We all grew up thinking that the only way to get ahead is to work hard at a regular 9-to-5 job, right? But there’s an alternative that’s been grabbing people’s attention all over the internet: Financial Independence Retire Early, or FIRE for short. It’s all about saving and planning so you can stop working and enjoy life—especially if you’re in your 30s. So, can you really retire early? Let’s dive into how it works, some strategies to consider, and the challenges you might face.
What is FIRE (Financial Independence Retire Early)?
FIRE, or Financial Independence Retire Early, is basically about getting your finances in order so that you can retire a lot sooner than most people. It’s not just about quitting your job; it’s about having enough money saved up so you can choose when and if you want to work. The idea is to live within your means, save smartly, and find other ways to make money so you can reach your goals.
Think about it—what if you could start the next part of your life however you wanted? You could travel, chase your dreams, or just hang out with friends and family. For many young adults today, retiring in their 30s isn’t just a fantasy; it’s a realistic goal. Financial Independence Retire Early gives you the freedom to live life on your own terms.
Different Types of FIRE
Just like with actual fire, there are quite a few different ways people follow to achieve Financial Independence Retire Early. Some people who are starting with few resources take a method akin to rubbing two pieces of wood together until it sparks: it requires patience, focus, and effort to have their needs met, but they are satisfied in the end. The other end of the spectrum is more like a blowtorch in a fireplace: go big, finish big, but take on a lot more risk along the way. It doesn’t really matter how you retire early, so long as it feels right to you. Here’s a few of the main types of FIRE:
- – Fat FIRE: This is for people who want to live a more luxurious life when they retire. They plan to spend more money while enjoying their free time. These people go big on everything, like Allen Wong.
- – Lean FIRE: This is the original FIRE method, and it’s all about living on less money to retire sooner. It requires a pretty strict budget, and living within your means when you retire.
- – Barista FIRE: For those who don’t want to stop working, but want to take back their lives. This mix allows you to have a low-impact, part-time job while living off your savings. It balances working and enjoying life.
Infographic Source: https://jethrojeff.com
Steps to Reach FIRE (Financial Independence Retire Early)
Reaching FIRE (Financial Independence Retire Early) isn’t easy, but it’s totally doable. Here are some steps to help you get there:
- – Set Clear Goals: Start by figuring out exactly what you want. Set specific financial goals for your retirement, like how much money you want to save and what kind of life you want to have.
- – Make a Savings Plan: Try to save at least 50% of what you earn, or follow the Rule of 25 (save 25 times what your annual expenses are). It might sound crazy, but with good budgeting, it can be done. Make your saving automatic so you don’t have to think about it.
- – Keep Track of Your Spending: Create a budget to see where your money goes. Apps like NerdWallet or RocketMoney can help you track your income, spending, and savings across accounts. This way, you can find areas to save more.
Finding Extra Income for Financial Independence Retire Early
To achieve financial independence retire early faster, you don’t want to just focus on NOT spending your money. Sure, it’s important to keep what’s going out of your accounts low, but also try to boost what’s coming in.
- – Side Jobs and Freelancing: Look into side gigs, like ride sharing or delivery driving, to earn more money. Or, if you have any skills or hobbies that can be monetized, try freelancing with apps like fiverr or upwork. It could be anything you’re passionate about, like writing a blog, starting an online store, or consulting.
- – Smart Investing and Passive Income : Investing helps grow your wealth. Focus on low-cost investments and spread your money out to reduce risk. The sooner you start, the more your money can grow. Starting out might seem daunting, but there are plenty of apps and services that can make it super simple, like Acorns and Robinhood.
- – Use Tax-Advantaged Accounts: Take advantage of traditional retirement savings methods, too. Tax-friendly accounts like IRAs and 401(k)s boost your retirement savings and lower what you pay in taxes. But, sometimes the economy can throw you a curveball. Stay aware of what’s happening and think about having a mixed investment strategy to protect your savings. Investing some of your income in stable assets like gold can help safeguard against volatile markets
Overcoming Challenges
While the FIRE (Financial Independence Retire Early) journey can be exciting, it’s not just a walk in the park to get there. It’s about finding the right combination of effort and sacrifices to take back control of your life as soon as possible. Then you’ll have time for actual walks in the park.
Control Your Spending
As you earn more, it can be tempting to spend more. It can be hard to focus on saving and investing that extra cash to maintain your financial goals, especially when it feels like everything fun costs money. But, if you really want to be serious about financial independence and early retirement, it might be time to start finding some new hobbies that will keep you busy without costing a bunch of money.
Hiking and other outdoor activities can be done at very little cost, with the added bonus of helping you with that New Years resolution to get fit. Gardening as a hobby comes with a lot of added benefits, like staying active, free food, and it’s good for your mental health. Arts and crafts are also good for your mental health. You may have been tricked into believing you have to buy a lot of expensive gear and supplies for these activities, but you can get all of your necessities at very low costs on local free stuff forums and Facebook marketplace.
Or, learn to cook! Most of us have probably had all the basic necessities for cooking since we first moved out on our own anyway, and there’s really no reason to buy a ton of expensive equipment to make delicious food. People who regularly cook at home save an average of almost $60 a month, or about $684 a year! Plus, you get the extra bonus of impressing your friends and family when you cook for them.
Health Care & Life Insurance for Early Retirees
When you’re thinking about early retirement, one of the most important things to consider is health care and health insurance for early retirees. You really need to know what your options are because if you achieve Financial Independence Retire Early, because you might not have employer-sponsored health insurance for a while. That means you won’t qualify for Medicare until you turn 65!
Without a solid retirement health insurance plan in place, you could end up with high medical bills that could really drain your savings. So, it’s super important to figure this out ahead of time, especially when planning for your financial independence. A qualified insurance agent can help you build a plan that’s tailored to your needs
Along with health insurance for early retirees, life insurance is also super important when you’re planning for early retirement. If you have family or dependents who rely on your income, life insurance can act like a safety net. If something were to happen to you, a life insurance policy can help pay for living expenses, debts, and any future financial needs your loved ones might have. It’s a way to make sure they’re taken care of, even if you’re not around, and can be a key part of your retirement planning.
Is Early Retirement in Your 30s for You?
Deciding to chase FIRE (Financial Independence Retire Early) is a personal choice that requires focus and planning. With the right strategies, early retirement can become a reality, leading to a happy and fulfilling life. So, why not start planning today? Take those first steps toward achieving financial independence!
If you want more guidance on your insurance needs for retirement, you can reach out to our team at Ashland Insurance online or give us a call!
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