Retiring Early: 4 Principles of the FIRE Movement

There comes a time in your life when you feel that you are ready to quit working and enjoy the fruits of your labor with a well-earned retirement.

If you have an entrepreneurial streak or simply want to generate as much income as possible, as quickly as possible, you will probably be a regular visitor to sites like journeytobillions for inspiration.

It may be that one of those ideas leads you to unlock the money you need to be able to retire early. You might also want to consider the principles of the FIRE movement, which is an extreme saving and investment movement that is designed to achieve a goal of Financial Independence and to Retire Early.

Here is a look at the key principles behind the FIRE movement.

Live for tomorrow

If you truly want to retire as early as possible you are going to have to make short-term sacrifices and adjustments to the way you live in order to achieve that goal.

A key element of the FIRE movement revolves around your ability to be financially disciplined with your money.

This means living as frugally as you possibly can so that you put aside as much of your income into savings and investments as possible. The target figure is to save 70% of your income and avoid debt as much as possible, or at least pay off your mortgage as a matter of priority.

The magic number that makes early retirement a reality is to be able to accumulate a net worth that is a multiple of at least 25 times your current annual spending.

A typical person who aspires to the FIRE principles manages to put aside somewhere between 25% and 50% of their monthly income.

Put your money to work

Simply putting your money into a savings account won’t get you to the finishing line of early retirement and it will probably mean that your wealth doesn’t keep pace with inflation either.

You need to grow your savings by investing in the stock market and taking calculated risks with your capital.

A tracker fund that follows the performance of the stock market would be a typical investment strategy, but it always pays to get professional guidance if you want to try and get the best returns.

Home ownership

You are never truly free to retire until you have paid off the mortgage and own a property outright so that you don’t have to make regular monthly payments anymore.

A key FIRE principle is to clear the mortgage as early as possible, even if that involves directing some of your savings to overpay the mortgage to clear it quicker.

Boost your income

It goes without saying that the more money you can earn each year the quicker you will be able to build up the sort of financial wealth and independence that will allow you to retire early.

Look at potential additional income streams such as so-called side hustles, which are extra jobs you do alongside your regular work.

Taking on part-time work or maybe starting your own business that can be run while you keep your full-time job can all help you get where you want to be at a faster rate.

Looking at your current financial situation, could FIRE be your route to early retirement?