As millennials and Gen Z grow up and establish new ways of life, many are deciding that they do not want to retire as late as 65 or 70. So, they are now working to gain independence from the man as early as 35! And a good portion of them are using the FIRE method to help them get there. Don’t know about the FIRE movement? Read on!
What Does F.I.R.E. Stand For?
In case you’re out of the loop, F.I.R.E. stands for “Financial Independence, Retire Early.” The whole goal is to save up in unconventional ways and retire earlier than the average American. Most importantly, the FIRE method focuses on saving half your income each paycheck. Of course, saving so much can seem like an impossible task at first. How could anyone live on that tight of a budget? However, those that choose the FIRE path understand that living an incredibly minimalistic life can be incredibly profitable.
And while some might think of “retirement” and think of becoming a couch potato, those in the FIRE movement see becoming financially independent in a completely different light. They view early retirement as the opportunity to travel or finally focus on that long-forgotten happy. Mostly, it means being free.
So, how do you join the FIRE movement? Read on!
Create A Plan
As is so often the case in financial matters, planning is the most essential first step in joining the FIRE movement. You cannot begin a journey without first knowing the destination! And, believe it or not, only 41% Americans plan or calculate what they’ll need to save for retirement. So you’ll be far ahead of the pack!
Jillian Johnsrud, a FIRE activist, said that planning and figuring goals out was the first thing she did that challenged her conventional notion of retirement and budgeting. She realized that she could achieve freedom quite quickly and immediately began saving, right out of college. Johnsrud also married someone with similar financial goals, something she says is imperative. Together, with a retirement goal in mind, they began building a modest budget…
Build A Humble Budget
If you hope to become financially independent and retire early, you’ll likely need a much more humble budget than your peers. The first step, Johnsrud says, is determining where you spend the most, and how much of your paycheck you spend each month. As you cut down your budget, the amount saved should become larger and larger, until you hit 50%.
What are some ways to cut down a budget? Well, Johnsrud and her husband opted for some extreme options! They live in a camper instead of student housing while at school. Afterward, they got a two-bedroom apartment instead of a house, and a roommate. They even kept the roommate after they had children! Still, because of these measures, the couple saved over $25,000 in just a few years.
Prioritize
As with any budget, prioritizing is the hardest part of the FIRE method. However, with a little patience and dedication, you can eliminate what you don’t need. For instance, one FIRE movement follower made a goal for herself: only buying food for her family that cost a dollar a pound or less. Likewise, the Johnsruds decided to get an old Honda Civic from a friend instead of buying a brand new car, and that worked out well! “We had to be really, really mindful about what was important to us,” said Jillian. “We asked ourselves what we really cared about and what we really valued.”
In the end, they retired at 32 and so can you! While you don’t have to go as far as the Johnsruds, the sooner you have a retirement goal and start saving, the sooner you can say goodbye to the 9-to-5 life!
Sources: Good Morning America, Dave Ramsey