3 Simple Ways To Achieve F.I.R.E (Financial Independence Retire Early)
What is F.I.R.E?
F.I.R.E stands for Financial Independence Retire Early. You know you have achieve Financial Independence when you can afford the lifestyle you desire. When you don’t have to drag yourself out of bed to make a living and constantly stress about how you can afford things in life.
How much does one need to achieve F.I.R.E?
One of the simplest rule is when you have 25 times your annual expenses saved. For example if your monthly expenses if $5000 x 12 months = $60000. Your yearly expense is $60000 x 25 = $1,500,000. You will need $1,500,000 to retire early. This amount could be either in saving, investments or business where you can withdraw from to cover your living expenses.
Here are 3 simples ways you can achieve Financial Independence:
Earn More, Spend Less and Increase Your Saving
This is by far the most obvious and commonly know way to reach FI (Financial Independence). Find ways to increase your income, this could either be the means of promotion, asking your employer for a pay rise, getting a higher paying job or even a second job.
Tracking your expenses or following a budget can be very tedious however it is a great way to achieve FI. I personally don’t like following a budget so I like to automate everything. Track your expenses for about 3 months. My this time you will get an idea of what your expenses are. The put that amount of money aside in a separate bank where all your expenses are deducted from. Have a little bit of buffer amount in this account just in case you do come across any unexpected expenses.
A great way to motivate yourself to spend less and save more is by having a Net Worth Calculator. A net worth calculator is where you are able to list all your assets (things you own) minus your liabilities (things you owe). If your assets more than your liabilities you will have a positive net worth.
You can download a FREE Net Worth Calculator HERE.
Eliminate Debt and Never Go Back
It’s difficult to reach FI if you owe money to the bank or people. Once you have found ways to increase your income the first aim should be to pay off your debt like credit cards and personal loans. Understandable that mortgages will take longer to pay off but the sooner you are able to pay this off the better and we all know most of our income goes toward pay the house we live in.
When you have paid off your debts never go back there again. There is a certain level of happiness and pride when you are able to pay for things with your own money and not having to stress about debts.
Side Hustle and Invest
The very first step to FI was to earn more. Now if you are working for someone else there will always be a cap to what you are able to earn. Therefore another way to earn extra cash is by starting your very own side business. This will not only increase your income and pay off your debt faster but also work as a safety net if you lose your full time job.
With the extra cash you earn from your full time job and side hustle you then invest them in stocks and bonds. Which will then assist you generate income when you do retire and the dividends and returns from your investments will replace your expenses.
There are many ways to achieve F.I.R.E the main point is to just start. Doesn’t matter what age you start at just keep going until you are able to make your dreams a reality.
