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What is the FIRE (Financial Independence, Retire Early) movement?

What is the FIRE (Financial Independence, Retire Early) movement? image

What is FIRE? It is an acronym that stands for Financial Independence, Retire Early. The main aim of the movement is to seek financial independence as a strategy to retire early. Instead of working to retire at 70, the proponents of the FIRE movement are planning to retire in their 40s or earlier. The idea is said to have originated from Peter Jonathan Adeney, a Canadian blogger who retired as a software engineer at the age of 30. He shared the concept in his blog named "Mr. Money Mustache".

Overview

According to the FIRE ambassadors, to achieve financial independence and early retirement, here is the pathway:

1.Earn an income that allows you to save

As interesting as it sounds, critics of the movement say this point does not make so much sense as everyone already wants to work where they'll earn big but such jobs are usually very competitive. Most people don't earn big pay.

2.Live simply

The second rule is to spend less than you earn. In other words, you should cut down your spending to give room for savings and investments.

3.Invest more

Most of your savings should be invested as much as possible. As nice as it sounds, this is a little difficult as virtually all investments come with a certain level of risk. This is why some proponents have resorted to Bitcoin and other digital coins as cryptocurrency is the most profitable financial investment now. If you're considering investing your saving in adherence to the principle of FIRE, Bitcoin should top your consideration list because it yields high ROI and has low risk.

4.Retire when your investment equals 25 times your annual expenses

This is pretty self explanatory. You should retire when the returns on your investments can yield 25 times your annual expenses. For example if your annual expenses is $1 million, you can retire if the returns on your investments hits $25 million.

5.Spend only 4% of your assets annually

Try to spend only 4% of your total assets annually. However, this may increase when there is inflation. Nevertheless, you can still aim for it.

Pros of FIRE concept

  • It helps you get rich quickly.
  • It helps you invest your money.
  • It helps you cut down unnecessary spending.
  • It shields you from debt.
  • For those whose jobs are strenuous and tedious, early retirement promotes their health.
  • It promotes conservativeness, minimalism, and frugality.
  • It leads to better finance management.

Cons of the concept

  • Not everyone earns enough to save.
  • It reduces the quality of life.
  • You may deprive yourself a lot of fun and still not live long enough to enjoy your savings.
  • Bad investment could plunge you into debt after quitting your job.
  • Many of the adherents and proponents of the concept don't actually retire. They only quit their corporate jobs.

In conclusion, overall, FIRE is a good concept and everyone should adopt all or part of its principles. Even if you don't earn enough to save, you can still cut down your expenses to avoid being in debt. Most importantly, consider Bitcoin and other digital coins for lucrative investments.

Sources

  • https://partners4prosperity.com/early-retirement-pros-cons/
  • https://www.moneyandlife.com.au/retirement/grow-your-wealth/extreme-saving-pros-and-cons-of-joining-the-fire-movement/
  • https://www.playingwithfire.co/whatisfire
  • http://www.mrmoneymustache.com/
  • https://www.bbc.com/worklife/article/20181101-fire-the-movement-to-live-frugally-and-retire-decades-early
  • https://www.hermoney.com/invest/retirement/5-things-to-take-from-the-fire-movement-even-if-you-dont-want-to-retire-early/
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