With the rapidly changing world towards more and more technological advancements, the lifestyles of the people are bound to be changed too. FIRE lifestyle is today’s answer to where our modern living is heading.
FIRE simply stands for Financial Independence, Retire Early. This is a movement spearheaded by the millennial generation.
As the name suggests, the movement is characterised by a dedicated view to extreme savings and frugal living.
The goal for these millennials and people who support the FIRE movement is to save as much as possible from early in their lives and invest the savings aggressively for future use.
The lifestyle seeks to save up to 70% of a person’s yearly income till the age they wish to retire and by making smart investment decisions. After retirement, the movement followers seek to only withdraw a small amount to support their post-retirement life.
This movement was made famous and is continuously gaining momentum through the social media channels, blogs, youtube communities and online discussion forums mostly followed by the younger generations.
Table of Contents
Why FIRE LifeStyle?
The followers of the movement find themselves at ease in life at the later stages. Generally, when the age of retirement is given thought to, 60+ is what comes to mind, according to where the person lives. But the propellers of FIRE say why not retire early at say 40 or sometimes even 30.
They believe in working hard now and working smartly towards accumulating enough assets to be able to live stress-free and without having to rigorously work day-in and day-out till 65.
They also believe that this lifestyle allows them to pursue other areas of interest that they would not have otherwise found time or age to do so after they retire at 65 instead. The movement calls for a simpler but freer living whilst working and after early retirement too.
Characteristics of the FIRE Lifestyle
There are a few distinguishing characteristics of the FIRE Lifestyle. Some are listed below:
1 – Self Assessment
FIRE Lifestylers need to first do a self-assessment of what they want in life to see the suitability of this lifestyle for themselves. They need to make sure that they do not follow this movement only for it being the ‘it’ thing to do or by the peer pressure of any sort. Given, that FIRE lifestyle champions minimalistic living style and extreme cost-cutting and cutbacks. Only individuals with will power and focus would be able to see the lifestyle through.
2 – Smart Budget Planning
Budgeting is one of the keys to leading a frugal but comfortable lifestyle. The budgeting plans for FIRE is two-fold.
One, cost-cutting. The proponents of this lifestyle need to do a self-assessment of their current income streams and spending habits. Reducing all the extra costs and getting rid of any expensive habits will be a deciding factor later in life.
Followers need to keep in mind this is not about cutting costs for a while but a complete overhaul of lifestyle. Shift to frugality. So, at a rate of 70% of total annual savings, the proponent will require about 10 years of work to gather 25 years of worth of savings.
Keeping in mind that, the FIRE lifestylers have no sure way to guess till what age they will live and thus any and every plan made needs to take this factor into account. Another factor to be kept in mind when making a budget is at a younger age, most likely the income will not be as much as in later years, thus adjustments will have to be made.
3 – Plan Your Retirement
Post-retirement spending plan. The second part of the budgetary plan needs to be laid out for the post-retirement period.
According to how they want to spend their time after retirement, a monthly and yearly budget needs to be set which can sustain the living expenses after retirement. Also, keeping in mind savings for emergencies, disasters and/ or medical expenses.
4 – Increase Income Streams
Increasing the income streams now to earn more is another key characteristic of the FIRE lifestyle. Looking for side gigs, opening passive income channels, setting up accounts and opening small businesses are some of the ways to increase the income.
The world of internet and digital media has opened a huge number of opportunities for individuals to start earning handsomely too. Blogging/ Vlogging is one of the more famous examples of setting up a passive income stream. The followers of the FIRE lifestyle actively seek to multiply their earnings and thus their ability to save more.
5-Asset Creation
Aggressive asset creation is another part of the FIRE Lifestyle though this can differ from person to person. Creating these assets when the proponent is on-job and working will help in future in case of emergencies or simply living how the individuals want to spend their life.
6-Sustaining Post Retirement Income
Only creating assets and saving income is, however, not enough. There are different options to sustain post-retirement funds. These include:
- Fat FIRE: With followers with normal job timeframe but who save more than the average person.
- Lean FIRE: Extremely stringent and minimalist.
- Coast FIRE: Part-timers.
- Barista FIRE: 9-5 quitters who still engage in some work for funds’ sustainability.
These are the six characteristics of FIRE enthusiasts that need to be followed, in order to stick to the FIRE lifestyle. The lifestyle certainly is a bit difficult to follow for someone who already does not live along the lines of these characteristics but the long term benefits are surely worth the effort.
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