Being Financially Independent and Retiring Early (FIRE) is something that has become popular in this era. It is not just fancy as some might see but a fundamental financial goal necessary to be achieved. FIRE culture is impactful for both youth and millennials. What happens in FIRE is that people in their 30s or above make sequential financial plans that will get them retired as soon as possible with passive money as a source of income. Let us know about “Money You Should Save For Retirement”
There are some things that one needs to keep in mind before being financially independent like no longer depending on your monthly paycheck for your daily expenses. It is said that the money you have invested or saved, should be 25 times to 30 times your annual expense.
FIRE is often interpreted as retiring and not working anymore. But in reality, there is not a single person who has achieved Financial Independence and is not working. FIRE means ‘retiring’ and not ‘not working for money ever again’. It could mean that once you achieve your goal, you can practice whatever career you want. For example, if you are good at a certain sport, you can coach the young fellows if that makes you happy.
So, how exactly can you achieve financial independence and retire early? Well, here’s how:
Save As Much As You Can
Savings are inversely proportional to retirement age, which means the more you save, the less time it takes for you to retire. One such calculation says you must save around 45-55% of your monthly income today if you want to retire tomorrow.
Lower Your Expenses
It is obvious that to save more, you should have your expenses low. But it is easier said than done. How to lower your expenses and not get distracted? Well, the many daily routines of your life such as ordering food online can be shut, going on morning walks and doing yoga is a perfect alternative for going to the gym, using public transport as much as you can help up in saving gas, wearing not-so-fancy apparel will also be a huge help and so on.
Grow Your Income
Whichever sector you work or whatever job you do, it is not in your hands to grow your income, but one thing that is in your hands is knowledge. Knowledge of passive income sources like setting up vending machines in high-traffic areas, renting out rooms, learning new skills that work in the online world, selling domains, affiliate marketing, digital marketing, freelancing, and many more will open new doors of income to your home.
Live A No Debt Life
The money you owe to someone will one day be hard on your pockets. Clear all debts as fast as possible to avoid drainage of money and acceptance of incoming money else in the end, there would be nothing left to save, and all your money will lose its value.
Calculate How Much Money Will You Exactly Need Once You Retire?
According to many FIRE experts, you must have at least 25 times your annual expense money saved or invested before you retire while some suggest having at least 40 times.
Investment Tools For Your Millennial Years
Investing will play one big part in your ‘being financially free’ journey. While it is always advised to put your money into consulting expert advice, some investments are secure and give high returns. Here are some investing ideas you should follow if you like, FIRE:
- SIP (Mutual Funds)
The acronym SIP is Systematic Investment Plans and gives you the dual advantage of tax savings and amazing returns between 12% to 20% on long-term investments.
The minimum age for starting a Mutual fund SIP is 18 years or more. The Tenure should be at least 6 months.
The benefits of SIP:
- Pocket-friendly for those on low-budgets
- You can increase or decrease your investment rate
- Compounding interest over long-term investments
- Get into Trading
While the stock market can sometimes never be trusted, some company shares always return good and are profitable. If you get into trading, chances are, that you will either increase your money by 10x or more or lose it.
So, it is advised to follow this investment plan with consciousness and responsibility.
Frequently Asked Questions:
- When should I retire?
Calculate your annual expenses, and emergency expenses, and then multiply them by 25 times. That’s the amount you need to achieve retirement early.
- What are retirement expenses?
Various expenses such as household bills, travel expenses, and medical bills are included in retirement expenses.
- What would my monthly income be?
The income you will have will include your investment plans, passive income and which will exclude your expenses.
Conclusion
Don’t wait until it’s too late. Today in this unpredicted life, financial freedom is essential. You can never rely on monthly paychecks and not be stressed. Set a goal to put your life on the right track- Financial Independence and Retire Early (FIRE).
