Dream of retiring early? In your forties or even as early as your thirties? Millions of people worldwide are following the FIRE (Financial Independence, Retire Early) method, a rigorous savings and investment plan.
Retirement is not solely about a specific age, but rather a financial threshold that allows you to live comfortably. No law states you must work until you’re 65. That’s a total myth, so why not change your life now?
FIRE investors’ main aim is to save as much of their annual income as possible during their working years, thereby hoping to attain financial independence and maintain it for the rest of their lives, also known as retirement.
Some many different ways and ideas can help reduce your expected retirement age. Here is our FIRE Checklist to help you in your quest.
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What does FIRE stand for?
So what does FIRE stand for? Well, it is an acronym
FIRE – Financial Independence, Retire Early
It is a way of life with the primary goal of saving and investing aggressively, keeping expenses extremely low, and identifying various ways to generate additional income.
What is the Fire movement?
The FIRE method is a lifestyle movement with the sole aim of achieving financial independence and retiring early. The term retirement can mean different things to each person. It’s not always about lying on a beach doing nothing all day, but a choice as to whether you have to work full-time or not.
The central aim is to generate a steady income through passive investments to support a comfortable retirement lifestyle.
The fire movement was inspired by the book “Your Money or Your Life,” by Vicki Robin and Joe Dominguez, published in 1992, which advocates for financial independence.
It has gained more appeal in the last few years, particularly during the pandemic, with many younger generations setting early retirement as their new financial goal and life aim.
Where to start with FIRE early retirement planning?
You don’t need to earn a fortune to start working towards this. Start with budgeting. Know where your money is going and create a budget that you can stick to.
Saving a few pounds here and there can add up over time and make a difference.
Your income shouldn’t discourage you from building your wealth—anyone can do it.
You don’t need a high-paying job to build wealth, invest and save. Here is a FIRE checklist to help you get started working towards your dream.
FIRE Checklist
The sole aim of gaining financial independence and aiming being able to retire early
Frugal
Find ways to keep expenses as low as possible. Living exceptionally frugally lifestyle. This is the first and most important step in the FIRE checklist.
Frugality is about being sparing, thrifty, not wasteful. Careful use of money in the most minimal way, food, clothes, living cost etc. Enabling savings to be built up faster.
Extreme budgeting is how to save money.
Example of Frugality
- Create a meal plan, batch cook and freeze.
- Use up leftovers
- Unplug small appliances
- Ride a bike
- Turn off lights when not needed
Extreme Saving
Save as much money as possible (from 50% up to 70%)
You must save at least half of your income
Consider looking at the 50-30-20 Rule
Paying off Debt
Get out of debt. Pay off all your consumer debt as first priority. Chop up credit cards and attack your debt!
Become debt-free first then start investing for retirement.
Work through each debt starting with the one with the highest interest rate. Then after repaying that start using the money saved from the previous debt to start paying off the next highest interest rate debt etc
Boost Income
If you want financial independence and to retire early try and boost your income —you must find creative ways to make more cash.
- Side hustle -Creating a small business at night and at weekends.
- Evening job – Delivering pizzas for example
- Investment Property -Buy a rental property to give you a constant income.
Additional income source plays a huge role in the FIRE movement working towards you dream of financial freedom and potential early retirement.
Investment
Investment is core to FIRE financial freedom and retirement plan it is about throwing huge chunks of income towards achieving the overall goal.
Remember poorly performing savings account can see your savings eroded due to inflation you need to invest it instead. Give savings the best chance of growth.
Dont be overly reliant on one source of income but have a mix of investments rather than everything in one pot which is not a good idea.
Spend Wisely
Think carefully before buying anything. Avoid buying luxury items.
Never impulsively buy something.
Think before getting a takeaway, a cup of coffee or even that pre packed sandwich. All these can add up and are a luxury.
Save money don’t spend it, think whether this is a luxury you can do without.
FIRE Movement Example
You must know what you want from your perfect life. This FIRE checklist is excellent, but if you don’t see what you are aiming for, why bother? Well, here are some examples of why it’s worth it…
Many people dream of travelling the World in a campervan, as van life has become a more common occurrence over the years. People can make money from being a YouTuber, but if that is not your thing, get a job that allows you to work remotely (WFH), and your living costs are extremely low, allowing you to save and invest while on an adventure.
Invest in stocks and shares that can provide a steady income, but also be aware that this can fluctuate depending on market conditions.
Buy a rental property, as everyone needs somewhere to live, making it a generally stable investment, even if the market fluctuates. This can provide you with an income while you pursue your true passions, and also serve as a backup plan in case circumstances change.
Create several small side hustle businesses, such as a SaaS (Software as a Service) or consultancy work, in between surfing.
Travelling is many people’s dream, and the cost of living in other countries can be much lower, so you can benefit even more.
Start taking action on your FIRE checklist to make your dream come true.
Retirement Planning
The FIRE movement has prompted younger people to consider retirement planning and what retirement and financial freedom mean to them.
Can you retire in your 30s or 40s? Yes, but you need to be incredibly disciplined and make huge sacrifices early on, which can be difficult. It also helps if you have a well-paid job to build your savings pot faster.
So much do you need to save for early retirement?
Aim towards 25 times your estimated annual spending. From this retirement pot, you should only withdraw a maximum 4% each year.
FIRE Checklist: Start planning your perfect future
This FIRE checklist is the basics you need to start thinking about and planning for your future. You don’t need to work your whole life, but be clever with your financial planning.
Save and invest – make good financial sense.
FIRE movement isn’t the answer if you hate your job because you need to be happy to make these sacrifices for the bigger picture.
Define what you would like your retirement to be like, and start making a plan to achieve it.
We hope this FIRE checklist has inspired you to plan for your future adventures.
