Financially Independent, Retire Early
You know you can get retired at an earlier age than that of the traditional norms. When I say early, I am not talking about retiring at 55 rather than 60. I am talking about retiring at 30, 35, 40 or even 45. Yes, there are so many people who are retiring at an early age as such and you may be wondering how. This was my first expression when I heard about this movement- F.I.R.E.
What is this F.I.R.E? Well, it means- Financially Independent Retire Early.
This movement is not for everyone. Unless you are ready to put a huge part of your earnings aside and save every bit of it, you cannot achieve financial independence.
According to you, what exactly is Financial Independence?
Naive me thought that financial independence means getting a chance to spend money as I want, purchase things that I want, and roam around. Basically for me it meant a fat bank balance.
But is it? The answer is a big NO. Financial Independence means a chance to not work for money. You don’t have to work to lead a lifestyle that you are leading now. Your investment returns and passive income should yield enough so that you don’t have to fret about earning money ever. This simply means your saved money will be working for you.
Is that possible in the first place?
Of course it is possible. Given that you have to make some smart investment choices which are long term. For suppose, investing in stocks is a good idea, investing in real estate will also yield you results until you are alive.
How Aggressive is a F.I.R.E Movement Is?
What percent of your salary do you save? 5,10,15 percent or at max 33.3% as said by experts. Do you think you will be able to retire early if you save 33.3% of your salary on a monthly basis? The answer will be a NO again.
When it comes to the F.I.R.E movement,you are supposed to save at least 50% of your salary and this could go up to 75% if you can. Woah, is this even possible. Yes, it is.
But let me clear a bit of air for you. The F.I.R.E movement doesn’t require you to earn a lot to save this much but at the same time you should have the privilege to save that much amount of money on a monthly basis. In a country like India where people live paycheck to paycheck and earn a lot less than minimum wage salary, saving this percent is tough.
So, do not stress on this movement too much if you can’t save a lot. It is not necessarily the only way to live right.
Now, let us proceed further, if you have the privilege to save that much every month, then invest it the right way. You can go with national and international stocks which will yield you money on a monthly basis or invest the amount in real estate so that you can get returns every month.
Remember that you cannot opt for F.I.R.E movement until and unless you have 30+ times of your early income saved.
This means if you are earning Rs.300,000 lakhs per year then you should have Rs. 90,00,000 with you in savings. If you are younger, then the amount should be even more.
Then only you can retire completely from your job and enjoy the early retirement phase. Once you retire, you can withdraw 3-4% of this amount every year. Thanks to the inflation, the amount that you have to withdraw will increase with time. So, be ready for that.
If you invest the amount in any real estate property, you will get the amount in the form of rent or lease on a monthly or yearly basis. This will cover your day to day expenses. Always remember to have a solid cushion. Having 30 times of your annual income may work right now but who knows how the future changes and how much you may want then. So, the safety cushion should be thick enough to cover you when you are in trouble.
How to Save?
Live below your means. Keep saving the amount. It is as simple as that. Basically you have to live very uncomfortably right now so that you can bear the fruits in future. Remember that the more you save, the earlier you will be independent financially.
How to Follow F.I.R.E?
I am going to be super honest here, in order to follow F.I.R.E, one has to be very disciplined and motivated. The relationship with money is not going to be easy, the person should be able to save up the same amount or even more every month without fail. Giving up certain things, certain impulse purchases, staying as minimalistic as possible are the need of the hour. It is not everyone’s cup of tea but once you do that without fail, you can literally retire whenever you have the required amount in the bank. If you get that amount within 2 years from now, boom just go and say goodbye to your job.
Do I Support F.I.R.E?
Yes, I do. When you are motivated enough you can do anything. There are people who earn very little yet ensure to support their kids through studies, marriage, etc. It is possible to save 75% of your earnings when you just give up on almost everything and live way below your means.
So many people did a lot more with very less amount and F.I.R.E gives them a chance to stay motivated.
There are several variations in F.I.R.E. Fat F.I.R.E is an easy-going option where you can save more without a lot of sacrifices whereas Lean F.I.R.E requires one to devote and spend very less. Depending upon the situation people pick one variation from these.
F.I.R.E gives a person required motivation to save and invest. If you are looking for a purpose to save your monthly salary, this can be it. I will do a series of post explaining to you how F.I.R.E can help you in your retirement phase next. Stay tuned.