There’s a movement that’s happening right now. It’s called the FIRE movement. And no, it’s not about educating kids on the dangers of wildfires taught by Smokey the Bear.
It stands for Financial Independence Retire Early and it’s starting to gain some momentum and is catching the public eye.
I discovered this movement while I was pregnant with my second child and it took me by storm and I fell deep into the rabbit hole. I was already a financial nerd but now I found something I could really geek out on!
FIRE is all about achieving financial independence so that you have the freedom to do whatever you truly desire. Now that’s something I’m all about, who isn’t really? But how do you get there?
We have all been conditioned by society that we have to work until we are 65 and then that’s when we can retire and live the good life. You go to school for years and years and then it’s off to the workforce, grinding it out year after year, payment after payment of mounting debt that you’ve incurred along the way. Stashing away a little cash (hopefully) so that you can build up a nice little “nest egg” to retire with. But what if you figured out a way to retire so much earlier than that? What would your life look like? How would you spend your days?
Time is our most precious resource and it’s non-renewable, so what if you could essentially “buy” more time for you to do what you love? And spend that time with those you love?
We get so tied down to our 9-5’s and all that it entails. Having a full-time job is never just about an 8 hour shift. Think about the time it takes to get ready for said job, the drive time, or the time spent decompressing after you get off from said job. Our jobs zap many more hours of our life energy than we realize. Check out Vicki Robin’s book Your Money Or Your Life to learn more of what I’m talking about, it’s one of my favorite books and really opens your eyes to how much things cost in terms of life hours and she sort of spearheaded this entire movement.
That’s where the FIRE movement comes in. There’s a whole community of people who have figured out how to optimize their savings strategy so that they can retire early and pursue their passions. It’s creating a “plan A” to live your life you want to live. It’s actually really simple too because it’s all in the math.
In a nutshell in order to achieve financial independence you need to figure out your annual expenses, multiply that by 25, and that’s generally the amount of money you need saved up in order to sustain your lifestyle for the rest of your life, assuming a 4% annual withdrawal rate. For example, if your annual expenses are $30,000 then you would need $750,000 saved and you would essentially be financially independent and would never have to work another day in your life.
Sounds great right? But how do you save that much money? Basically it’s all about controlling and lowering your expenses and increasing your savings rate.
By controlling your expenses it means getting out of debt first of all if you have any. It means living below your means. It means living a life of intentionality. Buying only what you need, not everything you want. Being content and not allowing lifestyle inflation to creep in on you. Not buying brand new cars every few years or the newest tech gadgets. Not going out to eat every day. Just making sound financial decisions in general. Take a look at what you are spending every month and ask yourself if spending this money now on these things is adding value to your life, if not then make cuts. Getting your monthly expenditures down as low as you can without sacrificing your values/needs is key.
The second part, saving a significant percentage of your income, means to save more than the average, to save more than what “society” recommends. Americans have an average savings rate of 3%. If you’re doing 5-10% then congrats, you are way ahead of most people. Americans spend almost every dollar that they make, why is that? It’s because we are living in a consumer driven economy. We are inundated with society telling us what’s normal and how we need all these things in our lives to make them better. What would happen if you could turn that around? What if you saved more than you spent?
There’s a fantastic article by Mr. Money Mustache (who retired at the age of 30) where he breaks down the simplicity of saving in order to retire early (it is a game changer!) and it will blow your mind. The math shows that if you are saving 5% of your income then it will take about 66 working years for you to retire! That’s a lot of working! If you double that savings rate to 10% (which is considered above average) then it will take 51 years. Still a very very long time.
But here’s the idea, if you decide to say “hey I make X amount of money, however, instead of spending all of it, I’m going to find a way to invest and save 30, 40, or even 50% of it, that way I am essentially buying years back of my life and can retire tens of years sooner” then you are well on your way to financial independence. Newsflash: we do not have to wait until we are 65 to retire. With a little intentionality and discipline almost anyone can retire early. This isn’t just for high income earners, this can be done by anybody as long as they make a plan and want to do it. It’s all in the math. If your values don’t align with living below your means than this will be very difficult to achieve.
If I were to ask you right now “if you didn’t get paid to do your job would you still go into work everyday and do it?” The answer you’d give me is probably no, you would not. Then if I asked you “so what would you do with all that time?” you would probably have a whole list of things/passions/hobbies that you like to do. Maybe its fishing, or maybe it’s building a treehouse, or knitting socks for kittens. Whatever it is that ignites your soul and makes you want to do a happy dance is what you’d want to be doing with all that time. So think about it, you can either work for 66 years at a job you may or may not like, putting away 5% of your income, anxiously awaiting for your two days off every week, or you can take the road less traveled and save much more, like 50% of your income and only work for 17 years and have the rest of your life to do whatever you want. You have the power to decide. How bad do you want it?
The more you can save now the sooner you can retire. Period.
Everybody’s life situations are different. Some people have been able to reach FIRE in their 20’s or 30’s by saving 75% of their income, and while I realize this seems unattainable and ludicrous to most people just know that there are lots people who have done this or are doing it, people just like you and me, average income earners, not multimillionaires who inherited fortunes. And while you may not be able to save that much right now you can make changes to slowly increase your savings rate. Small things add up. Cut the cable, quit buying so much “stuff”, take your lunch to work and quit eating out all the time, stop borrowing money, don’t buy new cars every few years.
For me FIRE is more about the financial independence, not so much the retire early. I want to reach financial independence so that I can have the freedom to make choices that are in my best interest. Whether that’s if I decide to spend my days sipping champagne and doing yoga or pursuing my passions and creating passive income I will have the freedom to so. It’s not about making enough money to quit my job and sit at home and watch TV. It’s about creating the life I desire and being able to have the flexibility to stop working whenever I want.
The other thing about the FIRE movement is that it’s not about deprivation. People who are achieving early retirement are still doing the things they love throughout the process. They have a goal and are willing to evaluate what it is they spend money on and make cuts if it doesn’t add value. It’s not about living this poor deprived life so that one day you can actually enjoy your money. It’s about creating a life now and for the future so that you can live the life you want to live.