Are you looking to incorporate some FIRE into your life?
We're not talking about combustion and flames. We mean the national movement towards early retirement entitled FIRE---Financial Independence/Retire Early.
If you're unfamiliar with the ideal, it's a movement growing in popularity across the United States, especially among younger adults, that preaches extreme saving, side gigs, long work hours and aggressive investing to achieve financial independence on an accelerated timeframe, often within 10 to 15 years of entering the work force.
How, you ask?
Here are some basic FIRE guidelines featured in a recent USA Today Article written by Personal Finance and Real Estate Reporter, Janna Herron.
In her article Herron notes, "Just like saving for regular retirement, it's easier to start early when you have more time to build up money and assets and no children to support. It is also important to realize that your FIRE journey could take longer than others who had a leg-up with a higher-earning job. Here are the basic steps."
1) Save: FIRE adherents aim to put away a significant chunk of their income – at least half, often more. To do that, they slash their costs, typically aiming for the biggest expenses first – housing, food and transportation – and then moving onto smaller bills and more discretionary spending like the internet, cellphone and entertainment.
2) House-hacking is a common strategy, usually taking on roommates to defray shelter costs. FIRE followers avoid dining out and get creative on food costs. For instance, Dogen squirreled away free food his employer handed out when he was in his 20s. As for transportation, many rely on just one older, cheaper model. Others choose public transit or bicycle for commuting.
3) Earn: While they save, FIRE aspirants work to increase their income, either logging in overtime or taking on outside gig work such as freelance writing, consulting or driving for Uber or Lyft. Many of them blog about their journeys as another way to earn extra income.
4) Invest: They max out their 401(k)s and IRAs, which help lower their taxable income. Leftover money is poured into low-cost index funds. Others buy rental properties to create a passive income stream. The goal is to reach the 4% rule, or building up a large enough nest egg that you can safely withdraw 4% a year in retirement without touching the principal.