Are you interested in learning about the FIRE movement? Did the FIRE movement peak your interest? If you have questions regarding the FIRE movement this article will answer them and cover a wide range of areas all related to the FIRE movement.
Along with this article explaining the FIRE movement you will also see the impacts the pandemic had on people who are apart of this movement and lessons they learned and how you can still FIRE and protect yourself in the future.
Below is a brief outline of what will be discussed feel free to jump ahead to any section.
- Overview of FIRE Movement
- Different Variations of the FIRE Movement
- How to Start your own FIRE Journey
- How the Pandemic Impacted FIRE Movement & How to Protect Yourself
Overview of The FIRE Movement
In simple terms, the FIRE movement stands for Financial Independence Retire Early. The traditional retirement age is around age 62 to 65.
The FIRE movement are passionate people who decide to retire before the traditional age and to achieve this they contribute more money to their retirement and investment accounts to reach financial independence sooner rather then later.
Many large media companies have attacked this way of thinking and philosophy but the math and case studies show it is possible for most people.
To achieve this financial independence status which means you no longer have to work for money a certain amount is need.
For example, lets say your goal is $800,000 for retirement early. If a person makes a gross income of $70,000 a year and saves $40,000 a year then in 11 years this equals a principle amount of $400,000.
If this money was invested in mutual funds that averaged 12% a year compounding then the interest earned during the 11 years would equal 426,100.
The principal amount, $400,000 plus the interest earned during the 11-year period, $426,100, equals $826,100 and then the person can retire early because he has reached his number.
For people who make less it will take longer but early retirement would still be possible.
For people wanting to become a part of the FIRE movement but have low income there is still hope and ways to accomplish this and this means you have to find a way to earn more under all circumstances.
Quick ideas are freelancing, changing jobs as well as careers or working longer hours.
A part of FIRE is building wealth. If you’re one of those people who want a full detailed layout of how to build wealth then quickly read this article “How to Build Wealth: The Complete Guide to Wealth Creation”.
Also, to speed up your FIRE movement progress or to get a fast start read “The basics of wealth Creation”.
Different Variations of the FIRE Movement
There are different variations of the FIRE movement. I will discuss three of them which are:
- Fat FIRE
- Lean FIRE
- Barista Fire
Fat FIRE is when a person can retire early without having to change their live styles, often these are high income earners. This is usually an aggressive way of saving and investing.
Lean Fire refers to the opposite of Fat Fire and people here will live a minimalist lifestyle to cut expenses so they can save and invest the cash to retire early.
Also, when reaching their financial independence number they often remain a minimalist an allow their investments to grow more.
Barista FIRE is people who are pursing FIRE but have lives in between the FAT and Lean FIRE category.
This means they live above the minimalist lifestyle but they also pursue side hustles or starting businesses and using the excess cash to speed up the process of retiring early.
If you wan to FIRE but think you may not make enough to save and invest then this article will help you make more money. Read and take action on this article: “6 Ways to Make More Money: How Regular People are Becoming Millionaires”.
CASE STUDY OF PEOPLE WHO RETIRED EARLY
https://money.cnn.com/2017/08/02/pf/early-retirement/index.html
How to Start your own FIRE Journey
It is now hard to start your own FIRE Journey. I think the most import thing is to make a checklist of all the things you need which can be covered in a few small steps to fast track your actions and results.
When beginning take these simple steps below and become a part of the FIRE movement now.
- Assess your own financial situation (Identity and know your Income & Expenses)
To make it easier for you check out this free tool here for managing your money: XXXX
- Decide on your (FIRE) Retirement Number (Monthly Expenses times 12 then times 20) The 12 is for months of the year and the 20 is a standard number of years you want to be covered for without having to work. Example: Monthly Expenses: $1200 x 12 = 14K; $14K x 20 = 288K. Your minimum FIRE number is $288K but I say multiply it by 2 or 3 to be safe.
- Decide on the amount you need to save and invest monthly as well as have a DEADLINE for completion. If you’re not earning enough to save and invest to retire early then find a way to earn more so you can reach your FIRE goal.
- Explore and choose a retirement account that works for you
- Register for your Retirement Account then set up automatic investment contributions monthly and research what investments will help you reach your goals
If your super ambitious and young and desire to retire before the age 40 then this article gives you the foundation for making it a reality.
These are proven methods. Read “How to Retire by 40”.
How the Pandemic Impacted FIRE
When the pandemic hit many people who were in the fire movement had severe declines in their investment account portfolio. A person with a $1,000,000 account value in mutual funds could have seen a drop to $450,000 in a day.
If people who FIRE react to this by selling their shares then it’s a huge mistake and they will have lost a large portion of their retirement money and the years it spent saving that much. The right thing to have done was to leave the account as it is and wait for the account value to rise again.
People in this situation that sold shares when they had a decline in there account value lost but the people who waited for the recovery of the market saw greater account value appreciation equal to or more then what there account value was before the market crash from the pandemic.
Overall, the people that didn’t worry about the market were the super-rich or people with this mentality.
The reason is because of superior skill and knowledge. The super-rich did not panic because they have assets working for them within and outside of the stock market.
As you pursue of the Fire Movement continue to learn about how to hedge risk. Remember that it is ok at first to start investing only in retirement accounts but to hedge risk against market crashes you must eventually find other investments outside of your retirement accounts in the future to fully protect yourself from market crashes.
The case and point is to start with retirement account investing for financial independence then move into more advanced investments so even if the market crashes you are still bringing in cash month to month.
Conclusion
If you got value out of this article share it and leave a comment below about your questions and concerns regarding the FIRE movement.
Also, join our FIRE movement group on facebook so you can get more access into the achieving your FIRE goals.