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Hey guys! It’s finally here – FIRE has gone mainstream!
How mainstream you say?
Well, business insider covered an article on it (here) which starts off with:
“The Financially Independent, Retire Early (FIRE) movement, strong among millennials in the US, has reached Australia. The goal of an early retirement is becoming popular among young people who don’t like what they see in the future, with healthcare and state-funded pensions crumbling, and aren’t that keen on the idea of a career for life”.
That’s right, MILLENNIALS FTW MUTHACHUCKAS!
We’re different from other generations in that the old, traditional race of working 40 hours a week for 40 years to retire on a pension of $40k a year just isn’t appealing anymore.
We want MORE!
And just like terms such as “rentvesting’ (renting where you want to live whilst, investing where you can afford), “smashed avo” (the art of pummeling an avocado into smithereens), FIRE has entered the general vernacular.
So for the uninitiated, what is FIRE?
As mentioned, it means to be financially independent in order to retire early, normally in your late 30’s, 40’s, mayyyybe 50’s – some even in their 20’s.
The main principle of FIRE is that you are living life on your own terms, sticking it to the man, “doing you” (post on the “doing you” principle here) and above all, gifting precious time back into your life.
Ways to FIRE?
There are mainly two schools of FIRE thought.
Save, save, save
This includes creating and maintaining and extremely strict budget, saving greater than 50% of your take home pay (usually much, much more), cutting down on every possible cost – e.g. personal transportation and eating out.
Some others take it to the extreme – flushing the toilet once a day, not showering for days on end, in fact, take me to the level of a vagabond and bring it up one, maybe two notches thanks.
The second way is to find ways to accelerating your income at work (read some ways on how to do it here).
It can be volunteering for all the crap no one wants to do, seeking new responsibilities, taking out the dirty plates off your manager, you know, anything you can do to get ahead and increase that earning potential.
Usually both ways incorporate trying to generate multiple streams of revenue aka the side “hustles”.
Running your own part-time business, being an Uber driver, starting your own blog, freelance writing online, becoming a digital assistant, trying your hand at being a hitman, the shark whisperer, vehicle crash test dummy… all viable options – these days, the world truly is your oyster.
Ooo, some other FIRE alternatives include:
This is whereby you continue to earn your domestic currency e.g. USD or AUD, and relocate your entire life to a foreign country with a much lower cost of living, e.g. SE Asia, Central/South America.
If you’ve ever traveled to a country where everything seems cheap – imagine living there long-term? Think of the savings you’ll be able to achieve just by breathing, eating and fuc.. sleeping… FOR THE WIN!
Sometimes you don’t even need to move countries, many are simply moving from a higher cost of living city e.g. New York/San Fran or Sydney/Melbourne to a lower cost one e.g. Philadelphia/Sacramento or Brisbane/Adelaide.
Bear in mind the bigger, better jobs are usually in a bigger city though…
Just like work, where you can rock up for 3 days a week and enjoy the sweet nectar of life for the other 4 – the same can be said for FIRE.
Many aspirants of this choose to work for months sometimes years at most, then take a few months sometimes years off (see the similarity) to yknow, do stuff – travelling, relaxing, spending time with kids, reproducing new kids, whatever tickles their fancy.
I actually first heard about part-time FIRE during the GFC, when the company I worked for hired a bunch of contractors to help out the back office. My manager told me that some people ONLY contract for a living, 6 mth, 12mth, 24 mths at a time – blew my mind at the time.
The Frugal Samurai FIRE
This is a version of FIRE in which, if you talk and write about FIRE enough, enough people will read your blog in order for you to FIRE.
Whichever FIRE path is embarked it all comes back to the simplest of financial equations:
Earn more than you save and invest the difference.
Everything comes back to that point, so it makes sense to either increase your revenue whilst at the same time decreasing your costs.
Do that (the earning and saving bit, not burning cash like Heath), and you will go a long way in any financial endeavour.
How to FIRE?
We’ve talked about operating multiple side hustles with multiple streams of income pouring in.
But if you’re like me, more of a traditionalist, a couple of the easier ways is to just invest in high dividend yielding shares (either through active or index investing) or in real estate for rental income.
Give them both some time to stew and viola! Moonay moonay!
This is when you identify the higher dividend payers in the market, invest and collect your dividend cheques as they come through.
In Australia, we have a system called franking in which the company pays the dividend tax on your behalf and pass on what’s known as a franking credit to the shareholders.
These franking credits can be used to reduce the income tax paid, or used as a tax refund. Many retirees and income-seekers use this strategy for their cash-flow purposes.
Historically the larger, blue-chip companies have consistently paid good dividends (the Big 4 banks and Telstra especially), which with the generous franking credits sometimes see yields as high as 7-8%.
Mind you shares are looking a bit shaky at the moment aren’t they?
If you’ve ever played monopoly you will understand that if you can chuck in a tenant on a building sitting on a piece of land, you’re entitled to a juicy rental income each time they reside there.
The most basic premise of investing in real estate is to participate in the capital and rental growth from the property through time, whilst reducing debt and paying off your loans.
There are numerous locations in Australia (and around the world) where you can receive high rental income from day 1, thereby helping to payoff your debt earlier, and building that cash flow sooner.
Personally it’s exciting to see that the FIRE movement is gathering momentum, there’s something really appealing sticking it to the man and living life on our own terms right!
As for me, I have my own path I picked out (read here).
FIRE isn’t for everyone of course – it’s just a means to an end, there is absolute nothing wrong if you’re happy chugging along in the 9 to 5.
But you know, if you are a bit more aspirational, want to get some of that time back AND learn a thing or two along the way, then why not give it a go and start that journey!
It’s addictive once you start, believe me.
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