how to FIRE (financial independence, retire early)

Photo by Cullan Smith on Unsplash

Sunday

For those who haven't heard of FIRE, here it is in a paragraph:

Basically, you are financially independent (FI) once you've saved up about 25 times your annual expenses—you never have to work again and you'll never run out of money. Middle-class Canadians can save up that much in 10 years or less, so if you start in your 20s, you can retire early (RE) in your 30s. "Retiring" just means quitting the 9–to-5, freeing you up to focus on your passions or whatever else you want to do. You might still work, but it will be for the love because you don't need the money.

Mr. Money Mustache is one of my fave FIRE bloggers, so you'll find links to a bunch of his posts interspersed below.

I've put together my own advice on how to FIRE in 4 steps that happen to spell out FIRE :)

How to FIRE frugal-kid style:

• Focus on happiness. Distilled to its core, FIRE is ultimately about happiness. If you adopt a mindset that focuses on happiness itself—sustainable, enduring happiness—FIRE just happens naturally. Luxury, convenience, and nonessentials will lose their appeal. Instead, you'll focus on spending time nurturing relationships, working on whatever you're passionate about, and contributing to causes you believe in to make the world a better place.

• Invest your savings. Your dollars are like workers, and each dollar sitting in a savings account is like a worker lying around doing nothing. Get your money to work for you by investing. When you have a dollar invested in shares of a company, you have thousands of people working to grow that dollar. You can expect a simple, low-cost portfolio of index funds to double in value every 10 to 15 years, while every dollar sitting in a savings account will be losing value forever because it can't even keep up with inflation.

• Reduce spending. The typical middle-class American (or Canadian) family spends about 3 times more than needed, and they'e sacrificing their freedom to keep up the unnecessary spending that isn't even making them happier. If you're not saving at least half of your take-home pay, consider yourself living beyond your means and reduce your spending. If you reduce your spending to 25% of your take-home pay and save the other 75%, your working career will only be 7 years long. (If you ignore this step and only save 15% of your take-home pay, your working career will be 43 years long!! No FIRE for you!)

• Embrace uncertainty. You don't need millions to retire happy. Who knows what the future holds? Your living expenses will fluctuate. You might get super rich by accident while working on your passions. You might lose a big chunk of your money somehow. But that's okay because you're a skilled person who can adapt. In retirement, you'll be awake for 112 hours every week doing things, creating things, working on things—early retirees have a tendency to get even richer after retirement because although making money is optional, it's also kind of inevitable. So be confident. Do not keep working one more year in perpetuity!!! Retire when you have roughly 25 times your annual living expenses, then just live your life on your own terms :)