We all love going to work every day, and prefer it to sleeping in, being outside, and doing what we really want to do – right? Wrong! Almost everyone would reduce their hours or retire completely, effective immediately, if they knew they had the money to do so. There are a few people who are making that dream a reality, however, with a lifestyle called FI/RE – Financial Independence, Retire Early.
Those who live the FI/RE lifestyle all have the same goal — securing enough money to retire much earlier than the average person. Though the details of how they achieve it vary based on each individual’s income and life situation, the general principles apply to everyone:
Start With A Goal
The first step to successfully joining the FI/RE lifestyle is to nail down a concrete reason why you want to do it. Saving to retire early is difficult – the earlier you aim to retire, the harder it will be. If you’re going to stay motivated, you need to be able to visualize the life you want, with clarity.
Start by asking yourself what you would do if you didn’t have to work for money. Note that this question doesn’t imply unlimited money, just unlimited time. This question will determine the rest of your approach, budget and restrictions that will need to be put in place to meet your goal. Common goals include:
- Travelling the world, renting homes for a few months in each country
- Outdoor exploring
- Making art or music
- Following another passion that does not pay enough for you to pursue now
Once you have a reason to want to retire early, you can start planning and acting. The unavoidable fact about FI/RE is that it requires a significant amount of discipline, and you must aggressively work to save as much as possible, while also increasing your income at every opportunity. If you’re unable to make retiring early a top priority, this lifestyle will likely not be for you.
Redesign Your Life
When you’re trying to retire early and with significant savings, the name of the game is simplification. You’re trying to reduce the amount of money you spend as much as possible, without making your life completely miserable. That means saying goodbye to most expensive splurges, mindless impulse buying, and minimizing any unplanned, unnecessary purchases. Keep your financial eye on the prize: never having to work another day in your life. Still want that designer coat, or need your daily coffee run?
You don’t have to start at full steam. A great way get started is by analyzing each aspect of your spending and considering if there is an equally pleasing option that costs less. If you live in a high cost-of-living area, is there a way you could move to a cheaper location? This is especially easy if you work remotely or if you work in a field that’s in especially high demand, but also applies to professionals that may be low income but useful everywhere, such as hospitality services, teachers and medical staff.
Consider any non-essential spending you can reduce. Restaurants are usually first on the chopping block (ba dum, tiss), and frequently replaced with a new interest in cooking at home. Hotel vacation can be replaced with camping or hostels whenever possible. Take time to really consider why you want to spend money on something, and if you can get the same value out of a less expensive or free option. Weigh each spending event as “is this worth waiting another X days to retire?”
Increase Your Income
No, FI/RE is not about working ridiculous hours every week until you exhaust yourself. However, it is about finding ways to increase your income whenever possible.
Depending on where you are in your career, this may mean:
- Investing in education to improve your job prospects (especially with online courses and certifications).
- Investigating passive income opportunities such as writing an e-book or renting out the in-law apartment on your property.
- Asking for raises and promotions, being more receptive to recruiters, or searching for a new position.
- Creating a side business involving either your hobby or your most marketable skill.
The way you increase your income is up to you – the FI/RE lifestyle is about keeping your eyes open for opportunities and aggressively pursuing them, however you see fit. To really qualify as being a part of this hyper-frugal, goal-oriented subculture, you should aim to save at least 50% of it for your early retirement.
Learn How To Invest
Investing is one of those topics that make many people shy away, glaze over or simply leave when it’s brought up in conversation, but it’s incredibly important, especially when you like having disposable income and lots of zeros on your bank statements.
There’s only so much saving and earning the average person can do without exhausting themselves, which is why investing is an essential part of FI/RE – it makes your money work for you. The way you invest is up to you, your existing knowledge of investing, and the amount you’re willing to dedicate to learning how to play the market correctly. It will also depend on the level of financial risk you’re willing to take on.
If you’re already financially stable, wish you had the freedom to quit your job and do what you really love, and are willing to give up attachment to many material comforts for the near future, FI/RE may just be your ticket to an early retirement. While this was only a primer to introduce the ideas of this spartan lifestyle, there are many more resources in the form of books, communities and tools.