Having enough wealth such that you no longer have to work and your wealth’s assets produce enough money to cover your expenses, is what people generally refer to as Financial Independence. The idea of being financially independent by the age of 30 or 40 seems like a very good deal to people. This is what FIRE is based on — earning enough money to be financially independent sooner.
What is FIRE and how does it work?
FIRE or Financial Independence, Retire Early is a movement to achieve financial independence and make enough money for an impregnable retirement at an early age by actionising extreme saving and investing methods.
The testament of FIRE was fashioned in the United States of America and some of its primordial concepts were published in 1922, in the book “Your Money or Your Life,” authored by Vicki Robin and Jon Dominguez, who propagated the idea of an economising life with income from investments to achieve retirement at an early stage.
The unembellished idea is to earn more and spend less in order to retire when you are still young.
Hierophants of the extreme-savings folklore often start by remaining in the traditional workforce for many years and save up to 70% of their yearly income. For such folks, financial independence does not mean to spend time in leisure after saving the king’s ransom. It means they have a choice to not work a full-time job if they don’t want to. They can either de-escalate to a part-time job or stop working altogether.
The savings rate influences the time you take to save up enough money to retire early. The more you save, the quicker is financial independence. Hypothesise a net worth of zero, if you save 50% of your income, you can retire in 17 years. If you save 75% of your income, you can retire in 7 years. If you save 85% of your income, retirement can be achieved in 4 years.
The mileage of FIRE
Draughting what you want your retirement to look like and charting a plan to get there puts you ahead of the curve. Folks who do practice frugal living scrutinise every rupee spent. They categorise their wants and needs and excise unnecessary expenses. This means that it involves having budgets and targets. If you really want to retire soon, you will also think of creative means to obtain higher income. You might even tread a career path that will lead you to a job that pays you in seven digits. Additional income would play a major part in helping you take a step back from working and retire sooner.
The impediments of FIRE
You will need to have a large amount of income. No matter how much your spare, it will take a substantial income to retire before your 40th revolution around the sun. You will have to envisage inflation as well as non-working years thus far. While FIRE might be an extreme lifestyle to lead, it should not promote the myth that you need a lavishly paying job to build your wealth that you need to retire early. FIRE advocates promote the usage of credit cards for the points and rewards. However, credit card usage promotes having liabilities while the whole point of FIRE is to save more. FIRE should not be used as an excuse to escape the job you hate. What you would need at that point is a new career path. After all, experience does matter!
How can we help you save better without having to take such extreme measures?
The righteousness of FIRE has aided people in facilitating financial matters from a very young age to save and invest from the origins of their career which can be very rewarding. However, trying to have a frugal lifestyle can damage your mental health as well as disrupt family life if you aren’t on the same page as everyone.
Finin can help you save up enough while living your life comfortably. With features such as budgeting, goal setting and hyper-personalised experience we’re aiming to build an outstanding Neobank in India.
With the aim of making India a more financially literate country, we work towards helping you start managing your finances better as well as aid you to save more without having to make drastic changes to your lifestyle. We offer multiple services to help you make smart financial decisions. It’s not too late to move to a neobank.
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