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How to Retire Early with a FIRE Lifestyle?

Team Jar
October 27, 2022
How to Retire Early with a FIRE Lifestyle?

FIRE strategy refers to extensive savings and investment planning. The follower has to cut down aggressively on his/her daily expenses. Read on to know all the basics of the FIRE lifestyle.

Who wouldn’t want a hassle-free life? Proper health, a good amount of wealth, and green ticks on your bucket list.

Every now and then, you must be visualising how you want your life to be. We all need rest.

If not that, we all have things we wish to accomplish before we get too old. But, does your hectic lifestyle let it happen? Not necessarily.

Early retirement is easy - you just need grit, determination, and, of course, put in that resignation!

But the dilemma of financial emergencies stands strong enough to crush our desires. 

There is a solution for everything. If you are keen on retiring early without compromising on your financial health, here’s what you can do - follow the FIRE lifestyle! 

This buzzword must ring a bell in your head. It's in vogue, but not everyone is keen enough to use this engaging retirement plan. If you are the keen type, here is what you need to know:

What is the FIRE lifestyle? 

FIRE (Financial Independence & Retire Early) lifestyle traces its roots from the 1992 best-selling novel, Your Money or Your Life by Vicki Robin and Joe Dominguez.

It escalated a movement that inspired people to carry on extreme savings and investments alongside an equally extreme cut down on expenses.

The basic morale behind this strategy lies in equating each and every expense in terms of the number of working hours that it took to finally be able  to pay for  it.

That is, under this strategy, you are constantly evaluating the effort that you put in to earn your money before carrying out any unnecessary expense.   

The golden side of this strategy is that with this mindset, we are bound to not kill our time and effort in reckless expenditure but smart saving and investment plans.

The FIRE lifestyle encourages you to follow a frugal approach in your daily routine, from food to clothing, you must make your spending as economical as possible.

Somewhere on the lines, a minimal lifestyle like this is quite sustainable in an economic sense and creates enough space in your financial portfolio to take risks by investing in a number of funds, etc. Here are some tips for you to stop impulsive buying and curb your spending.  

The FIRE lifestyle, in simple terms, encourages you to save around 70% of your annual income. Here, the more you save, the better (& early) retirement you’ll have.

The two financial gurus who introduced this lifestyle equate this lifestyle to living-off with small withdrawals and accumulating a large fund over the years. 

Who wouldn’t want to have a no-finance-worries retirement? This is what ignited the flame of the FIRE movement.

While not everyone could accomplish it and some turned out to be too stingy, this strategy still gives us hope that a retirement that is way too early than the traditional retirement is possible. 

Now that we have an overview of what FIRE lifestyle is, let's dive deeper and see how you can inculcate this in your spending and saving habits:

Understanding the rationale behind FIRE

The disciples of FIRE lifestyle target the conventional age of retirement, 65 years. They dedicate a major fraction of their earnings to savings and sustain on extremely small amounts.

The goal is to accumulate enough wealth in order to retire decades before they reach 65. Their financial portfolios are designed in a way that enables them to multiply their money by manifolds and attain an utterly secured financial background. 

Who is loving the FIRE lifestyle?

According to a report by Vox, millennials are positively embracing the FIRE lifestyle. The idea of a minimalist lifestyle, awesome bank balance at the time of  retirement and ultimate financial security is what makes the idea of FIRE appealing to the millennials. 

To cover up finance post this type of early retirement, FIRE followers usually save around 30 times of their annual expenses. With this bulky investment and saving plan, they very easily quit their jobs and retire altogether.

But, how much do they spend during their non-retirement period? FIRE life-stylers often withdraw only around 3 to 4% of their total annual balance! Due to this extensive demand of this financial strategy, the followers have to be extremely diligent in making investments and diversifying their portfolio. 

The variations in FIRE strategy

1. Lean FIRE

This is the most stringent FIRE strategy. People who choose to  follow this often adhere to an extreme minimal  lifestyle. In a way, they only spend on the necessities and refrain from any other expenses.

With extremely low spendings, they aim to multiply their net worth too quickly. These people live restricted lives. Even the expenses like trips, picnic plans, parties etc are too hefty a cost for them!

2. Fat FIRE

The followers of fat FIRE are a bit lenient in their saving strategy. These people aim to save a substantial amount but don't really give up on their current lifestyle.

They plan to earn and save more than an average person. For this strategy to work, the followers have to make sure  that they earn quite a high salary and also carry out more comprehensive and diversified investments.

Since they aren’t  as strict as the lean FIRE strategy in terms of cutting down on spendings, the work in the context of savings and investment becomes more regressive here. Watch your savings add up with these 8 money management skills. 

3. Barista  FIRE 

 

The followers of the Barista FIRE strategy sail between the Lean FIRE and Fat FIRE strategy.

These people usually quit their traditional 9 to 5 job and find a decent part time job. With a combination of this part time job and a reliable saving plan, the Barista people live a less-than-minimal lifestyle.

Their job acts like an allowance for a healthy lifestyle and savings help them to not dig into their other funds for emergency spendings. Here are 13 Small Changes In Your Money Habits Can Help You Achieve Financial Success.

Who can follow the FIRE strategy?

There are several illusions surrounding who should actually follow the FIRE strategy. The truth is, anyone can. Whether you earn in six digits or in thousands, FIRE is open to all.

The strategy can be modified according to your investment and spending habits. This strategy is all about proper planning and execution.

If you wish to retire early in your 30s or 40s, you will definitely need a higher salary in your 20s so that you can accumulate a sufficient amount before your retirement.

However, there is sufficient room for everyone to fit in and save according to their early retirement plan, maybe not as early as 30s or 40s but decently before the age of 65. 

FIRE moral

The FIRE strategy is more or less an amazing saving and investment strategy. These extreme habits will take time to build on and also, the execution is not easy as it may seem.

The first step here is FI, that is, financial independence. Before retiring, you have to work somewhere, earn something and save enough. The best way to keep the motivation high is to work at something that you love to do.

Pursuing a job that you consider nothing but something that you have to do will lower your morale too soon. 

The author of the book Robin says that FIRE is not just something that is planning your early retirement at the expense of your present, rather, it teaches you how to lead a peaceful minimalist life.

FIRE strategy teaches us how to consume less, but live better. This twin fold benefit of FIRE lifestyle is what we are here for! With the bomb combo of smart savings and investment plans, you can have a hassle free a retirement. 

More work, more savings, smart investments and a handful of minimalist consumption- the recipe of your FIRE lifestyle explained easily. 

The basic tip to make the FIRE strategy work the best for you is smart investment and a savings plan. While considering reliable savings tools, the follower of FIRE has to be even more careful.

However, there are plenty of online tools and investment apps like Jar that makes it possible for even a mediocre earner to accumulate enough for a financially secured future. 

You can start saving small and easy, automatically, with the Jar app. Explore how here. Simple online savings and investment tools like Jar can help  you accumulate enough wealth that FIRE would be easy for you.

Invest in digital gold, turn your spare change and pennies into gold and you will even have the opportunity to do daily spins that can double your invested amount! With the Jar app, FIRE would be easy!