Have you heard of the FIRE movement
Published 04/28/2022 | Last updated on May 01, 2022
If you've ever heard of financial independence or retiring young, you may have heard of the FIRE Movement. This movement is a way of living, saving, and investing that is gaining more and more followers. They are people committed to smartly generating income to create their early retirement. We are talking about the FIRE movement, which aims to ensure that citizens can enjoy their retirement before 50. Yes, and let's see how.
The FIRE Movement, an acronym for "Financial Independence Retire Early," is an exciting option if you disagree with the traditional work and retirement model and if you want to wait until old age to receive a pension with which to enjoy your life and money. The fantasy of retiring at 40 is becoming a reality for many young people worldwide because of this movement.
The basic model goes something like this: participants live as austerely as possible, saving half or more of their income between their 20s and 40s. It's all about financial independence: the goal is to have a sufficient savings fund and live as simply as possible.
And while these ideas have been around for a long time, online communities have allowed the FIRE movement to really take hold in the last decade.
We invite you to read our article Learn about financial freedom.
What is the FIRE movement?
F.I.R.E., or Financial Independence, Retire Early, is a movement that started in the United States in 2010 but has managed to spread to different countries. It is said that the proposal arises in books on education and financial independence written up to a decade before. However, the "boom" of this movement has been ignited by millennials.
As we mentioned in the introduction, FIRE is a movement that proposes early retirement through leading a minimalist and frugal lifestyle. It promotes the accumulation of investments, income diversification, cutting debt completely, eliminating non-essential expenses, and saving aggressively to not depend on a retirement pension or a minimum wage as an employee.
It is estimated that compared to the average person's shared goal of saving between 10% and 20% of their income, FIRE followers could aim to save up to 50% and even more.
The goal of financial independence FIRE is clear: each individual must set up a savings and investment plan to allow them to enjoy a passive income as soon as they retire. And if they can retire as quickly as possible, at the age of 50, all the better.
The first thing that followers of this trend do is analyze their personal or family finances. That is, expenses, income, debts, and the potential profitability of their properties or investments. The calculation makes it possible to establish how much money they need to live on when they retire.
We invite you to read our article Benefits of financial education.
Guidelines for joining the FIRE Movement
If you think that the FIRE Movement will allow you not to work, the reality is that this happens only in the end. In the beginning, unless you have a very purposeful life, you will find yourself having to work even harder than the average person to achieve this ambitious goal.
Now, if you are aware of all the effort to achieve your "FIRE goal," then let's delve into the guidelines that the movement dictates in its "roadmap" for achieving financial freedom at a very young age.
Control expenses
Take a close look at your expenses and reduce and control them down to minor details. This control will help you put more money aside for savings and make ends meet with money to spare.
In controlling your expenses, it is of utmost importance to cancel altogether or cut what is considered unnecessary and dispensable on an excellent survival, eliminate as soon as possible all outstanding debts, and avoid borrowing money.
Practicing super savings
Most of those who practice this movement say that to achieve their goal. They plan to save approximately 25 times the amount they think they will spend in the first year of retirement and to do so. They must go through a strict process of aggressive saving.
If you want to get started by taking the first step, here are the best money-saving tips you can implement today.
We invite you to read our article Do you know how to make a personal budget?
Smart, long-term investing
Once they have a base of money saved, each person in the FIRE Movement draws their own investment plan to multiply their income with a long-term vision.
The sources of an investment may vary according to the interests and objectives of each person. However, this is not a subject that can be taken lightly, so it is essential to get a lot of information or seek professional advice before doing so. Here you have an option to make your income grow.
The 4% rule
This rule was proposed in a study conducted by Trinity University in 1998. This study suggests that it is possible to foresee the amount of money we need to save during "early retirement" without depending on income.
Is this situation possible?
Retirement is one of the essential unknowns of our economic system. The recent pension reform does not solve the basic problem of fewer and fewer contributions to Social Security, which does not bode well for the future of public pensions.
This situation is becoming increasingly important to think about private plans because of the far from optimistic forecasts, which is still challenging to instill in the people's mentality. However, we are becoming more and more aware of it.
Therefore, in this context, it is essential to consider different options, such as one that comes from the United States that ensures retirement and anticipates it.
At El Paisa Multiservices we want to help you with your finances in Hartford, CT. You can contact us if you have questions about our services.
By Ingenuity & Solutions
