FIRE Movement And What You Should Know About It?
Updated: Feb 2
Over the last couple of years, a new wave of financial savviness has taken over. More and more people are working towards becoming financially independent to retire early (FIRE). Have you ever heard of the FIRE movement?
The FIRE movement encourages people to save and invest so they can retire in their 30s or 40s. So, if you are in search of financial freedom and fulfillment, this may be for you. Statistics show that most Americans between the ages of 55- and 64 have saved about 12 % of what they require for retirement. Worrying, isn't it? If you are approaching retirement or thinking of financial independence, let's take a look at what this movement has to offer.
What is the FIRE movement?
The FIRE movement started in 1992 after Vicki Robin and Joe Dominguez published the book Your Money or Your Life. The book emphasized the need for individuals to attain financial freedom rather than remain dependent on their 9-5 jobs. FIRE (Financial Independence, Retire Early) movement can be split into two separate concepts. However, you do not need to apply both concepts at once.
- Financial independence
For most people, losing a job often means losing their livelihood. The only way to escape this predicament is by attaining financial independence. To do this, you will need to generate an alternative source of income in addition to your salary.
The biggest goal within this movement is to generate enough income to sustain you in the absence of employment. As a bonus, your independence will help you decide whether or not you want to continue working. Hence the second concept.
- Retire Early
The retirement age of 65 years does not seem to cut it in today's world. Luckily, you do not have to wait that long. You can retire in your 30s or 40s as long as you have your finances straightened out. But what will you do after retirement at 30?
Contrary to popular opinion, retiring does not mean that you should stop working. You can always choose to start a business or switch to a more fulfilling career path. Financial independence enables you to make changes to your life without taking money into the account.
What are the Pros and cons of the FIRE movement?
The FIRE movement has attracted thousands of followers around the globe. But what exactly does it have to offer?
✅ The pros
It encourages the pursuit of a meaningful and satisfying life.
It encourages the quest for financial independence and early retirement.
It promotes good personal finance habits such as saving and spending.
It makes retirement flexible. You can take up other projects or travel.
❌ The cons
Even though the movement pushes for financial freedom, you may have to make some drastic changes to your lifestyle.
It can be unrealistic. The idea of saving 50% of your monthly salary could be impossible given your responsibilities or circumstances.
Extreme frugality can be uncomfortable. Saving a big chunk of your paycheck can strain your monthly budget. Some expenses make life easier and fun, so cutting them off could make your life miserable.
Luckily, numerous steps can help you beat the cons.
Steps to take to ensure Financial independence
1. Increase your income
Cutting down on expenses is good, but you would reach your FIRE goals faster by increasing your income. As you may have worked out by now, the FIRE movement requires a large amount of savings. You have two options:
To live a very frugal lifestyle and ignore major expenses.
Increase your income so you can cover your costs and save comfortably.
To increase your income, you could:
Put your savings in a savings account with great interest rates.
Start a business or a side hustle to create smart passive income.
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2. Cut down on your expenses
FIRE (Financial Independence, Retire Early) goals will require you to cut your expenses. Lowering your costs lowers the amount of money you need to reach your goal.
⚠️ Pro tip: If your goal is to raise $1000 a month, saving $100 means you need $900 more. Consider cutting expenses that do not add any value to your day today. Remember, the goal is to save money, not make your life miserable.
3. Make investments
Unless your paycheck allows you to save enough for your retirement, you will need to fill the gap by making investments. You could consider investing in:
Certificates of Deposit
4. Use Honeygain to make more money
The whole point of the FIRE movement is to develop financial security and retire early. With Honeygain, you can make smart passive income for your savings or investments. Additionally, Honeygain offers you some regular financial tips to help you achieve your financial goals.
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5. Avoid credit cards
Did you know, that typically we tend to spend more when we use credit cards than when we use cash? Plus, it is difficult to save and invest when your salary is still servicing debt. Most people are one emergency away from taking on too much debt.
⚠️ Things to keep in mind
💡Financial emergencies can derail your progress
We do not live in a perfect world. Financial emergencies can drain your savings and affect your investments. We recommend creating an emergency fund to cushion financial blows and avoid credit card debt.
💡You can start saving at any age
It is always advisable to start saving for retirement early in your career. But, don't worry if you haven't started. All you need to do is save aggressively, cut your expenses and make wise investments.
💡Your retirement goals are unique to you
Your retirement dreams are as unique as you are. Some people want to travel the world after retirement, while others would rather venture into business. Avoid copy-pasting a friend or relative's plan. It might not fit your dreams.
Do you want to join the FIRE movement?
The journey towards financial independence is about how you spend, invest, and save money. The best way to turn your dream into a reality is by practicing good financial habits and improving your personal finances. Find as many potential income sources as possible, try Honeygain as one of the smart passive income ⬇️
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