The F.I.R.E. Movement – Financial Independence, Retire Early.

There’s a growing number of people who are looking to escape the traditional work life model. Why retire at 65 when you can retire at 35 or younger?

The main goal of the movement is to save enough to live off a portion of the interest. For many people the figure they are trying to reach is 25 times your annual living expenses. At this level you should be able to withdraw enough to cover your living costs, usually 3-4%, and still be able to grow your savings.

The key figures here are income and living costs. The larger the gap between them, the more you can save. The question is, can you save 25-50% of your income each month?

Of course having a high income is important, but saving at this level calls into question how your lifestyle impacts your living costs.

If you are able to live frugally, your retirement goal will be a lot lower, and it will also increase the rate at which you can save.

With 25 years of living expenses as the goal, it’s quite easy to calculate your savings goal. If you spend $20k a year, you could aim to retire with $500k.

Getting there from zero is going to take a while. If you can save 25% of your income you will be able to retire in around 32 years, 50% will take 16 years, 65% will take just 10 years.

For many FIREists getting to these high percentage savings is done through living frugally. If you are able to reduce your expenses, move to a smaller property in a cheaper area, reducing spend on luxuries, switching to less expensive hobbies it all helps. Every $100 a month reduction brings your goal $30,000 closer.

If you’d like to read more try ‘Work Optional’ by Tanja Hester.

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