Reach Independence With FIRE. You’re missing out!

The FIRE movement is growing at a rapid pace these years and this is your opportunity to understand a possible path to comeplete financial independence FIRE.

Financial freedom is possible to achieve with a frugal simple lifestyle without having a huge paycheck coming in every month. 

I love my job as a kitesurfing instructor and definitely don’t get paid the big bucks.

But hey it’s what I would be doing if I didn’t get paid.

Dream job.

How would the thought of working towards financial independence and enjoying your work life to the fullest on the way, sound?

Let’s get into how!

FIRE is a term which stands for Financial Independence Early Retirement.

There are two parts to this term. 

Here they come!

1. FI = Financial Independence

Reaching financial independence is by some people believed to only be a possibility for lottery winners, lawyers, doctors, pilots, companies that skyrocket and a few more.

But the FIRE movement is now inspiring normal working people with an average or even low pay a way of reaching this status by using discipline and conscious planning.

Financial independence can be achieved in many ways.

Some people are into real estate, some into businesses and others are into stocks and bonds.

Some people do love their job and stay in the steady 9 to 5 job, which is also totally fine. This is also a great way to reach FIRE.

Great for you!

In all cases, it is about setting up a system that you can earn money from while you are asleep and ultimately can create income when you’re retired.

2. Re: Retire Early

The second part of FIRE is to retire early. This is for some in the FIRE community the definition of freedom.

The traditional way of average work-life is 40 maybe 50 years of work saving 10% of your income and being able to retire hereafter.

What the FIRE community works towards is saving +50% of your income, investing and retiring after 5, 10, 20 years of work with the freedom to do whatever you want afterwards.

Now you’re interested? I sure am!

One important aspect to this that I would like to point out is, it doesn’t take a huge salary to achieve financial independence.

It’s not how much you earn, it’s how much you save and invest

Luckily as stated above it’s your savings rate and not the amount you earn that influences your goal of reaching financial independence. More on this important topic from Money Mow here. 

Now there are a few things that factor in when trying to achieve FIRE status and one of these is understanding of the power of investing.

Now, investing for the inexperienced investor is something that may be considered as dangerous, uncertain and in some cases the cause of many devastating stories you hear in your network that have happened throughout recent financial crisis’s.

This is far from the truth!

There is always a risk when investing, correct, but with the right simple principles, this risk can be managed and reduced which is the technique I am following here on Thriving Willow. 

The power of investing has been described as:

‘The eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” Albert Einstein.

This has all to do with the math.

I will save the mathematical specifics for an in-depth blog post but for now, the power of investing is a way of making your money grow at an exponential rate instead of losing value in a normal bank account.

Who wouldn’t want that right?

What is the FIRE investment strategy?

Reducing this risk has therefore led to big popularity of the way of investing called index investing which is how many FIRE enthusiasts reach their FIRE status.

But choose investments that interest you if your on your path to financial independence FIRE! See the other options here.

Index investing is a method of investing which is automatic, requires no previous experience and only needs a few hours of work every year to maintain as a minimum.

Seriously!

The reason why investing in stocks is known by some people for being risky is the risk of the company you’ve invested in shutting down for good.

Index investing is therefore perfect for inexperienced investors.

Instead of buying a part in just one company, buying a stock in an index gives you a small part of say 500 or 2500 companies in one go (the number of companies depending on the index). 

If one company, out of the say 500, were to close you would still have 499 companies in your portfolio and therefore still have your money invested, with now only a tiny loss compared to all of your money.

The World Index has the last 90 years increase by 9,8 % per year on average before inflation.

Yes through all the huge crisis’s you heard about on the news and from your family and friends, a 9,8% increase per year.  

Now you may be thinking that by investing in indexes that you won’t get as good a return as choosing individual companies.

Wrong! Wait, what? 

Many research articles over recent years have shown that 95% of professionals can’t beat the average market return by buying individual stocks.

So why even bother spending time when the professionals have no success in doing so?  

Now for those of you don’t know me I’m an outdoor person that loves teaching adventure activities and I would hate having to spend my day reading company budgets and yearly reports to decide which companies to invest in.

This would no doubt be a full-time job, comparing at risk, analysing and predicting future returns.

Let’s do the more fun stuff right?

Indexing investing is, therefore, a great way for people who wish to passively invest and beat 95% of investors choosing to spend time on choosing individual companies.

How much do you need to have invested Independence FIRE-wise?

Reaching financial independence in the FIRE Community is achieved by having more income from the stock market than the size of your yearly expenses.

And the calculation most retires work with is what is called the safe withdrawal rate of 4 %.

Which means in plain English: You’ve reached financial independence the day you can live off 4 % of your total amount invested in your index portfolio; also called ”Safe Withdrawal Rate”.

This is backed up by the famous Trinity Study which has shown that this method would have been sustainable in 95% of periods throughout a span of 80 years (1925-1995). 

The key takeaways from this post

• Anyone can achieve financial independence FIRE with consistency and planning
• It’s not how much you earn but how much you save
• Index investing beats 95% of investors
• Index investing is lower risk than picking individual stocks

Are you interested in knowing more about the FIRE community? 

Add your email in the sidebar and you’ll get a reminder when there is more to come. 

Thriving Willow