Acquaintance with FIRE (Financial Independence, Retire Early)

financialtreat – will explain about Acquaintance with FIRE (Financial Independence, Retire Early) that you will get in the following article. Let’s look at this article carefully!

Maybe you have heard a little about the Financial Independence, Retire Early (FIRE) movement through the internet media with various stories about an individual who reaches early retirement. What is the FIRE movement like, let’s discuss it here!

The FIRE movement began to develop in 2010 when blogs, podcasts, discussion forums, and the formation of various FIRE-based unity communities. The community formed also consists of people with a variety of backgrounds and socioeconomic statuses to tell each other about their journey to financial freedom.

Each person who aspires to achieve FIRE implements a strategy that suits his personality, but there are some similarities that can be drawn as FIRE’s common thread.

Acquaintance with FIRE (Financial Independence, Retire Early)

Financial Independence can be interpreted as a condition in which a person achieves all his needs without having to work. In other words, financial freedom is a time when we are free to make any spending decisions without any financial hindrance.

You could say, Financial independence is like a place we want to go when traveling. Do you want to use the fastest and most comfortable vehicle to get to your destination? Just like going somewhere, we need a vehicle that can help us achieve Financial Independence, which is the investment where it is most appropriate for us, and how to control it so that our investment vehicle runs smoothly.

FIRE Is Not Early Retirement

When one hears the term financial freedom, not always people imagine early retirement even though it stands for the term retire early. How we interpret FIRE more precisely is to ask ourselves here, what comes up when we hear the word financial freedom.

If Indonesia’s population of about 264 million is asked about it, we can get 264 million different answers because of different backgrounds and financial conditions. There are people who see financial freedom as not having to think of money for their own needs, but some interpret it to live in an exotic country. Therefore we can withdraw that FIRE is a movement to achieve an ideal.

Saving, Investing, and Determining Lifestyle

The FIRE community has a very high spirit to achieve its goals. Any way to achieve this will be done. Given that each person has a different background, then we cannot generalize his approach to each individual. Some fit into the super economical lifestyle looking for a rebate or buy 1 get 1 but not all can do that.

So as a first step it’s a good idea to be aware of the importance of saving, investing, and a lifestyle that we can live from day to day. Like FIRE is the opposite of a diet where diet people want to be thin, FIRE wants to fat his wallet. If the diet is only trendy but cannot be done consistently, then it will be difficult to achieve the final goal.

Who Can Reach FIRE

Anyone can, no exception to you. Start asking yourself a few questions and do the calculations to find out how much you have to downsize to fit into the financial goals you want to achieve.

Both of these questions are important for you to ponder if you want to reach FIRE. For the first question, as mentioned earlier, a very useful rule of thumb is the 4% rule.

This rule says that your retirement savings must be large enough for you to withdraw 4% per year. For that, you need to save 25 times from the annual routine expenses. What you need to note, is that the number of withdrawals you may increase due to inflation. So, you need to prepare more savings funds.

To increase the amount of savings and maximize the growth of your savings, then you can use the FIRE method. And remember, this FIRE is all or nothing. In fact, achieving 50% of the goal of financial freedom is a remarkable achievement.

Tips for Achieving Financial Independence Retire Early

A person who adopts Financial Independence Retire Early as his lifestyle, then his adherents will be very frugal. Perhaps some of them think that Financial Independence Retire Early means living a life of sacrifice until its investment portfolio is achieved.

However, make no mistake. Some of the strategic sacrifices implemented will give financial independence and retire early practitioners space to indulge. So, basically, the principles of Financial Independence Retire Early can be accessed freely by everyone.

What can be done to achieve financial freedom?

Well, to achieve Financial Independence Retire Early effectively, then you need to pay attention to some of the following tips:

  • Maximize employer matching with retirement plans, such as financial institution pension funds or employer pension funds. Choose and sort expenses that include needs or desires. Allocate some of your salaries to save for retirement funds, yes.
  • Invest deeply in the right instruments, such as low-cost index mutual funds to generate higher long-term returns than cash.
  • Start investing in commercial real estate assets or rental properties that can generate predictable income.
  • Pay off all expensive debts, such as cars, credit cards, and high-interest loans as soon as possible. Because these debts will be a heavy burden and can prevent you from being able to save.

Live more sparingly. Remember, frugality does not mean stingy. Save is to use the priority scale in making money. Be sure to look for products at a cheaper price in the same function. Do not be consumed with prestige to buy products with well-known brands when there are the same goods as other brands at a cheaper price.

  • Buy a used car and keep it for as long as possible,
  • Use bicycles or other low-cost modes of transportation to cut travel costs
  • Learn how to repair your own home instead of buying new appliances or paying a handyman, especially if the damage is only minor.
  • Reduce regular expenses, such as subscribing to streaming accounts, internet, and other services if possible.
  • Take advantage of the free entertainment that is around.

Set a Target Time to Reach FIRE

The ideal without an effort and the target of realization is just a beautiful delusion in the personal mind. The first step of an idea becoming a realization is to write it physically onto a paper. If we see it in writing and not just in the mind, we can continue the journey of realizing ideals by doing calculations.

The FIRE community says a person has achieved financial freedom if he has reached 25x his income in a year. With this calculation, everyone will reach a different number.

A freelancer who has an income of Rp100 thousand per day (e.g. Rp3 million / month, Rp36 million / year) can be said to be financially free if he has money of as much as Rp900 million. How can someone who has an income of Rp36 million per year save Rp900 million? That’s where we get back to our spirit to find solutions and consistently save, invest, and maintain a lifestyle.

Advantages and Disadvantages of Financial Independence

From the above stages, you can take a lot of positive things. The first is that in order to achieve independence, one must be able to live a simple life. Living a simple life is one of the keys to achieving healthy finances.

Second, to achieve financial independence, one must diligently save and make investments. These two interconnected things are one excellent financial arrangement. The third is that you don’t have to work for a lifetime especially if the job doesn’t develop you or even take up the entire time of your life.

However, behind the good lifestyle, actually, the limits required by financial independence do not have to be done by everyone. For example, extreme simplicity. Sometimes, the simplicity required by financial independence makes you forget the meaning of life.

Also Read Financial Independence:

You are only young once, is it worth it to spend your youth without filling it with exciting experiences that make life more meaningful and fulfilling? Live for today because you don’t know what will happen tomorrow.

Second, working to support your needs is actually not as bad as imagined. What’s wrong is his job, not his work. If you do the right job, be it what you love and in accordance with your vision and mission, it must be a very satisfying job. Well, you already know the name now called FIRE. If you are interested in reaching FIRE, start now. Good luck!

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