Achieving FIRE (financial independence, retire early) is a goal for many people. But achieving this goal isn’t always easy. It takes time and planning to reach the level of financial independence necessary to retire early. Rather than going through a plan of achieving FIRE, because, to be honest, circumstances and strategies change and I’m constantly learning and applying on the go, I have narrowed my approach down to these three principles that I believe will guide me to achieve fire.
These three steps are simple:
- Save money
- Buy assets
- Reduce bad debt
I believe the best way to save money is through a combination of living below my means and working hard. For example, I currently live at home, which costs me only $400 per month, including utilities, which allows me to put away most of my income for investments.
Working hard involves increasing revenue and reducing expenses, using side hustles like my e-commerce business, selling old items online and doing surveys to supplement my income while also looking for ways to decrease the costs like groceries or buying material things.
In addition to these two factors that help me save money, one of the most significant benefits is that I am a very frugal person by nature who doesn’t spend much on anything unless it’s worth it. I recommend watching Marie Kondo’s shows on Netflix if you are interested in becoming more of a minimalist.
I will continue following these three steps to save money until I achieve fire!
The best rule of thumb when buying assets is to ‘buy quality, undervalued assets, ‘ which I try to do. It can be not easy, but I always look at the numbers and decide whether it’s worth paying more than an item costs because of that specific quality or feature.
Currently, my assets include a mix of stocks, cryptos and property. I plan to continue buying assets until I retire, at which point my retirement money will be making enough passive income to fund my lifestyle.
Reduce Bad Debt
Borrowing money is often necessary, but borrowing too much or using debt on unproductive assets can be detrimental to achieving FIRE. An example of unproductive debt is a car loan whereby the asset (car) is not producing income and decreases in value over time whilst accruing interest.
On the other hand, acquiring debt to purchase an investment property whereby the rent covers the repayments and interest (positive geared) and adds money to your pocket could be a highly productive use of debt.
If you have no choice but to acquire bad debt, I would suggest prioritising paying those debts off first before the more productive debts.
I think that narrowing down everything I do regarding finance to these three guiding principles can help me make quick decisions on finance-related matters, particularly since FIRE is still a long while away for me. It’s easy to go off track when the goal is so far away.
It’s also important to remember that reaching FIRE can be a long and tiring journey, so cut yourself some slack when you have a bad day, week or month here and there. Know that if you stick to your principles in the long haul, your future self will thank you for it.
This blog post was primarily inspired by the book “Money School – Become Financially Independent and Reclaim Your Life” by Lacey Filipich. This is a great book for any beginner to FIRE and also a good refresher for a veteran who needs a little motivation or realignment of goals.