FINANCIAL INDEPENDENCE AND RETIRE EARLY: FIRE GOALS YOUNG INDIANS ARE CHASING TO EXPLORE LIFE BEYOND '9 TO 5' SCHEDULE
Financial Independence, Retire Early, or FIRE, was a term authors Vicki Robin and Joe Dominguez used extensively in their book, 'Your Money or Your Life', in 1992, popularising the movement that believes in extreme savings that would facilitate an early retirement. Today, more and more individuals are trying to adopt this and move away from the hustle of a long and mundane 9 am to 5 pm work life.
With the corporate sector demanding workers to spend at least 40 hours (if not 70 hours) at their jobs every week, and a large proportion of working class pushing for a 5-day and in some countries, 4-day working week, the idea of a work-life balance is not really the same for everyone.
The Covid-19 pandemic changed everything and forced people to take a pause, evaluate their priorities and take a look at what exactly they are hustling for. While the FIRE movement is not a new one, it is certainly gaining momentum, specially among millennials, who are trying to find where they belong in a rapidly changing world.
What Is FIRE?
The acronym of FIRE marries two concepts — financial independence, and early retirement
Financial independence is the core principle behind FIRE. To attain this goal, you must ensure that you have more than one source of income to see to your needs. Your desired lifestyle cannot be achieved by relying on a single, traditional job. Rather, you have to aim to generate passive income via other sources like rental properties, side jobs, returns from portfolio, etc.
Early Retirement is the ultimate aim for individuals who follow the FIRE movement. They want to escape the daily monotony of a 9 to 5 job. The goal remains to nullify the argument of retirement at 60 years and above, and achieve early retirement in 30s, 40s, or 50s, instead. They might not necessarily want to retire early, rather engage themselves in a passion project or lifestyle that might not generate the best possible income. The primary idea is to not have to work to earn money till the age of 60 and spend your life in pursuing your passions or spending time with your family.
How To Achieve FIRE Goals?
- Minimalism - The key to achieving financial success and early retirement is to avoid living a lavish lifestyle. The movement calls for individuals to be extremely frugal and avoid expenses as much as possible. This might impact your comfort level, but the goal of ridding yourself of the necessity to work demands discipline of the highest order.
- Savings - The FIRE movement calls for saving a majority portion of your income, ranging between 50 to 70 per cent. This might seem harsh, but you need to live well below your means to increase your savings at an aggressive rate and achieve early retirement. The focus needs to be on prioritising your long-term goals.
- Investment - Simply saving money and cutting down expenses won’t help you achieve FIRE. You have to dedicate your resources towards building a retirement fund and a passive income source for your later years. You can invest in a diversified portfolio including real estate, stocks, bonds, metals, saving schemes, etc. Make sure that you select the right investment for you based on your risk appetite and financial needs.
- Restrict Your Impulses - An efficient way to live a frugal life is restrict your shopping impulses and opt for homemade alternatives to save money. You can choose to cook at home more, find cheaper entertainment options, buy used items instead of new ones, and do DIY projects to avoid paying for services.
- 4 Per Cent Rule - A common way to understand how much money you need to save to begin the FIRE movement is the 4 Per Cent Rule. The rule says that you should consume 4 per cent of your retirement savings annually to see to your expenses. This rate of consumption is said to be sustainable in the long run and last you comfortably in your retirement years. It is crucial to note that the 4 per cent rule is just a starting point and the actual money needed for savings and managing expenses might change based on your situation and wants.
- Avoid Credit Cards - Stay away from the debt trap and avoid the usage of credit cards. While you might be able to pay back your credit on time, it only takes one missed deadline or emergency for the penalties to start piling up. This goes against the minimalist approach of the FIRE movement and risks your savings in the long run.
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FIRE: Pros and Cons
The FIRE movement is not suitable for everyone. Depending on your wants, needs and nature, it might be achievable for you or seem too much of a hassle. While it does have its own benefits, there are some drawbacks to the approach as well.
Pros
- Security - Adopting the FIRE model helps you build a financially secure future where you don’t have to worry about doing a job that you might not like for the sake of your basic needs.
- Freedom - The FIRE movement aspires to help individuals claim back their freedom from the capitalist clutches of society and dictate the terms of their life on their own.
- Elimination of Stress - Retiring early allows you to enjoy life in a stress free environment and do activities that you cherish.
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Cons
- Unattainability - It can be argued that achieving the FIRE model is not possible unless you have a high salary with perks involved. Low wage jobs with stringent conditions don’t allow individuals the space to work towards their financial goals successfully.
- Risk Factor - The FIRE model only works if your retirement years don't involve any unforeseen tragedy. Your basic medical expenses might be covered in the savings you have kept for your retirement years, but tragedies don’t come announced. All it takes is a life changing instance for the whole planning to unravel and you might find yourself in financial trouble.
- Living By The Clock - Adopting the FIRE movement might assure you a comfortable life, but nothing is guaranteed in this world. You might be giving up living your youth happily to secure a future you aren’t even sure you will get to see. Therefore, the movement goes against the idea of living in the moment and takes away the beauty of life in the youth.
Eventually, the decision is yours if the FIRE movement suits your needs, lifestyle, and perspective. There is no right or wrong here, it's all a matter of financial goals and choices. So make your decision after careful consideration and do your due diligence.
2024-04-16T01:46:27Z dg43tfdfdgfd