So what is this mysterious FIRE movement everyone is talking about and will it be affected by the current global pandemic? These questions and more will be answered through this article below but I warn you, after you read about FIRE you will definitely be feeling some type of way…
What is FIRE?
Well, in short, FIRE stands for Financial Independence Retire Early but what does this really mean? The actual meaning behind what financial independence and retiring early can be up to the interpretation of the individual but loosely it means having enough money in investments (or passively coming in each month from businesses) that you virtually never have to work again and can focus on whatever it is that makes you happiest.
Traditionally, people retire around the age of 65. Even the financial systems set in place by the government use around this age for retirement vehicles. For example, you can start collecting social security at 62 or you can withdraw from your IRA (individual retirement account) without any penalty at 59.5.
However, the new wave of retirees who are part of the movement are redefining what it really means to be retired. To them, it is more about having the freedom and flexibility to spend your time doing what you absolutely love and not having to make money from it (since you invested/saved up enough to live off of already).
Some people even accomplish FIRE but stay at their job because they love it so much. So really what matters is having your financial health in order and then retirement can really be whatever brings you the most joy in life.
Note that there are two general approaches to FIRE. The first is to have enough invested/saved that you can live off of for the rest of your life and the second is to have enough monthly cash flow from business ventures that you can live off of for the rest of your life. Personally, I am pursuing the latter of the two.
Stepping Into The FIRE
While FIRE can sound incredibly intriguing, don’t be fooled. It can definitely be a trying process depending on the level of frugality you are pursuing. That is why the very first step is to figure out your why.
- Why do you never want to have to work again?
- Why is it important to you to save all of this money up?
- What are you going to do when you are financially independent?
Start off by answering these questions and storing your answers somewhere you can refer back to when you are feeling really tired and ready to quit.
Now the next step at a high-level is to save more than you spend.
Begin to really analyze your money flows. How much is coming in each week, month, year, and how much is going out each week, month, and year? Apps like Mint are really helpful at tracking your spending and helping you create a budget for you to stick to but you also should be looking historically at least a month or two to really understand where your money is going and now that it’s been spent if you are happy with the purchase or wish you had your money still. This feeling will help motivate you into the next part.
Frugality is key at the beginning. The harder you can push yourself at the beginning, the easier the rest of this process will be. I mean seriously question every single purchase. Do you really need a package of Oreos from the grocery store or could that money be used for something even better when you’re financially independent?
While Oreos is a great example, it is critical to focus on minimizing your biggest expenses first. Housing, transportation, and food are the largest expense categories so target those first. Do you need to get take-out again this week or can you make dinner instead?
Check out how I actually completely eliminated my housing expense in this article.
Once you have seriously analyzed your cash flow and have eliminated any extra frivolous expenses, it is time to start figuring out how you can earn more money.
An easy way to do this is to make sure you are using credit cards with the best rewards for all of your transactions. I like NerdWallet’s site the best for this but ThePointsGuy is also good. Personally, I like to go for the best travel benefits because normally you can get 1.5x the value vs. just using cashback cards but it is whatever works for you and your own situation.
Next is to start investing all of the money you saved up. It is important to make money passively and actively. First, passively is when your money is literally making money for you without you even lifting a finger. There are quite a few ways to go about this, here are just a few:
- Invest in the stock market (index funds in particular)
- Buy rental properties for the monthly cash flow
- Purchase profitable websites for monthly cash flow
Now to make money actively, this requires your time. Some examples include:
- Start a side hustle by selling printables on Etsy
- Freelance graphic design on the side
- Begin to walk dogs, wait tables, mow lawns in your free time for extra dough
You can make money by doing so many different things, the possibilities are endless. It is just a matter of using your time wisely to make extra money to put towards your goals.
Is FIRE For You?
I am going to bet that the sound of never having to work again sounds pretty dang nice and I agree however FIRE is not for the faint of hearts. It is as easy or hard as you want to make it and it all depends on how quickly you want to be financially free right?
For me, I am trying to get there as soon as possible so when I am not working my 9-5 (but let’s be honest it’s really 7 am – 7 pm) job I am freelancing, investing in index funds, investing in rental properties, etc. The grind never stops when your WHY is big enough.
That said, don’t try FIRE if you’re not willing to really put in the work. Even if you have a super high paying job that you may dislike but you are comfortable in, if you’re not going to put in any effort towards saving more or spending less then FIRE probably isn’t for you. You really have to save much more than you spend to get to retirement quickly.
Not to mention the educational aspect of it. Rules and regulations around the financial system and taxation are constantly changing. To stay up to date, it is crucial to read blogs, listen to podcasts and soak in as much juicy info as you can to make sure you are making the best financial choices for your end game.
Regardless, I think that the principals behind FIRE and the steps needed to get there should be something everyone should strive towards. It is really a movement of financial health which I could not support more. Especially seeing such young people who are so financially aware and understand the value of their time.
Will FIRE Survive The Current Global Pandemic?
To wrap this up, a lot of speculators are saying that we will see the demise of the FIRE movement because of this pandemic which I agree and also disagree with for many reasons.
I think that if people were truly pursuing FIRE with the right intentions and an educated mind then they would know that a bear market was inevitable. They understand that bear markets offer huge opportunities to wise investors. I would also bet they would have emergency funds saved up so that in case they did lose their job because of the pandemic, they would be financially stable.
But where I do agree with the speculators is when there are people who are pursuing FIRE but for the wrong reasons and try to outsmart the system. They don’t save up any cash for emergencies because they just want to invest every dime. They sell all of their stock market investments as soon as the market turned and continue to sell as the market continues to fall. These are the people who don’t truly understand the market or the FIRE movement. These are the ones who will write articles saying the FIRE movement is dying because of COVID-19.
To wrap up, the FIRE movement will survive the pandemic however with fewer numbers. Many who weren’t as prepared and maybe did not have strong enough WHYs will head back to the workforce and talk about how the FIRE movement is impossible while those who were prepared sit back and relax.
My Take On The FIRE Movement
As mentioned early on in the article, I prefer to chase FIRE from the monthly cash flow standpoint. While I do believe building up a nest egg is vital, I don’t think it is 100% necessary to consider yourself financially independent. The biggest takeaway from the FIRE movement that I love the most is that young people are seriously starting to track and own their financial health from such a young age. People are really starting to understand how valuable their time is and how little they have which at the end of the day, is why people are chasing FIRE – to have the freedom to choose what you want to do and when. Hopefully, you have a better grasp on what the FIRE movement really is, if it is for you, and if it will survive the global pandemic!
Are you part of the FIRE movement? Let us know in the comments!
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