This is my first blog post, welcome to Start to FIRE!
Financial Independence Retire Early
FIRE is the abbreviation for “Financial Independence Retire Early“, become financially independent to be able to retire earlier. The words ‘to be able’ are important: you can retire earlier, but you don’t have to. You have a choice.
When are you financially independent? Simply put, when you can support yourself with passive income, which is income from investments.
The FIRE (Financial Independence, Retire Early) movement is a lifestyle movement with the goal of gaining financial independence and retiring early. The model became particularly popular among millennials in the 2010s, gaining traction through online communities via information shared in blogs, podcasts, and online discussion forums.
Wikipedia (1)
The ideas of FIRE originated in 1992 with the publication of the book “Your Money or Your Life” by Vicki Robin and Joe Dominguez.
Variations of FIRE
In the FIRE movement there are also variations :
- Normal FIRE : cover your living expenses (normal budget) with passive income.
- Lean FIRE : minimalism, passive income only covers basic expenses.
- Fat FIRE : living on a bigger budget including luxury expenses.
- Barista FIRE : generate a little income through work and the rest through withdrawing from assets, a kind of “part-time FIRE”.
- Coast FIRE : invested enough at an early age and don’t need to invest anymore because of compound interest.
How do I start?
Step 1 : calculate your net worth
You start by calculating your net worth, meaning possessions minus debts.
Step 2 : create a budget
The second step is to create a (monthly) budget, this is important to understand your income and expenses.
You can also visualize these in a graph, a picture says more than 1000 words…
Step 3 : pay off debt (excl. mortgage)
Debt entails costs and these interests can be high. You can use the saved interest for other purposes.
Step 4 : create an emergency fund
An emergency fund serves for unexpected expenses, this is a kind of “insurance”.
Step 5 : build a financial plan
The foundation for financial independence is making a good financial plan. In this plan you list your financial goals and describe how you plan to achieve them.
Step 6 : invest and “stay the course”
Start investing based on your financial plan. And more importantly: stick with it and don’t deviate from this plan.
In the next blog posts I will discuss these steps one by one.
This info is for informational, educational and entertainment purposes only, and does not constitute financial, accounting, or legal advice. Please do your own research (disclaimer).
Sources:
(1) Wikipedia (2021, March 16). FIRE movement. Wikipedia. https://en.wikipedia.org/wiki/FIRE_movement