Your A-Z guide is part of an ongoing column for the WiB blog where we offer some tips and advice as you navigate your way through career and life.
Before we take a closer look at what is FIRE, it is most important to keep in mind this is by no means a comprehensive guide on FIRE but rather a starter on understanding more about this movement! For a more comprehensive guide, feel free to visit the resources down below!
Now let's dive in!
What is the F.I.R.E Movement?
F.I.R.E. stands for “Financial Independence, Retire Early.” The main goal is to save and invest all your savings—somewhere between 50–75% of your income—so you can achieve financial independence, which can mean retire earlier in your 30s or 40s as opposed to the conventional retirement age of 65.
In order to achieve F.I.R.E and save more than half of your income, there are two ways to reach this goal: keep expenses extremely low and increase income. Keeping the expenses low is also where the notorious extreme frugality comes in order to reach the desired expense ratio. Another way is to take up more freelance jobs on top of your full-time job in order to reach a higher income. The general idea is that the higher your income is and the lower your expenses are, the faster you can reach financial independence.
As for the meaning of "financial independence", it doesn't have to neccessarily mean retirement for those in the F.I.R.E. movement. It means that you will have the choice and the flexiblity to quit your full-time jon when you want, or pursuing other part-time job or freelance jobs without needing to worry about financial security. The choice is yours.
How does the F.I.R.E Movement work?
The F.I.R.E. Movement often follows what is known as the Four Percent Rule. The Four Percent Rule states that you can withdraw 4% of your portfolio each year in retirement for a comfortable life. This rule is based on the assumption that the stock market generates an average return of 5%, hence the 4% withdrawal still allows a safety margin of 1% to accumulate. Therefore, you reach financial independence once you can withdraw 4% of the entire portfolio, without affecting the value of the portfolio due to the 5% market gain.
If this sounds too complicated, you can check out this retirement calculator that does that maths for you: https://www.playingwithfire.co/retirementcalculator
Consider carefully where FIRE is Suitable For You
While the F.I.R.E Movement has both loyal supporters and critics, the movement is challenging what we view as the conventional lifestyle where you need to work till 65 and enjoy retirement age afterwards. With all decisions in life, there are both sides to the coin. So the most important is to do more research, evaluate the pros and cons, and take action!
For more information on F.I.R.E:
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