financial growth

Beginners Guide for Going from Zero to FIRE

Nobody wants to keep working until they die. Nowadays, more and more people want a life outside of their job. That could mean traveling the world or pursuing their dream careers. However, the reality is that there are bills to pay, but that doesn’t mean you can’t live a life you want. This is why people turn to the FIRE movement.

FIRE means ‘financially independent, retire early.’ This is a lifestyle choice wherein people save a lot and earn as much as they can now. This is so that they can accumulate enough money that they would no longer need to work. Usually, it involves having a fixed age where you will decide to quit your job and do something else in life. This requires building enough funds to account for inflation and other scenarios.

If you are someone who wants to achieve FIRE, here are the steps you need to do.

Secure an emergency fund

You might have noticed in the past few months that people have been losing their jobs and scrambling to find a way to make ends meet. The pandemic has highlighted the exact reason why you need to have an emergency fund. An emergency fund will keep you secure in case of an emergency. This could be sudden unemployment or a medical emergency.

Before you can start risking your money on investments, you need to make sure that you have enough emergency funds first. Generally, it has to be worth three months of your expenses, but financial experts suggest going as much as having a year’s worth. To calculate what you need, add up all the essential expenses and remove non-essential costs. Multiply this by the number of months.

Once you have this settled, have the amount placed in an account that is high-yielding but easy to cash in. There are kinds of savings accounts with higher interest rates if you don’t withdraw for an entire month.

Get into investing

Computing income

The next step is to get some passive income, and investments are the best way to do this. Before putting your money into anything, you will need to create an investor profile. This is just a series of questions that determine how much of a risk-taker you are.

Some investments have high returns but also have a high potential for losses. Mutual Funds or Treasury Bonds are examples of low-risk investments. That means there is a low possibility of losing money, but the returns are also small. However, it will still be higher than what you usually earn in bank interests.

For high-earners, business financial advisors handle their high-risk investments, such as stocks. These kinds of investments are quite fickle and can change at a moment’s notice. These advisors can track trends and know when to cash in or invest more.

Diversify your options

One of the most important things about FIRE is to make sure that you have options. You don’t just rely on your salary or one type of investment. Diversify your investments and have multiple income sources to make sure you have a fallback for the future. This is how people can save up and retire early.

All successful early retirees have a mix of high and low-risk investments. One habit that financially independent people have is constantly investing and finding new assets. With the economy today, it is challenging to generate enough money to retire early. Relying on your income alone will not be enough, but you can speed up this process by diversification.

Have a plan for retirement

Lastly, something that the average person fails to consider is what they will be doing after retirement. It’s important to have an idea or a plan of what your life will be like after you retire. This is essential in determining how much money you need to save up before retiring. If you plan to live lavishly, then you should plan accordingly.

A common issue that some people come across is having no idea what to do after achieving FIRE. Some people fail to realize how much time they actually have when they’re not working. While it seems like a first-world problem, it can actually make you more unhappy later on. You can become miserable because you would end up spending most of your days doing nothing.

There are, in fact, people who still work even after retiring. However, the difference is that they don’t work to survive. Rather, they do jobs that make them happy or fulfilled, despite the low salaries. That can be a rewarding life because their lives don’t rely on their jobs. Consider what you could be doing if you can work without having to worry about the bills.

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