Happy Independence Day, dear readers! I thought I’d take this opportunity to talk about a more specific type of independence. You know, the type of independence all retirement savers are shooting for—financial independence. These days, the term financial independence is thrown around a lot in discussions of early retirement. The FIRE movement (Financial Independence, Retire Early), has been steadily gaining traction in both numbers and media attention over the six or seven years I’ve been following it.
For the uninitiated, FIRE is typically thought to be achieved when one has 25 times their annual expenses saved, which FIRE supporters argue allows for an indefinite annual withdrawal rate of 4%, allowing retirement to be reached years, and sometimes decades, before the standard American retirement age of 67. The typical American lifestyle is expensive and FIRE converts have do things differently than most to achieve different results. They generally choose to forego the typical status markers—expensive cars, houses, clothes, etc..— and opt for a much simpler lifestyle that allows them to supercharge their savings instead. I won’t kid you and act like this is an easily attainable goal or that the path to get there will be the same for anyone who tries—many Americans have high interest debt like student loans, low paying jobs, or might not learn about early retirement until they’re near standard retirement age. Even though most of us won’t realistically be able to retire by 40, we could all stand to benefit from adopting some of the FIRE mindset.
Try to DIY
One of the commonalities that a lot of FIRE followers seem to share is their willingness to DIY things or at least Google something before hiring it out. Maybe you won’t personally ever redo your own siding or try to repair your own car (though kudos if this is you!), but there are a lot of very doable things that people outsource daily. One of the biggest ones that comes to mind is cooking—seriously, invest in a nice knife and a knife skills class. If you can make it your default to pause and ask yourself “Can I realistically do this myself?” you could save yourself a boatload of money over the years.
Stop Caring What Other People Think
Consider if what you’re doing is something that you actually value or if you’re just falling into line. When I got engaged everyone expected me to have an engagement ring. That didn’t seem like a worthwhile use of money to me considering I don’t enjoy wearing jewelry. Do some people think it’s weird that I don’t have a ring? Maybe, but so what? I would rather spend my money on things that add value to my life than spend a few grand just because that’s the expectation.
Take Your Head Out of the Sand
Do you have non-mortgage debt? Treat it like a crisis and throw as much of your discretionary income at that sucker with laser focus until it’s gone. Do you know how much your monthly expenses are? Track every dollar until you know exactly where your money is going and having a reckoning with those numbers. Are you prioritizing your tax-advantaged accounts in a strategic way? Reach out to a blooom advisor and let us help you make a plan.
Making a few simple changes to the way you approach your money can boost your savings, giving you more options and control over your life—and heck—may even shave off a few years of clock-punching.
Written by Laura Wittmer, blooom Financial Advisor