start smart-spending, saving more of your income and investing correctly NOW and you’ll be amazed how far ahead of the game you will get.