Everyone has their own definition of financial independence or F.I.R.E. when it comes to having a life and financial goals. Some people climb the career ladder at work through decades of raises, promotions, raising a family, and collecting a pension or 401k at the end.
People may also earn a degree in the field of their choice and land a dream job only to discover that they want to make a career change mid-way through and say become a lawyer after being a doctor for a few years… They take their money and start over with a higher and oftentimes more fulfilling salary…
But there’s a new sheriff in town when it comes to this new way of thinking about retirement and it’s been around for about a decade or so… A substantial segment of the population is dropping the rat race completely and throwing caution to the wind… Their philosophy is why put off until later the life that you could be enjoying now?
Life Is About Choices
Many people go about life doing what people think that they should do instead of what they want to do. This is often true with everything from what college to attend, career path to choose, living situation and the list goes on and on… The bottom line is that YOLO(you only live once) and truly fulfilling life is what you make it…
We All Have A F.I.R.E. Number
The original idea of fire is achieving a certain amount of wealth— to be able to retire and maintain the desired lifestyle while living off of a percentage of your income for the next 30 years or so. Here’s how you determine your number:
- Add up your annual living expenses (Calculate monthly expenses * 12)
- Multiply annual expenses by 25 (the number of expected sustainable years)
- Examine all of your income sources
- Calculate your 4 percent withdrawal rate
Once your savings and all other sources of income combined allow you to live comfortably for at least 25 years at a 4 percent withdrawal rate then you’ve reached F.I.R.E. Most people reach this number within 15 years but some are killing it and getting there in 10 years or less…
You Need Multiple Income Sources
Now you can absolutely retire eventually by working a job over the course of 30 to 50 years of your life … But just like it takes two full-time or at least a good-paying full-time and one part-time income to sustain a typical household of four— one or two isn’t going to cut it.
If you plan on having the freedom to enjoy life on your terms without a financial care in the world— while you’re still young, healthier, and more adventurous— then when it comes to income to achieve early retirement the more the merrier…
The following sources can help you ride that gravy train to your financial destination:
- Employer income
- 401k savings
- Long term savings
- Self-employment income
- IRA account balances
- Passive income sources
- Side Hustles
- Possible inheritances
- Stocks/bonds/real estate/crypto investments
One Size Doesn’t Fit All
Financial independence is a movement with versatility and adaptability. The main concept is the same but the way that you achieve it can be adapted to your timing, lifestyle choices, and passions in life… Depending on your comfort level there are four additional types of F.I.R.E. lifestyle to choose from.
- Lean Fire- Living frugally or well below your means while enjoying financial freedom and independence
- Fat Fire- Retiring early while living on a budget for a more expensive lifestyle
- Barista Fire- Enjoying financial independence but choosing to work part-time to supplement your lifestyle a little
- Coast Fire- Having enough savings to retire early while working part-time and retaining the ability to save less to achieve full F.I.R.E.
We all have the ability to choose how we want to live and what financial goals are necessary to enjoy the best life. Financial Independence Retire Early in a movement that puts you in the driver’s seat. Check out some of the premier F.I.R.E. communities and see which one may be right for you…