Today, we get to the most exciting part of our reboot! The long term goal is financial independence! Maybe even FIRE! Never heard of it?
Eryn from Simply Successful Sisters is going to give you an introduction.
What is FIRE?
If you’ve been in the personal finance space in recent years, you’ve probably heard the term FIRE (financial independence retire early) pop up more and more. While the concept itself isn’t new, it’s garnered additional attention lately.
Let’s break the term FIRE up into two parts:
Financial independence is a term meaning your assets are enough to support you financially such that you don’t need a standard 9-5 job. This means that should you need to quit your job, you have enough money to get by each day. The goal for many Americans is that you become financially independent at some point around the age of 65 so that you can retire from your job.
This is where the retire early component comes in. With the FIRE movement, many participants strive to become financially independent long before traditional retirement age and therefore decide to retire early from the workforce. Those who retire early spend time doing whatever they want with their time instead of being chained to a desk for 30+ years. Many start their own businesses, volunteer for charities, gain new skills, and spend time with loved ones in this newfound time.
How Does Someone Achieve FIRE?ChooseFI wrote a wonderful post with the 10 Pillars of FI that summarizes the movement in great detail. There are several intricate strategies for becoming financially independent, many of which are simple to understand but take discipline.
To boil it down to the simplest components, FIRE is about keeping your expenses low (very low in some cases) and investing as much of your income as you can. Many members of the FIRE movement are saving 50% or more of their income each pay period and investing it
Why? Well, if you supercharge investments for a decade or so, those investments will eventually hit a point where they are making so much money for you that you no longer need a 9-5 job. Mr. Money Moustache is known as one of the pioneers of the FI movement and he wrote about the Shockingly Simple Math Behind Early Retirement. The math works.
People across all income levels and across all industries have successfully reached financial independence by:
Essentially, you spend time and money on things that add value to your life, and stop doing the things that don’t.
Can the Average Person Retire Early?
The average person following the average first-world spending habits cannot retire early. According to Magnify Money, the median American household has just $12,120 in savings in March 2019.
If that’s you, you are not in a good position to retire early...yet. With some intentional effort, you can become financially independent and even set yourself up to retire early - if you want!
First, you will want to take an assessment of your finances by setting up a budget with your income and expenses.
Second, read some of the aforementioned resources to get a pulse on the main tenets of financial independence. Educating yourself will help you understand if this something you strive to achieve.
Third, take action. Taking in all the financial knowledge in the world means nothing if you don’t do anything with it. So take steps each day to get closer and closer to your financial goals.
Should the Average Person Retire Early?
If you save a significant portion of your income and make smart financial decisions, you can retire early.
Financial independence looks different for each person, so even if you don’t aspire to retire early, you will benefit from learning about the FIRE movement.
I’ve always been a financially-savvy person but since I’ve gone down the rabbit hole of FIRE, my finances have exponentially improved. I don’t know that I’ll ever retire early, but knowing I have that freedom makes every sacrifice I make in getting me there worth it.
Eryn is one half of Successfully Simple Sisters, a website she runs with her twin sister, Kaila, to help women simplify their faith, family, and finances. Eryn is a digital marketer by trade and has a passion for all things web, especially for optimizing websites, SEO, and marketing analytics. Eryn loves making things from scratch and curling up with a good book. She enjoys spending time with her husband, Kody, and her son, Drew (2).
Hi! I am Ali, a homeschool mom who is passionate about science, managing my money and time well. Unfortunately, with an army of tiny faces, I am always still kind of a mess.
I was tired of not having a judgement free place to talk about money troubles with other moms. So I created one!
Click on the picture above to join my Facebook Group, Money Savvy Mommas.