Moo-Lah Mama

“Financial Independence Retire Early is less about financials and more about freedom.”

― Manoj Arora

If you haven’t heard of the FIRE movement, no need to worry, I hadn’t either until the last few years. FIRE stands for: Financial Independence Retire Early. Not to mention there are now more than a dozen different types of FIRE so let’s dive in below.

The 4 Pillars of FIRE (Financial Independence Retire Early)

1. Financial Independence

This here will be out ultimate goal. FIRE isn’t just about retiring early and sitting around doing nothing, it’s about being free and feeling financially secure. The goal here will be able to have enough savings and investments to cover your living expenses without relying on a paycheck. We’ll deep dive in another blog post, but the general rule of thumb is to have 25 times (x) your annual expenses, which allows you to draw down 4% per year in retirement.

• Example: Say I find that I generally spend $4,000 a month on expenses for my family. I would then take that amount and times it by 25 to get my goal retirement number. That number would allow me to draw down roughly 4% per year without losing my investments.
  • 4,000×25 = $60,000/year. $60,000×25 = $1.5 million needed for retirement to be able to withdraw on average 4% per year
  • Free calculator available here that will factor in other pieces of your situation: Retirement Calculator.

3. Frugality

If you are looking for a true FIRE movement experience, then frugality would be considered the cornerstone of the FIRE philosophy. With that being said, this is where a lot of others struggle with FIRE. In another blog post I’ll be covering the different types of FIRE so that you can still continue to enjoy your life in the moment.

3. Aggressive Saving and Investing

This will vary here depending on which type of FIRE you are looking to achieve. However the general rule of thumb is to save 20% of your take home pay MINIMUM. This can be a daunting task, some things you can do to ramp up to the 20%:

• Raise/Promotion: If you get an annual raise at work or a promotion, the next time you get one, take that percentage and put it towards your 20%. You have already been living off your current income, if you change before the new amount takes effect you can put it right into your savings and investments and won’t notice the difference.
• Cut Back: This is not a fun one, but take some time to look what you are spending your money on, is there something you really don’t need? Are you paying for subscriptions you no longer use? If so cancel or cut back and save the difference to start building.
• Side Hustle: There are exhaustive lists out there on side hustles that can make anywhere from a couple hundred to thousands of dollars. If you are really serious about getting to the 20%, find a good side hustle and put those dollars to work.

Nerd Wallet has a great article talking about how much money you should be allocating to where. While this may not work for everyone, it does have some good guidelines to start with – How Much Should I Save?

3. Mindset Shift

While going through the FIRE movement like myself and many others, your mindset will start to shift. You will start to see a change in how you view money, work, and time. It promotes the idea that wealth should help you LIVE your life to the fullest.

Thoughts?

What are your thoughts on the FIRE movement? Leave your comments below or head on over to the contact page to ask questions or let me know what else you want to hear about.