Are you on FIRE?! If not, you may want to light a few matches and set your financial path ablaze! Even if you’re not 100% on board, there are plenty of things to learn from the FIRE community. At least 8 to be exact…
What is this whole FIRE business all about anyway?
Financial Independence Retired Early (FIRE) is the goal for this community of money-savvy go-getters, and it’s not just the wealthy pursuing this lifestyle. With a solid live-on-less-than-you-make-and-invest-the-rest type of approach, many are finding FIRE within their own reach.
Top 8 Things to Learn From the FIRE Community
This post was written by our fabulous staff writer, Kerah Kemmerer.
So what’s the driving motivation?
To nix standard retirement timelines and reach financial independence/retirement decades earlier while still getting to enjoy the youth, energy and monetary means to live life on one’s own terms.
So what is it that you should learn from the FIRE community?
1) Define your financial goals
If you love your job and don’t mind the idea of working until your 65, then by all means, keep at it! But for others ready to:
- claim more free time,
- take on passion projects, and
- eager to nix the 9-5…
…being able to opt out of work is music to the ears.
In order to achieve FIRE, you must first determine your life goals and priorities.
- Would you rather live on less now and save and invest the difference to enjoy several years down the road?
- Or, are you more of a live-for-the-moment type of person?
- Are you able to envision the goal of future freedom so clearly that it helps you power through the sacrifices you will need to make along the way?
2) Where are you headed?
Those that are on FIRE often list out their goals for life, money, passion projects, and dreams. Then, they put a rough timeline around these goals.
- Are you on your way to achieving any of these goals right now?
- What sort of changes could you start making today to help you reach these goals faster?
- What could you be doing right now to prepare for your future while still taking advantage of current opportunities?
There is a lot to think about when deciding to pursue FIRE. Finding the balance between living and enjoying life as it is now while working towards that ultimate freedom in the not-so-distant future. Once you’ve defined your goals and you have an idea of what you would like your life to look like, you will better be able to decide if this path is the right one for you.
This is one of the best things to learn from the FIRE community – to actually have a plan for your life! Most don’t…
3) Live on half of what you earn
Living on less than you earn is hardly an earth shattering concept for anyone reading this blog. You will obviously need to do so in order to get ahead financially. The question is … how much less? This is where the FIRE community gets FAR more radical than the average human being.
While the numbers will ultimately be dictated by your personal goals, a good rule of thumb to speed up your savings progress is to learn to live on at least half of what you earn per month. In an ideal scenario, ultimately saving 60-70% of your monthly income.
Related: 10 Extreme Tips to Cut Your Spending in Half
While this may seem extreme, it will give you quite the boost toward achieving FIRE.
In fact, Jacob Lund Fisker of the blog Early Retirement Extreme shares how he manages to keep his personal living costs to an all time low of $5-$7k per year.
His lifestyle may not be feasible for many, but there are plenty of practical tactics he uses that could be tweaked for individual situations. The journey to FIRE may be challenging, but knowing what the ultimate goal entails often provides the motivation to keep pushing past the need for immediate gratification.
What’s there to learn from the FIRE community here? If you live much differently today, then your life could be dramatically different just 5 years from now!
4) Earn More
While saving 50%+ of one’s income is great in theory, for many of us, that means we will also need to increase our income.
- For some, relocating to a more affordable area is all they will need to do to move the needle and up their savings rate.
- Others may seek out side hustles or continue to move from one organization to the next in pursuit of a higher salary.
Whatever route you choose, be sure that you are still seeking opportunities for growth and not just the bottom line. One thing I was able to learn from the FIRE community is: the greater your earning potential, the more quickly you will be able to achieve FIRE.
Don’t simply settle for the exact number you think you need to achieve the goal because there are too many variables in life. Seek out ways to build your skills and even create passive income in the process. A focus on earning more will definitely boost your ability to achieve FIRE faster.
5) Build your skills
Another major component to learn from the FIRE community is finding ways to “insource” commonly paid-for services by learning to do them yourself.
Here are just a few areas where you could build some new skills and save money:
- Do your own housecleaning/landscaping (Pinterest has a ton of great hacks!)
- Change the oil in the car/wash the car
- Cut your own hair
- Take your own family portraits
- Take care of basic plumbing issues
- Learn to repair your own bike/motorcycle/appliance/tool, etc.
With Youtube, Skillshare and so many other online resources, there is no shortage of education available to the willing student.
6) Figure out your housing plan
Housing is a major fixed expense for most of us and finding ways to make it more cost effective will definitely help in achieving FIRE at a faster rate.
Some housing hacks to consider:
- Live with family or roommates and share the cost of living (a tough one, but a major financial booster).
- Purchase a multi-family property and live in one unit while renting out the other(s).
- Live in an RV or tiny home on your own property or a friend’s land with cheap rent.
- Purchase a small home or fixer upper, pay it off quickly and stay put once it’s paid.
For more house hacking ideas, check out 7 Alternatives for Traditional Housing for the Motivated Saver. You’ll learn from the FIRE community with their ideas, as well as a few others!
7) But there’s more to it than just cutting costs
While it’s certainly important to cut costs and to increase your savings rate wherever possible, investing is the other piece of the puzzle.
Not all, but many FIRE bloggers are fans of utilizing index funds as part of their wealth-building strategies.
The appeal here is that index funds are a more passive approach to investing with lower costs and risk involved. These funds also create a more diverse portfolio and often outperform actively managed funds.
8) How much will you need?
Supporters of this lifestyle often refer to two rules to help prepare for FIRE – the Multiply by 25 Rule and the 4% Rule.
- The first rule helps you determine how much you will need to have in savings and investments in order to retire, and
- The second rule is a guide for withdrawal recommendations once you’ve achieved FIRE.
As with any rule, there are pros and cons and opinions on both sides of the conversation. You can learn even more about these rules and how to factor for inflation from financial guru Paula Pant.
The key thing to learn from the FIRE community here is to have a rock-solid plan for your future. It really isn’t that complicated, and extremely early retirement CAN be accomplished! Just make the plan, achieve it, and enjoy your freedom!
Learn From the FIRE Community – You Won’t Regret It
So now that you know the basics, it’s time to learn from others who have already achieved FIRE.
Some of the best known leaders in this movement never set out to lead a movement. They merely started by chronicling their own journey to FIRE and amassed a following in the process.
- Jacob Lund Fisker from Early Retirement Extreme and
- Pete Adeney from Mr. Money Mustache
They both helped set a new standard that not only rivals our view of standard retirement, but also challenges our current standard of living.
If you are looking for even more inspiration and want to get a glimpse of how others are pursuing or reached FIRE, check out these folks as well:
- 1500 Days
- Our Next Life
- Retire by 40
So that’s FIRE in a nutshell. Simple in theory, but takes a passionate commitment to achieve.
What will you learn from the FIRE community? What’s your take-away?
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