FIRE MOVEMENT

Financial Independence, Retire Early   (F I R E)

Does the concept of working till the age of 65 and not living your dream life, scare you? Do you want to retire in your 40's or maybe even 30's and travel the world or start a business or maybe even buy an island and spend the rest of your life there without ever having to worry about money?

If yes then this article is just for you.

To retire early you need to have Independence, and not just independence in any sense you have to be Financially Independent. Now what that means is that you should be having enough money to pay for your living expenses for the rest of your life without having to work or depend on others and considering the average retirement age 62 for women and 64 for men, technically you’re considered FIRE if you retire before then.

FIRE Movement was born from a 1992 book "Your Money or Your Life," written by two financial gurus, and here is how it works: You save a large chunk of your paycheck and invest it in some assets and hope that someday the investments will give a return equal to your expenses. The ultimate goal of FIRE is to be able to create a lifestyle where you have the freedom to make choices outside of your financial responsibilities. For example, instead of worrying about taking on a job because it pays more, you can pursue your passion and work part-time doing something you love without worrying about how you’ll pay the bills.

The idea is to Invest most of your income and retire by the age of 30-40 and live off the investment, withdrawing a small amounts from your total portfolio. This theory is backed by the 4% rule, The rule is based on a 1994 study by William Bengen, an investment management specialist, who explored sustainable withdrawal rates for retirement portfolios

Now suppose If you retire with 1 million in your portfolio that generates a return of  10%, you’d withdraw 40,000 in the first year, according to the rule and at the end of the first year the investment would grow by 10% that means the investment will be 1.1 million minus your withdrawal amount(1.1million - 40000 = 1060000). Going forward, by the end of the second year your remaining 1060000 will grow by 10% and become 1.16 million and you’d withdraw 40,000 plus inflation. If inflation in year two is 3%, you would withdraw 41,200. The additional 1,200 compensates for inflation, ensuring you can maintain your standard of living. And this goes on.

Keeping your portfolio invested during retirement allows you to earn an average return over time. In theory, your investments will grow, preventing you from depleting your funds too quickly. Now, this may sound intimidating but the theory has its drawbacks, like we assumed the expenses to be fixed and income tax was not calculated and inflation was kept constant. 

This doesn't mean that it is impossible to retire early, it is in fact possible and a lot of people have followed the strict habit of saving and have made it through. 

Now even if you could not retire as early as in your 30's or your 40's through this concept of FIRE but at least you will have an early retirement than what you were originally supposed to get and even if you can't save up enough to live the rest of your life on the investments then at least you will enough money to quit your current job and go for a less hectic job or maybe try earning through your hobbies or maybe even start a business because you have money that would support this for at least for a few years and the success of this totally depends on the discipline and how you manage your expenses. So it is always better to start as soon as possible because there is no such independence as financial independence. 

We will be posting more on how to actually achieve FIRE, as these theories are based on a few assumptions so the real picture is a lot bigger and tougher than we think but with discipline and regular saving, it is actually possible to escape the rat race and be FINANCIALLY   INDEPENDENT.

For more information you could reach out at:

namangazta@gmailcom