SACRAMENTO, Calif. — The Financial Independence / Retire Early (FIRE) movement is flipping traditional ideas of work and retirement on its head.
ABC10 spoke with a financial coach about how FIRE can work for you.
“Just talking about it has me feeling excited. I think a lot of times with money and finances, we feel that it’s controlling us rather than us controlling it,” said financial coach Maureen Paley.
FIRE is all about controlling spending now to have more to enjoy later, and by retiring early we’re talking 45 or even 35 instead of the traditional age of 65.
“Folks who really throw everything that they have at this FIRE goal — financial independence, retire early goal — they're usually living very simply,” said Paley.
Paley says FIRE is a commitment that’s not always easy but can be worth the effort.
“Maybe they’re not vacationing once or twice a year, maybe they’re not buying a new car every five years. So, there are certain decisions folks in this community will make so that they keep as much of that disposable income that they have and put it towards investing wisely so they can leave the workforce early and they can have that financial comfort in the future,” said Paley.
Anyone can live the FIRE lifestyle, and everyone’s goals look different. The bottom line is that it all comes down to planning and using investment tools you might already have like a 401k or index funds.
“Their disposable income, which is left over after their bills are paid, their housing is paid and so on and so forth, that money is put in the service of growing more money usually through investments so that they can get to that goal much quicker,” said Paley.
The difference between being financially savvy and the FIRE approach is the level of aggressiveness. While most people put 10-20% of their paycheck in their 401k, FIRE people might put 50-70%.
The key is willpower. Paley says you can find motivation through the FIRE community, getting inspiration from other people also trying to live the FIRE lifestyle.
“When they see what’s possible, and I think when they start seeing results after they start taking their first few steps toward that FIRE goal, they get really excited and really motivated,” said Paley.
The sooner you start, the more time you’ll have to build up investments and ride out some market volatility. There are still benefits if you put FIRE into practice even if you’re older.
If you’re 55, for example, taking a more conservative approach makes sense since you don’t have much time to ride out market volatility.
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