There are so much more fire people,
who are aspiring to live a life that is beyond the retirement age norms. Esotericisms’
methods of saving and investing are massively preserving and escalating, all
with the intent of reaching an early retirement age considered far from
realistic by today’s standards – 65.
What
is FIRE?
FIRE stands for financial
independence, retire early – it means a way of life aimed at obtaining early
freedom from work and the necessity to earn money. The concept here is to set
aside a large portion of earnings (or at least 50/50) and use the money to buy
income-generating assets such as stocks or real estate. When you reach a
certain level of saving, you can draw down on your savings and retire.
How
Does FIRE Work?
The fundamental concept about the
FIRE is the principles of 25x rule which states that one requires twenty-five
months-worth of annual income for retirement. For instance, if you require
$40,000 annual, then for over 40 years, you will be required to save $1
million. Once you get to that mark, you should be able to live off your savings
by taking one percent of your money and withdrawing 4% every year in your
retirement period.
Key
Strategies of FIRE
Aggressive Saving and Investing: Most FIRE enthusiasts limit their expenditure to 30
to 50 percent of their income, or less, and invest in passive index funds
or other investments that provide compounded returns.
Frugality:
Cutting down the expenses on living and living a frugal life is one of the
most important strategies of FIRE. This encompasses reducing wastage and
expense and increasing expenditure savings.
Increasing Income:
Same way, many work hard to increase their income whether by doing other
jobs or advancing in their careers to become financially independent
faster.
Variations
of FIRE
Lean FIRE:
In retirement, how to make do with very little money to work with?
Fat FIRE:
Having a budget at retirement to live a more comfortable life than some
other persons.
Barista FIRE:
Earning some autonomy in spending but also taking a low paying, part-time
job.
Is
FIRE for You?
FIRE involves working very hard,
passing up on opportunities to consume those hard earned wealth, and planning
ahead. Coupled with this, you need to figure out if it is okay for you to live
a life of no frills and save a lot of money for very many years. Also, risks
that are related to the future such as price risks and other uncontrollable
expenses have to be taken into account.
Conclusion
FIRE is a way of freeing oneself
from the need to work and start living life on one’s own terms when those terms
are financially independent, retired, and ecstatic. It is not for the faint
hearted but for those willing and able to plan, save and invest, early
retirement can seen as financially possible.
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