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The FIRE Movement: Blazing a Path to Financial Freedom

In a world where basic expenses are on a steady upward trend and average household income grudgingly drags its feet, financial freedom seems like little more than a pipe dream for most people. Many wonder if they’ll ever truly be able to retire at all much less before their Social Security benefits and retirement accounts are scheduled to kick in. For some, though, the FIRE Movement is lighting the way to a brighter future.

What is FIRE?

On the surface, FIRE is an acronym for “financially independent, retiring early”. Digging deeper reveals it’s essentially a way of life designed to fuel a highly sought-after lifestyle. In order to fully understand the FIRE movement, it’s important to let go of the traditional idea of retirement.

This concept focuses more on the financial independence aspect at its core than walking away from the working world for good. It’s all about creating a great deal of financial wiggle room with the ultimate goal of liberating yourself from economic struggles.

FIRE is sparking a great deal of interest among young rising professionals, particularly those in their mid-twenties to thirties. Still, the movement really doesn’t leave out anyone short of retirement age. Many who’ve realized their dreams of financial freedom using this approach simply don’t want to spend decades struggling with debt. They’re painfully aware of the growing gap between income and expense. They’ve watched their parents work their lives away only to have little money and energy left for the golden years.

Taking a Deeper Look

Before jumping out of the frying pan, you need to decide exactly what your goals are. Where are you now? Where would you like to be in five or ten years? Do you truly want to leave behind your job or a career altogether, or are you just looking for a little more free time?

Aspects like these will all play into your overall strategy; not to mention, they’ll go a long way toward determining if FIRE is the best approach for you. Financial analysts and trailblazers of the FIRE movement alike point to a few key factors in achieving success.

  • CalculatorAnalyze Your Spending: Though spending comes in a number of forms, this leg of the process revolves around more reckless financial habits. In combing through your expenses, you’ll gain a greater understanding of how much money you’re spending unnecessarily. Most people are stunned to learn just how much money they’re throwing away on nonessentials.
  • Live beneath Your Means: While food, shelter, transportation, clothing and insurance are some of life’s basic necessities, they don’t necessarily have to take up the bulk of your income. Give up a new vehicle for a decent used one. Cut coupons, go with store brands and look for sales. Opt for a fixer-upper rather than a new build when you’re in the market for a home and carry out repairs gradually on your own. All these efforts may entail minimal sacrifices, but they’ll pay off over the long term.
  • Invest: Although some of the finances you bank by living on the lower end of the spectrum and cutting out needless expenses should go directly into a savings account, investment shouldn’t be left out of the mix. Look into index funds, IRAs, 401(k) plans and other options to decide which ones best suit your needs. Low-risk investments may not offer the highest yields, but they do tend to hold their own.
  • Generate Secondary Income: From taking on odd jobs to purchasing rental properties, supplemental income can make all the difference when it comes to paying off debts and obtaining financial freedom.

Each of these steps helps veer a little farther away from the financially restrictive lives most people lead. Though they do involve certain cutbacks, those who’ve found success through these strategies insist the sacrifices are well worth the rewards.

Is the FIRE Movement Right for Me?

First off, FIRE isn’t a get-rich-quick scheme. It requires planning, effort and determination. If you’d prefer living in the moment rather than looking ahead, this might not be the best path to follow, and there’s nothing wrong with that. Those who insist on driving the latest vehicles to hit the market; living in a sprawling, high-end home; taking lengthy vacations abroad and frequently dining at all the trendiest restaurants may not be ready or willing to adhere to the more frugal lifestyle involved with this strategy.

Two people counting moneyIt’s only fair to mention willpower alone doesn’t necessarily create a way here, either. Although virtually everyone can benefit from cutting out needless spending, the FIRE movement does require enough extra cashflow to cover saving and investing. Experts recommend setting aside at least 35 to 40 percent of your income to truly be able to retire early with 50 percent being an ideal figure. If you’re currently barely making ends meet, starting off small and working your way up to fully engulfed status may be the best course of action.

Understanding your reasons behind joining the movement is also crucial to success. Simply being unhappy at work or wanting more time off isn’t reason enough to commit to this type of plan. Those falling into this category may be best served by switching jobs or making themselves indispensable at work to better position themselves for more flexibility.

Many say FIRE is a perfect fit for those who want to follow passions outside their primary careers. One prime example would be a corporate attorney who aspires to leave behind the world of litigation and dedicate his or her legal skills to veteran advocacy.

In a Nutshell

Though the FIRE movement has revived the ideas of early retirement and fiscal freedom almost lost to the world’s growing financial gaps, it’s not for everyone. Patience and effort are required, and a certain amount of extra income is vital to success. Investment is also crucial. While this alone poses some potential dangers, it’s possible to minimize the risks.

Some sacrifices must be made along the way as well. This particular FIRE is largely fueled by cutting expenses and capitalizing on your own financial persistence. If you’re willing and able to follow a plan like this, you might find yourself following in the footsteps of others who’ve managed to retire in their 30s or 40s.

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