What if I told you that you could potentially retire in your 40s and enjoy many years of total freedom with your loved ones? If you’re a high-income earner — like most medical professionals — it’s entirely possible with a little planning. As a financial advisor, my job is to hear your goals and help you achieve them using the right financial tools. In this article, I want to discuss the FIRE method.
FIRE stands for “Financial Independence, Retire Early.” The first thing I need to clarify is: FIRE is not for everyone. It’s an extremely aggressive plan that requires a TON of discipline and patience.
The basic concept is to earn and save aggressively now so that by the time you’re in your 40s, you could have enough saved to retire and thrive. Typically, folks following the FIRE method save at least 75% of their income. If this sounds like a fair trade for saying sayonara to your work week and moving to an island in your 40’s, then FIRE may be for you.
How the FIRE method works:
Step 1: Planning
The first step is to have a solid plan. (I can help you here.) If you have a partner, make sure your partner is on the same page. This lifestyle is challenging and like I said, not for everyone. Your plan should include a very detailed budget and timeline as well as which financial tools will help you make your way to that luxury beach condo while you’re still youthful enough to win the limbo contest.
Step 2: Reducing Expenses
The key to being able to save 75% or more of your income is not spending it! This means keeping your expenses to an absolute minimum. The first expenses to cut are any and all debt. Interest rates will reduce your savings faster than anything else and for nothing. Pay off your debts ASAP by setting achievable goals and sticking to your plan.
Feeling overwhelmed by student or other debts? Get a financial plan.
The next area to look at in order to cut down expenses is recurring expenses. Think phone and internet plans, any subscriptions you may have, car and insurance payments. Reexamine these expenses and make sure you ACTUALLY need what you’re paying for. You might be paying for unlimited data when in reality, you can get by with 5 GB. Drive a flashy newer car? Look into switching to a more economical option. How much do you spend on grocery delivery or a meal delivery service or eating out? Is there room there to save?
Step 3: Investing
Money doesn’t grow on trees, but it does have the potential to grow in high-interest savings accounts, retirements accounts, stocks, and mutual funds. Depending on your situation, one or more of these products will be the right fit for you. Make sure to consult a financial advisor here. I don’t want you to make these lifestyle sacrifices now, only to have invested in a product that leaves you empty handed when the market crashes.
The sooner you start investing, the better. (As long as you’ve gotten your debt paid off first.)
Step 4: Increasing your income
Increasing your income will help you hit fast forward on your working days stage. Obviously the more you make, the more you can save, the more compound interest you can earn, the faster you can retire. You can increase your income in many ways, especially today with the digital resources for earning extra passive income. Better yet, make extra cash doing something you love. Have a hobby you can monetize on Etsy or other marketplace websites? Look into teaching courses on skillshare or other similar sites. There are tons of ways to incorporate a side hustle into your daily routine. The extra hours and income will be necessary unless you already have a very high paying position.
The Bottom Line
The bottom line is retiring early can require you to save. The FIRE method typically requires saving at least 75% of your income. If that sounds too aggressive right now, that’s okay. As long as you’re thinking about retirement right now and willing to save more, spend less, and invest wisely, you’re on the path to financial independence. Every challenge can be a little easier with some guidance. Whether you’re taking on the FIRE method or simply trying to build a happy life for your family, I’m here to help you through every step of your financial journey.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Theo Desmulier and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past
performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.