The FIRE Movement is the hot new trend going around the virtual world of finance. It stands for “Financial Independence, Retire Early“. This involves living very well below your means so that you can aggressively save and invest at least 50%-75% of your income. The FIRE Movement is centered around frugality, increasing your income, and planning far ahead. Read about exactly what the FIRE Movement is here, and how you can get started.
What is it with Millennials and the FIRE Movement?
Financial Independence, Retire Early.
It’s pretty self explanatory.
The Millennial generation has brought about many new trends and waves to the world of finance and business.
Millennial’s grew up through big tech booms, including the birth of the internet, so it can be assumed that we’d do things a little differently from our predecessors.
For example, one major change is our job-hopping tendencies.
Regardless of why we tend to job-hop more frequently than previous generations, it has caused business’s to place far greater emphasis and improving their employee retention strategies.
That is just one major change in the world of finance and business that has shaped the way modern companies run.
The FIRE Movement is just another trend being brought forth by the Millennial generation that is focused on planning/budgeting your time and money, heavily cutting expenses, and increasing your income.
Understanding how to shift from a broke mindset to being focused on your financial future is the most important part of striving for FIRE.
Read about why I’m personally choosing to join the movement here.
How Are People Achieving FIRE at Such a Young Age?
Achieving FIRE at a young age is definitely not easy, and comes with sacrifice. The steps to get started on your FIRE journey today are as follows:
1. Figure Out Your FIRE Number and Budget Accordingly
Your FIRE Number is the magic dollar amount you need in your nest egg to be completely financially independent. Meaning you can live off your investments on a certain amount per year (a 4% withdrawal rate is recommended) for the rest of your life. You can calculate your FIRE Number here.
Once you know your FIRE Number, you can create your budget to reflect your goal. Read about how to make an effective budget here to get you started, I’ll even include a free interactive budgeting template.
I would also recommend utilizing money management tools to help you track your expenses, and plan your monthly budget. It has helped me out a ton!
The key to achieving FIRE young is to start planning today.
Don’t hesitate. Every dollar you spend is a dollar that could be invested.
2. Start Aggressively Cutting Your Expenses
Once you know your FIRE Number and have a plan in place to achieve it, it’s time to start taking action.
Regardless of your income, there are expenses in your life that you can minimize or eliminate completely.
Sometimes, doing this involves making sacrifices. Depending on where you’re at right now financially, you may need to make more sacrifices than others.
People that are buried in debt need to do whatever they can to cut their expenses and re-allocate that money entirely into their debt. No excuses.
You cannot build wealth when paying off debt with an interest rate.
There are plenty of guides out there that will go more into detail to cut your expenses in half, so get started on that right now.
Lowering your expenses and living frugal is a key pillar in the FIRE Movement.
The less you spend, the more you can invest,
Be addicted to saving your money.
3. Increase Your Income with Side Hustles
You know your FIRE Number, you have a plan for how to achieve it, you know how to cut your expenses to maximize the value of your money.
Now it’s time to create multiple streams of income. This is easier said than done.
Those that can manage to get at least 3 or 4 streams of income are the ones that start to see huge increases while building their nest egg.
Here are 30 side hustles that can eventually be turned into a full time business.
Whether it be arbitrage, starting a Youtube channel or Blog, doing freelance work, affiliate marketing, or getting a second job, gaining another income source can make-or-break your FIRE goals.
Not everyone has the free time to partake in this, and many of these things take at least a year or two to really start building up consistent cash flow. Therefore it’s important that it’s something that you enjoy doing on the side. Something you can commit to for a long period of time.
Once you have started working on the above steps, you will be well on your way to achieving FIRE.
Eventually, you reach a point where it’d be recommended to get a professional financial adviser to help you plan out your retirement. They can help you maximize the value of your money that you’ve invested over time.
The best mindset to have to help you get into the habit of investing first is to view every single one of your purchases as a missed opportunity to invest it.
For example, if I spend $100 at target on shopping for stuff I didn’t really need, I’m missing out on the opportunity to invest that money, in which that $100 would be worth $216 in 10 years at an 8% growth rate.
A better example would be if I got Starbucks before work every single day, which isn’t uncommon in the modern corporate world.
Spending $5 on a Starbucks beverage Monday-Friday for an entire year (261 Working Days) comes out to be a total of $1,080 in one year. Lets cut that habit starting today and invest the difference:
If you invested that $1,080 every year for the next 10 years at 8% growth rate, you would have just about $18,000 in your brokerage account.
An extra $18,000 just from cutting out one simple habit. Not to mention eliminating Starbucks sugary drinks from your diet would have great health benefits.
If you want to get started on your FIRE Journey today, go ahead and start reading my Hustle Young, Retire Early Series (HYRE), where I aim to pay off my student loan debt and earn $1M by the time I turn 30.
Learn about everything I’m doing to achieve this goal so that you can do it along with me!