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What You Need To Know About The Global FIRE Movement

Have you heard of the FIRE movement? If not, let us explain. The FIRE movement is a global movement which has been gaining ground quite steadily. Gung-ho proponents of the campaign believe that retiring at 65 is too late, and they argue that you can easily retire a lot earlier if you practice frugality and embrace some smart tactics. The whole idea of the FIRE movement is to cut back your day-to-today expenses and to max out your savings so you can attain complete financial independence and retire early. ‘FIRE’ is an acronym for ‘Financial Independence Retire Early’.

What Exactly Is The FIRE Movement?

The movement was pioneered by American podcaster, Tim Ferriss who essentially picked up the idea from Cashing in on the American Dream, a book authored by Paul Terhorst in the late 1980s. Tim’s show featured MMM or Mr. Money Moustache, a FIRE blog that became extremely popular in 2010. Shortly after The Tim Ferriss Show was broadcast, the concept found wide currency in the mainstream media, and the lighthouse adopters instantly became social media celebrities. The proponents of the concept believe that you should be able to retire much before the traditional retirement age of 65.

Who Is Mr. Money Moustache?

The real name of Mr. Money Moustache is Peter Adeney who, along with his wife, tried to live an unbelievably frugal lifestyle in Longmont, their hometown. They managed to save around 50% of their lifetime income in Vanguard funds, and due to their low-cost lifestyle, substantial investments in Vanguard funds, and two properties rented out, Peter could retire at the age of 30! Peter Adeney is still a key figure in the global FIRE community and has a big role in spreading the movement far and wide. Inspired by Peter, a number of FIRE blogs have popped up in recent times.

How Can You Follow A Low-Cost Lifestyle Like Peter Did?

To make the concept actually work for you, you need to save a lot and lead a frugal lifestyle, too. Most Americans, especially those who belong to the middle-class sector, find it quite difficult to combine an aggressive saving strategy with an incredibly frugal lifestyle. You might wonder how the adopters of the FIRE concept can live on a shoestring budget. Peter Adney recently came up with a detailed annual budget of his family, and it turned out that the family only spends $25,000 in a year to maximize their savings. Can you imagine an entire family of four living in the suburbs of Denver on such an annual budget?

Reducing your personal expenses to less than ten thousand dollars each year needs a lot of planning, perseverance, and patience. You may need to cut back on your groceries and may need to settle for two-wheelers instead of four-wheelers or maybe bicycles, and may have to borrow many things instead of buying. You may not be able to afford the luxury of dining out even once a month if you join the movement. Of course, nobody will pressure you as the choice is all yours, but that’s how it goes. It’s the ‘norm’.

Can You Save At Least Fifty Percent Of Your Income?

Most Americans save a meager percentage of their earnings every month. However, the FIRE movement rules of thumb require you to save around 50% of your income every month. This means you cannot perform regular and expensive purchases, go on a shopping spree, or dine out with your friends and family on a regular basis. You may save the money in low-cost funds. Many FIRE-focused individuals save their money in low-cost index funds. While many investment gurus advocate for saving 10-15% of monthly income in a 401(K) account, FIRE supporters argue that the tax benefits of 401(K) are not worth the wait (these funds restrict user access to their money until they reach their retirement age), and they prefer the Vanguard funds instead.

How To Know Your Date Of Retirement?

If you are spending $25,000 each year for the entire family, having $100,000 in your savings account implies that you have already got four years of expenses in your account. If you can save aggressively and bring down your expenses, you will eventually reach a point where you won’t have to go to or even do your day job anymore. That’s the whole scheme in a nutshell.

If you start calculating your monthly and yearly savings today and do some serious planning, you may be able to retire early as people in the FIRE community do. Isn’t that cool and challenging at the same time?

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