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Financial Independence, Retire Early – Your Ultimate Guide to the F.I.R.E Movement

It’s not uncommon for people to want to retire early. With the retirement age in many countries gradually creeping up each year, the prospect of chilling out and enjoying your later years can seem incredibly far away. However, it doesn’t have to be this way – there are some strategies you can employ to gain financial independence and retire early.

In this article, we’ll explore one of the most popular strategies – the F.I.R.E movement. We’ll discuss what this movement is and how you can get involved, ensuring you’ve got the tools and expertise needed to improve your financial situation today.

What is the F.I.R.E Movement?

First thing’s first – what is the F.I.R.E movement? As defined by Forbes, the F.I.R.E. movement revolves around saving enough money to have freedom in your life – without depending on a regular job to pay the bills. This movement was popularised in the 1992 book ‘Your Money or Your Life’, which explores how we can introduce an element of minimalism to our lives (and our expenses), allowing us to save more and achieve financial freedom earlier.

Diving a little deeper, the F.I.R.E movement is all about saving – and saving a lot! You’ll need to do two things to get the most out of this strategy. Firstly, you’ll need to keep a substantial portion of your income (between 50% and 75%) each year, and secondly, you’ll have to drastically cut your expenses down to the bare bones. As you can see, this strategy is pretty dramatic compared to others – although it has to be for it to work.

By employing this strategy, you’ll be able to build up a net worth of 25x your annual spending and lower your expenses dramatically, which can put you in a position to ‘retire’ way before the traditional retirement age. The word ‘retire’ is highlighted here because people who follow the F.I.R.E method don’t tend to lounge on a beach for the next 50 years – they’ll spend their time working on the hobbies they love or perhaps even take a part-time job!

How Can We Put the F.I.R.E Movement Into Practice?

So, what steps are needed to begin putting the F.I.R.E movement into practice in your life? Essentially it boils down to three core components, which are detailed below:

1. Save (and invest) between 50%-75% of your income

The key behind the F.I.R.E movement is to build up enough cash so that you can make regular withdrawals (a maximum of 4% of your savings per year) over a period of decades and still be able to sustain yourself. The way to do this is by saving the majority of your income. However, it’s also crucial to invest your savings wisely to reduce the impact of inflation and maintain the value of your cash over the longer term. There is an abundance of investment avenues you can explore, such as peer-to-peer loans (like the ones here at Lendermarket), so make sure to evaluate all of your options and choose one that suits your goals and risk appetite.

2. Keep your expenses extremely low

There’s no point in saving all this money if your monthly expenses are through the roof – that’s why it’s crucial to lower these as much as possible! As noted by The Times, the key to achieving this step is being extremely frugal. This involves eliminating all expenses that don’t constitute a ‘necessity’. At first, this may seem extreme – but it moulds the mindset needed to live off of your savings in the long term.

3. Look for a way to increase your income

Finally, you can speed up the process by seeking alternative income streams. Again, there are hundreds of avenues to explore in this area, although investing is perhaps the most popular. Some people opt to take on second jobs to save more, whilst others find ways to monetise their post-work hobbies. Regardless of how it is achieved, increasing your income (while decreasing expenses) can accelerate the F.I.R.E movement significantly – helping you achieve financial independence that much quicker.

Things To Avoid When Seeking Financial Independence

Although the F.I.R.E movement may seem like a golden ticket to freedom, this strategy requires extreme discipline over a period of years (if not decades). Due to the frugality needed to follow this movement, you’ll need to really cut back on your lifestyle in the short term. Moreover, once you have reached the pinnacle and earned the ability to live off your savings, you still have to monitor expenses and stick to a strict withdrawal structure each month.

This sort of lifestyle isn’t for everyone – especially those who wish to have some additional luxuries later in life! However, as noted earlier, many people who follow the F.I.R.E movement don’t retire entirely and instead pick up a part-time job or find a way to earn money from their hobby. By doing this, you’ll be able to pay for your expenses through your monthly withdrawals and then utilise the money from your part-time job/hobby to enjoy the finer things in life!

The F.I.R.E Movement – Final Thoughts 

To summarise, the F.I.R.E movement is a strategy that can be employed to help you achieve financial independence much earlier in life than you’d expect – but it does require intense discipline and hard work. However, by following this strategy, you’ll be able to focus on what you love and spend time with the people that mean the most to you, making it incredibly worthwhile for people who stick at it!

As a final note, if you’d like to learn more about some of the investment options we offer that can help you speed up the F.I.R.E movement, simply click HERE to learn more about how our service works. With annual investment returns since 2019 of between 12% and 15%, our loan products can help you meet your investment goals, ensuring you’re on the right track to financial independence!

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