Would you like to learn how to become financially independent & retire early (FIRE)? Who would say no to this! On Monethalia, I am going to document my journey on Monethalia so you can follow me step by step. FIRE is a lifestyle that takes saving money to the extreme to enable you to retire in your thirties or forties. Meaning you can leave your job early and spend the rest of your life
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How can I achieve FIRE and can everybody do it?
To achieve FIRE you need to save more than you spend and invest your savings into high-interest funds. The saving rate needs to be high as obviously a large sum of money is required. At this point in time, I strongly believe that FIRE is achievable for nearly everybody, except those with terminal diseases, expensive medical conditions and those nearing retiring age. FIRE is more about having the right mindset than starting off with a well-paid job or large savings.
You do not need to be well off
I know people who earn a six-figure salary yet spend it all on rubbish. Even if you have nothing right now, you could retire before these people! You may be living on a minimum wage or be a single parent and have zero savings at the moment. Although your salary may be small, you are always free to explore alternative income streams. Matched betting or blogging would be good starting points and I will be posting about other ideas as I explore them. In the end, you are limited by your creativity, not your salary. If you are having small children, you may not be able to start saving a large sum immediately. However, you can still use it to explore alternative income streams. And even if you cannot afford to start immediately, your children are not going to stay small forever.
If you are ready to start, here is a list of 100 ways you can make money.
Fully achieving FIRE may be difficult for some, but even if your funds are not large enough, you can always go for “part-time” FIRE. Instead of fully retiring, you could instead continue to work
How can I get started?
The first step is to stop making excuses! If you would like to become financially independent and retire early, then you need to start NOW. If you cannot start saving now, you can at least start planning. Below I outline the first steps I took to get started.
1. Check what you have
If you are unaware of what you have, you will not know how much you will have to save. For me, my money is distributed over a few accounts and I found that I also had money in places I did not expect! Many finance bloggers post their net worth as an indicator of what they possess. The net worth essentially tells you how much a person is worth–financially that it.
To calculate your net worth, you start by adding up your assets and subtracting your liabilities. You can use my net worth calculator, which also includes a tracker to measure your progress. My net worth turned out to be £11,806 (end of February 2019). Surprisingly, half of this comes from matched betting!
Free Net Worth Calculator and Tracker
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2. Check how much you need
To be financially independent, you need to have a large sum of money so you can live from the interest alone. Here, it is assumed that your money is well invested and has a high annual return. There is a general consensus that you can safely withdraw 4.00% of your FIRE fund without diminishing the actual amount of money. Hence, your FIRE fund can sustain you indefinitely!
To calculate how much money you need, you simply divide your expenses by 0.04. Your annual expenses include all the money you spend for example bills, holidays food, etc. It is easiest to calculate these per month and time the result by twelve. I am no math genius but there is a good article here that explains how the formula works.
My current expenses are £12,852.00 per year which divided by 0.04 amounts to £321,300. I also used this calculator which showed me that I can retire in 14.9 years if I reduce my expenses to £1,000.00 a month. Note that these calculations are based on estimates so you probably want to add a little bit extra just to be safe. For me, the plan is to retire in 10 years with £400,000. Therefore, I will be looking to increase my income and reduce my expenses. Lots of posts on these topics will follow!
3. Increase your income, reduce your expenses and save wisely
Should you have any debts, pay these off first. Increasing your income and reducing your expenses should help with this! Again, I am going to explore lots of ways to do so and will post about all of them (the successes and the failures). Use my free interactive workbook if you need help.
Once debt-free, you may wish to build up an emergency fund. This should be in an easily accessible account and amount to three times your monthly expenses. For those who are debt free and have an emergency fund, it is recommended to put your savings into high-interest funds such as index funds.
Here is a useful guide that talks you through the different investment classes for passive income.
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