This site is dedicated to Financial Independence and Retiring Early by accumulating assets and building wealth. Achieving FIRE and building Wealth go hand in hand as you need to accumulate assets to generate passive income to cover your living expenses. So I wanted to summarize everything below in Ten Steps.
F.I.R.E. is a lifestyle movement where you are able to become financially independent and retire early so that you can pursue other things in life. In another blog post, I have outlined how I plan to achieve this, which is through a combination of Real Estate Investing, and Stock Market Investing (read: How I Plan to Retire Early in Our 40s).
1. Make a Commitment
Achieving this will take a lot of sacrifices along the way. You may have to forego going to a nice new restaurant often, not getting the shiny new car that your friends are buying, or living in a modest home when you could have borrowed much more money.
Honestly ask yourself why you want to achieve FIRE and whether will you be able to endure the sacrifices you'll have to make along the way to live the life you dream of. One of the reasons for us making this commitment is to be able to spend more time with our family and be able to travel more freely. (read: Financial Goals Before 40).
2. Set Goals
When do you determine it's time to retire?
Some methods are generating 4% of living expenses through stock market distribution and investing to that number.
Others can be having a rental income that meets your living expenses.
Or it's an X amount of time or money of working and living off of what you have saved after that.
The final goal and when to hang up the boots are different for everyone. Figure out what that end goal means to you. By knowing the finish line, you can work backward and figure out what you need to accomplish now.
3. Know Your Number (cost of living)
Being financially independent means you are generating a passive income to cover your expenses. You need to know what your monthly expense is so that you can target how much passive income you'll need to generate. One method for calculating your living expense is setting a budget. That way you can forecast for any variables and when you do retire, you will have a process in place to not overspend (read: Create a Budget, Track Everything).
4. Have an Investing or Savings Plan
Having a plan allows you to work towards something and get better over time. This investment can also include investing in your passion and things you enjoy doing in your free time to turn them into an additional income stream. For us, we plan to invest in four to five investment properties that will generate our living expenses.
5. Save and Invest a Lot
The more you can save and invest in an asset each month, the faster you'll be able to achieve financial independence. This can also mean maximizing your income through working additional jobs or building side hustles to put the additional income into investing (10 Ways to Save Money at Home).
We are currently saving and investing half of our take-home pay each month; of which 20% is used to pay down the principal of our investment property. After we have paid off this property, we plan to use the profits to continue paying down additional units (read: How to Buy an Investment Property every 3 Years).
6. Continuously Diversify your Income
Typical millionaires have seven income streams and they are able to scale their work into bringing more income even when they are not working. Not only will diversifying your income bring in additional funds, but when one source of income is eliminated, you can rely on other sources of income.
To some people, this can be a race so earning as much as you can as quickly as possible may be a good decision to enjoy the journey when you get to the finish line.
7. Live within Your Means / Don't Let Lifestyle Creep Occur
The biggest wealth trap I see is people spending too much money on consumable goods just in order to keep up with the Joneses.
True wealth to me is being able to pursue what I want at any time because I have obtained Financial Independence. Buying a home or a car you cannot afford will keep you in the rat race and in the end, people do not admire you for the things that you have as much as they admire the possession itself.
Applying concepts like purchasing a modest home where you can pay it off, or not letting inflation creep occur even when you get a raise or a bonus will help you better achieve financial independence.
8. Monitor your Net Asset
Maybe you're ahead of your goal or behind. By monitoring the performance of your investments and having a good track of your net assets, you can adjust accordingly and modify as needed. Maybe you can retire earlier than you thought, or phase out your working hours to a part-time (read: Assets In My Portfolio).
9. Continue to Learn and Share Idea
Having a support group to learn from each other can help you learn and grow. Personal Finance has many strategies and ideas you can implement. The wealth of knowledge from books can help you continue to fine-tune your retirement plans and FIRE plans (read: 10 Smart Money Habits We Try to Follow).
10. Stay Consistent
Building wealth doesn't happen overnight. And at times you may want to give up but know that you have set a good plan and all that's left to do is execute it. Don't give up and have support from friends and family to achieve it.
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