Advertisement Close

What Is the FIRE Movement?

posted on: Nov 8, 2021

A good life needs a lot of money; If we knew this from childhood, we would have started saving from the age of four to retire before 50! However, according to emerging Fire movement enthusiasts; Retiring before 50 become obtainable! If your age is between 18-30, you have major and minor degrees, can get a full-time job and part-time work, then you have a great chance to achieve financial security for you and your family before getting 50! In addition, you will get great perks that your colleagues will lack! For example, you can invest in the stock market, rent real estate, or even learn advice from the manager of iGaming portal, Daniel Klink, on how to constantly make wins from online casino games.

Can you imagine saying goodbye forever to 8 hours working. Free your day from setting the alarm and cascading cups of coffee. Enjoying a walk on Tuesday. Enjoying Monday like Sunday without any difference. You will have plenty of time to do what you are really passionate about; This lifestyle is achievable in one way, which is the FIRE Movement!

What Is the FIRE Movement?

FIRE is an acronym for (Financial Independence, Early Retire). The principle of this movement states that everyone can achieve financial security to retire early. In fact, pensions are currently meagre and do not meet the needs of people around the world, which makes people think of different ways and methods to grow their wealth and obtain more financial resources

However, FIRE promises more than that; Obtaining financial independence early, thus deciding to retire early, and devote yourself to enjoying life! Therefore, you are guaranteed to have a better future for yourself and your family as well.

As you can expect, savings, austerity, and investments are some of this plan’s pillars. The basic principle of the FIRE movement is that one should save 25-30x the value of your annual expenses. To achieve this, you need to save 25% to 70% of your monthly salary and eliminate any instalments that may eat up a large part of your income! However, you should know that the savings you could accumulate in 5-10 years will only cover your expenses for 10-25 years after retirement and live a good lifestyle. So, it would be best to use these savings to generate a passive income (e.g., renting real estate, buying stock in the stock exchange, making a savings account in the bank or a CD).

Achieving the FIRE Plan Using the 4% Rule

In 1998, professors at Trinity University came up with this plan which states that if you can make a good amount of money, you can invest it and live on just 4% of your annual returns. So, you don’t have to think about using your savings.

For example, if you spend 20,000 euros a year, you must save a whopping 5,000,000 euros. Then, if you invest that amount to get 4% a year, you will get 20,000 euros yearly! On the other hand, the time it takes to save 5,000,000 euros depends on the size of your salary and how much you save annually. On average, you will get 3000 euros per month. So, if you save half of your income, you will need 28 years. Thus, if you start implementing this plan at age 21, you will finish it by age 49 and retire before 50!

However, this plan has many challenges; The most important is that a dry lifestyle is not suitable for legendary misers who would rather save than buying medicine! In addition, this plan omitted the vicissitudes of life, financial contingencies, and urgent problems that could occur at any time. Furthermore, it did not take into account inflation, currency depreciation, or fluctuations in investments.

Myths & Facts About Fire Movement

  1. Fire Movement Supporters Want to Stop Working Only!

In fact, the goal of the Fire movement is to stop working early, but not to sit on the Recliner for the rest of their lives! Many people who support this movement want to travel. Discover the world. Allocate more time for family and friends. Get rid of the work’s pressures. Develop their own projects even if it will not give them a good income. By the way, we can consider the wealthiest person in the world, Jeff Bezos, a follower of the Fire movement! Amazon founder gave up the leadership of his company and decided to devote himself to working on “new products and early initiatives”, as he said.

2. Sacrificing Is the FIRE Movement Key Factor

The only way to set aside money to achieve your FIRE plan is to save! We don’t mean just holding the few cents left on every purchase, but cutting out any unnecessary expenses! In other words, why eat out every day when you could enjoy the experience of eating out more if you did it once a week?! To implement the savings intended here, you should limit your expenses to the essentials and stay away from the costs of luxuries; You do not have to rummage through garbage looking for food, but only eliminate any unnecessary expenses!

3. FIRE Movement Is For People With High Salaries Only!

Indeed, the Fire movement is initially intended for people with high salaries who could save a large amount of money during an average period. They have the solvency to diversify their investments. Live a good life after early retirement. However, the lean version of the FIRE movement can suit people with low incomes. For example, if your annual income is 6000 euros; You can allocate 35% of it to medium-risk investments to get a good return before retirement.

Furthermore, you can depend on the same principles, such as cutting any unnecessary expenses. For example, don’t get a newer iPhone every year and never buy anything you don’t need! Also, you can apply your version of the FIRE movement. For example, you could aim to retire from a full-time job before 50 and replace it with a 4-hour work for ten another years, then retire at 60.

Don’t forget to check out Arab America’s blog!