If you’ve heard of the FIRE movement, then you’re probably interested in learning how to make it work for you. For the unfamiliar, FIRE stands for “Financially Independent, Retire Early” and is a goal some people have to get out of the workforce as quickly as possible. Switching to a FIRE mindset isn’t easy as it requires a drastic shift in how you think about money. It also requires becoming creative with your financial strategies so that you’re able to support yourself solely on savings and investments. So how can you get started? Here are four methods you can use to create your FIRE strategy today.
Method One: Automate your finances
The more hands-off you are with your finances, the fewer opportunities you’ll have to spend impulsively. Collect all of your bills and set a budget that accounts for how money flows in and out of your life. Next, create a plan to get rid of debt. Try using Credello's debt snowball calculator to create a plan that knocks out debt as quickly as possible. By removing debt from your life, you’ll be able to drastically shorten the amount of time until you can retire. Don’t let past mistakes ruin your chance to retire early. Once your debt plan is established, set up autopay on your bills to ensure that you’ll never miss a payment deadline again. Give autopay a few months before doing anything else so that you can observe and correct any issues that pop up in your budget. Lastly, head to your payroll department and set up auto deposits into different retirement accounts. There’s no specific amount; consider the contribution limits and the most your budget can sustain. If you don’t have a payroll department or are self-employed, this part will have to be manual but is still easy to do. Many banking companies such as Fidelity or Vanguard have auto-deposit options that can help automate retirement contributions but only set them up if your income is stable and consistent.
Method Two: Stop feeling ashamed of your financial goals
The mindset you have around your finances is key to retiring early. Having a negative mindset around money that makes you feel ashamed or embarrassed will make reaching your goals more difficult. It doesn’t matter if you want to retire early because of mental health, travel opportunities, or just because you hate having to work for others; embrace it! When you’re excited about a goal, you have a higher chance of success to achieve it so don’t let others' opinions influence the things you want out of life. Don’t feel ashamed of your debt, paycheck, savings accounts, or anything else related to your financial situation. Accept that you’re not perfect, yet still deserving of working towards the goals you want to achieve.
Method Three: Become a minimalist
Becoming a minimalist doesn’t have to mean living out of a camper van and eating beans (unless that’s what you want). The most effective method of minimalism is one that you can adhere to easily. If you want to live in a shack with roommates and make your clothing, go for it. If you’d rather see minimalism as buying quality over quantity (i.e., saving up for an expensive but well-made pair of winter boots that will last for years instead of buying a new pair every winter), that works, too. Understand that minimalism has a spectrum, but a spectrum you must stick with to retire early. Stay intentional with your purchasing habits, and don’t let lifestyle creep ruin your chance at achieving FIRE.
Method Four: Monetize everything
The easiest way to retire early is to bring in more money that goes directly into savings or investments. If you’re not already using multiple income streams to make more money, then it’s time to start today. Two aspects need to be considered when creating more income: 1. Monetize what you already have 2. Don’t ruin the things you love
Monetizing what you have
You’ve probably heard, “you need to spend money to make money.” To some extent, that’s true, but that doesn’t mean you need to go into debt to generate more income. There are many ways you can leverage your time without putting money down. If you have monetizable skills, then look into gig sites like Fiverr or Upwork. If you have things to sell, set up a free shop on eBay or Etsy and use the camera on your phone. Both of these options require no extra money down because they take a cut of everything earned. You don’t need to set up an entire business structure to make more money. Leverage the time you spend doing these things already and monetize that for your advantage.
Don’t ruin the things you love
Don’t let yourself fall into the trap of turning a hobby you love into a job you hate. There’s not much point in retiring early if you have nothing to do that excites you. Let whatever money you make be seen as a bonus and not a requirement so that you keep a healthy balance between earning money and living well.
FIRE is a long-term strategy that requires consistent effort to put as much money away as possible. Start with one of these methods to ensure you’re on the path towards early retirement.