FIRE: Financial Independence, Retire Early
FIRE: financial independence, retire early is a growing movement that is enabling people to retire in their 40s – or even earlier.
It takes discipline and living as frugally as possible, saving at least half your income for a couple of decades. The younger you start and the quicker you clear any debts; the sooner you’ll be able to kick back.
Now, some might find the idea of early retirement with nothing to do for 50 years to be daunting, so in reality many are simply focused on financial independence. This allows them to only have to earn enough to cover living expenses. Without the pressures of debt and accompanying interest rates, people can take on a part time role for more free time, lower income passion project or alleviate themselves from the pressures of chasing promotions and pay rises.
Whatever the goal, a lot can be said for reducing debt and having a little extra later on.
Here are a few tips for your journey to financial independence.
- Do your research if you have to borrow money. It makes sense to go for the lowest interest rate you can get, but it might also benefit you to make the most of promotions. This could mean transferring credit card debt to one with a 0% interest offer or shopping about for alternative finance options instead of just taking the one offered by the car dealership. You could also look at consolidating all your debts into one with a lower interest option to save you money in the long run.
- Meet payment deadlines to avoid late fees. Ensure you keep track of when bills and repayments need to be made. Put the dates in your calendars and ensure you have a reminder well in advance of the deadline.
- Focus on paying off debt before trying to save money. In most instances you’ll find that interest rates on debt is much higher than those on savings. Some even suggest that it would be beneficial to pay off debts with savings and starting from scratch once you’re in the clear. Make sure you budget carefully however, and don’t be tempted to pay back more than you can afford.
- Make a budget and stick to it. Learn to understand how much you really need to live on including deciding what are essentials. Track your expenditure each month either via a written diary or an app. Some banking apps even provide a full breakdown of your spending by type i.e. bills, food, shopping, entertainment, and will let you set an alert limit on each.
- Aim to own everything and not rent anything. It’ll be cheaper in the long run and in some case can even help you earn money. Consider car share platforms or the likes of Air B’n’B to rent your assets to others and pocket extra income. Also consider borrowing things you only need for a short term, such as a lawn mower and save the money you would have spent on purchasing one.
- Cut back, not cut off to help keep you on track. It’s not about excluding things from your life but being more considered about it. Drive an older car, use an older model phone, eat out less, shop the sale and find more affordable, alternative brands.
These little bits of wisdom are only the tip of the iceberg when it comes to being frugal with money. Even making just a small change can have a huge impact on your money in the longer term. So why not give it a try and see what you can do to get yourself on the road to financial independence?
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