Are you on a F.I.R.E. path? Financial Independence, Retire Early is a movement that has gained a lot of traction in recent years. The idea is to save as much money as possible so that you can retire early and live off of your savings or investments. While this may sound like a great idea, it's not easy to achieve. In this blog post, we will discuss some tips from a professional financial planner on how to achieve financial independence and retire early!
What is FIRE?
FIRE stands for "financial independence, early retirement" which is pretty self-explanatory. The goal is to achieve financial independence so that you can retire younger and enjoy your life. To do this, the idea is to save as much money as possible so that you can retire early and live off of your savings and investments.
Building your FIRE
Cover the basics
Make sure you have an emergency fund saved up, your debt is paid off, and you have a strict budget in place to make sure you can easily cover all of your day-to-day expenses before jumping into the savings portion. Once you've done that, start thinking about how you can increase your savings rate.
Identify your true expenses
One of the trickiest parts of FIRE is identifying your true expenses during the planning phase. This includes both your current expenses and your future expenses. For example, if you plan on retiring early, you'll need to account for healthcare costs, travel costs, and other things that you may not be currently paying for.
It's also important to consider what your needs are vs your wants. Inflating your retirement expenses to include a luxurious lifestyle may not be realistic and could delay your retirement, or even put your entire plan at risk. Alternatively, estimating too low will make it much harder to live comfortably after you've retired.
Plan your investments
Rather than relying solely on savings, investing is a key part of FIRE and there are a lot of different ways to go about it. You'll need to figure out what your investment goals are and how much risk you're willing to take on. Understanding different investment vehicles and how they work is crucial to making sure your money is working for you, so if you're unsure, it can be extremely helpful to seek out a financial planner to help you navigate as you get started.
Diversify your income
One of the biggest mistakes people make when trying to achieve FIRE is relying on one income stream, whether it's from a job, investments, or other sources. If something happens to that income stream, you could be in trouble. So, it's important to diversify your income sources. This will not only make achieving FIRE much easier, but it will also ensure the security of your income once you are able to retire.
Hopefully this post with financial independence retire early planner tips has provided some insight into how you can successfully achieve FIRE. If you feel like you could use a little guidance to increase your chances of success, there are FIRE financial planners who can help you get a plan in place to make your dream a reality.