The FIRE (financial independence and Retire early) movement has become well-known for the last 2-3 years in India. Every young investor dreams to achieve the state of FIRE movement as early as possible leaving no stone unturned.
As the journey to financial freedom is not as easy as it is being projected everywhere however I have tried to clarify the road map to achieve the successful financial freedom.
Before going into the details of the movement spread around the world, let us first understand about the fundamental basis of this movement.
We will have discussion on important points related to FIRE movement and financial planning
What is the FIRE :Financial Freedom
FIRE is a short form for “Financial Independence, Retire Early.” The main central feature of this movement is very high aggressive saving and investing (more than 60-70 % of your income) with the target to retire in your 30’s or 40’s
Fire Movement calculator
According to the movement, you need to amass a net worth of 25 times your expected annual expenses to achieve financial independence. The amount may be put in any debt instrument for about 7-8 % return.
After saving the amount ,you may withdraw a maximum 4% each year and the amount will never end till you live life.
To make the financial independence successful, you require having an emergency savings amount for six months expenses aside .This money will be parked in saving account to get the excess immediately.
Other expenses will be taken care by main corpus.
Process for FIRE: Financial Freedom
The process of financial independence has the steps :
“A Penny Saved is a Penny Earned”
One should analyze the expenses and to minimize the expenses, one may control eating outside ,smart shopping on discounts, removing unnecessary expenses ,proper utilization of appliances and energy conservation etc
Ways to increase Income
To increase the income one should target to achieve both active and passive income sources. The ways can be to learn new skills which can increase earning capability and per hour rates .The improved productivity will earn more income efficiently .One may start side works with main work and upselling the existing product .
Invest the saved amount and take advantage of compound interest. Investing in stocks or index funds will compound the money in long term.
Tax planning to be done to minimize the tax burden.
Why FIRE movement important
Why people aspire to achieve financial independence? Because they want the freedom to do whatever want to do. This desire drives them to create a plan and follow the plan diligently.
“Ultimately, financial independence isn’t about making all the money in the world. It’s about being responsible with the money you have right now.”
Can follow the work you enjoy
FIRE movement, financial independence is not the happiness in achieving early retirement. In fact it is about having the freedom to choose the work that you love to enjoy without thinking about the money.
May be someone doing some high income corporate job may dream to enjoy doing fishing.
Financial independence and freedom for money gives you the chance to prefer the work that you want to do.
Quality time with family
We normally give our all efforts to get success in our corporate works on the cost of our family time .Due to this sometimes our family life gets disturbed.
But when the time passes, we feel regret that we could have enjoyed out time with family and parents.
So financial freedom through FIRE makes us able to spend as much time with family as we want. You may work as per your wish ,may enjoy time with your partner and spend unlimited time with your parents without distressing about any boss .
Travel anywhere in the world.
You get limited holidays in job (both private or public sector) and you don’t get time for travelling places you admire . The dream of the person to move freely from one place to another cannot be fulfilled in job. This ultimate aim can only be achieved once reaching the financial freedom
Once you attain FIRE in your life, a new world of prospects unlocks and you can decide .
Types of FIRE
In this the person lives very simple life to get retirement early .
In this the person gets retire from full time job but takes a part time job to complement retired life
In this the person invests aggressively and early to enjoy the effect of compounding i.e. compound interest at later time.
In this type the person saves and invests a lot more to maintain high standard of living during retirement life
“Essentials to happiness in this life are something to do, something to love, and something to hope for.”
― Hector Garcia Puigcerver, Ikigai: The Japanese Secret to a long and happy life
In this way the retirement is not needed if we get the job which we like to do. Following the passion makes we all enthusiastic and full of energy which is more than retiring the life.
So we should follow our passion in life rather searching for FIRE.