build wealth for fire

6 Essential Ways Millennials Can Build Wealth For FIRE

If you’ve ever dreamed about quitting your job to travel the world, but don’t want to wait until your 65 to do so, the FIRE Movement may be for you. More and more, we are seeing millennial’s hustle and grind their way to an early retirement. How can people build wealth for FIRE at such a young age you may ask? Let’s see how:

“Retirement isn’t age – it’s a financial number.” – Chris Hogan

Millennial’s have proven this by adopting the FIRE movement. FIRE means Financial Independence, Retire Early. Many millennials, in the age group of 23 to 38, are saving and investing up to 80% of their income. Their goal is generally to retire before the age of 40. 

Are you a millennial? Take a look at the 6 essential ways you can build wealth for FIRE:

1. Roth IRA: Beneficial for millennials who want to build wealth for FIRE

You may want to invest in a Roth IRA if you’re aiming for FIRE. It is an investment account that is tax-advantaged. The contribution limit on the account is $6,000 for 2020 and the limit usually increases as time goes on.     

Why does a millennial want to open a Roth IRA account?

  1. You pay taxes upfront as opposed to a Traditional 401(k)/IRA, therefore your money can grow tax-free.
  2. The Roth IRA is ideal for millennials who are now in a lower tax bracket and are expecting their income to rise in the future.
  3. Money withdrawals will be tax-free once you reach a higher income figure
  4. Roth IRA’s are preferred for early retirees since you are able to withdraw money at any time with no taxes or penalties (after 5 years). In a traditional retirement account, you will face penalties if you withdraw money before the age of 59 and a half.
Investing in a Roth IRA is a great way for millennials to start accruing compound interest and build wealth for FIRE.

2. Investment diversification: Use the stock market and mutual funds for a good return

Stock Market: Mike Kerins, CEO of RobustWealth, says investing in the stock market can be quite risky as it has volatile tendencies. But he has not witnessed the market in a downward position for a long duration. 

Younger individuals are able to take on more risk and will find far more value in investing their money in the stock market than saving in a low-interest savings account. 

So, investing in the stock market is ideal for millennials. Since the market is volatile and unpredictable, it’s important to do diligent research before investing. A profitable share can give you dividends too.  

Take a look at the 3 of the top stocks owned by millennials in 2020 according to a Business Insider report.

Apple – 13.5% of millennial’s have invested in the tech giant.

Amazon – 11.2% of millennial’s have invested in the online supermarket.

Tesla – 5.8% of millennial’s have an investment in the electric vehicle-making company.

Mutual Fund: A mutual fund is an actively managed investment fund that attracts money from multiple investors to purchase securities. Investing in a mutual fund should remain a long-term goal for millennials. Mutual funds are an ideal option if you are seeking an investment term for more than 5 years at least.  

According to many financial experts, a diversified MF option is much better than investing in single stocks. Investing in a mutual fund can be a vital step for millennials to build wealth for FIRE.

Check out Minted Millennial’s 3 pronged investment approach here.

3. Certificate of Deposits: The king of short term and mid-term financial savings

Certificate of Deposit or CD will do wonders if you are aiming to save for a short or mid-term period. The return won’t be sky-high like a mutual fund but it is much safer.

There are 3 solid benefits if you invest in the CD or Certificate of Deposit.

  1. The return is fixed. You won’t get a penny less than what they have promised to pay you at the beginning, making it very safe.
  2. The return on a CD is higher than a normal bank savings account. This is the reason millennials are getting more attracted towards the certificate of deposits than a normal savings account in the bank.
  3. The maturity date is fixed. You will get the money within the stipulated time as it is written in the agreement.  

I recommend using CIT Bank’s CD’s if this is your route of choice.

4. Generate Passive Income: Earn some extra money in parallel with your regular income

This may be the best time so far to generate passive income. Various options and opportunities are now available like never before. Take a look at 2 passive income strategies that are starting to grow in popularity.   

Rent your garage to newbie entrepreneurs: You may see nowadays that various corporate giants are investing in newly-formed startups. There is no dearth of money for these startups; what these entrepreneurs are lacking is a place where they can invent something new. So garage-renting can generate hefty passive earnings for you.

Explore the creativity within you for earning purposes: The internet has made it possible for just about anyone to market their creative skills or hobbies. Many people make side money from blogs or YouTube which can turn into significant streams of passive income. 

You can sell or license your photographs through stock photography sites. For example, you can choose 500px, Shutterstock, and Adobe Stock to sell these photographs.

Related: 30 Side Hustles That Can Turn Into a Full-Time Business

5. Repay the student debt quickly: Don't live with that burden

There is a total of $1.5 Trillion worth of student loan debt in the U.S. currently. Many millennial’s have either taken out a federal loan or private loan to help pay for their college education.  

There are generally 5 plans to pay down student loans:

  1. Standard Repayment Plan: This is the basic student loan repayment method. 
  2. Graduated Repayment plan: This will be a good plan for you if you want the lower payment option in the beginning.
  3. Income Sensitive Repayment Plan: You have to repay the student loan within 15 years. The payment plan will be based on your annual income.
  4. Extended Repayment Plan: You will get a payment extension of up to 25 years. The monthly payment will be lower than the Standard Repayment Plan and Graduated Repayment plan. 
  5. Income-driven Payment Plan: Your earnings figure is more important than the debt amount. Your federal student loan repayment plan will be calculated on your income.        

You can refinance your student loan if you have taken out a private one. Refinancing means you are taking out a new loan to pay off your previous private student loan, typically at a lower interest rate.

If you have a lot of student loan debt, it’s worth it to check out Credible to see if you can get a lower interest rate!

Related: March Madness: Putting $5,000 Towards My Student Loans In One Month

6. Embrace a frugal lifestyle: The secret sauce to build wealth for FIRE

Try to adopt a frugal lifestyle at an early age. It can give you the happiness and contentment of a financially composed life.

Try to repay your credit card debts quickly. Living frugal will help you put more money towards paying off debt. 

You may also explore the merits of a debt consolidation program to help you pay off your credit card debt at a lower interest rate.

Try to make a sound budget between the 1st or 2nd day of a month. A sound budget has the power to make your life a balanced one. You can spend as per your needs, and save the amount necessary for early retirement. Adopt a disciplined life where you will never cross your own created budget line.

The core point of FIRE is retiring early to live a peaceful life where you can set the goals of what you want to do after retirement. My suggestion is to stop comparing your financial status with your friends, relatives, or office colleagues.

It will create nothing but superiority and inferiority complex within you. So, try to be happy with the money you have earned and try to embrace frugal lifestyle ideas for savings.

Utilize these 6 essential strategies to help you build wealth for FIRE.

linda guest post

Linda Richardson

Guest Post

Linda Richardson is a New Jersey-based financial content writer and enduring learner with an ongoing interest to learn new things. She uses that curiosity, connected with her knowledge as a financial writer, to write about subjects valuable to small businesses. You can find her on Twitter at @LindaRossie9.

*Disclaimer: Some of the links in this post are affiliate links. This means if you click on the link and purchase the item, I will receive an affiliate commission at no extra cost to you. All opinions remain my own. Read more about it here.

Leave a Comment

Your email address will not be published. Required fields are marked *

CommentLuv badge

Scroll Up