Experiences cost money, so freedom in the modern world looks like wealth and free time. Welcome to the Financial Independence Retire Early (FIRE) movement.
One of the major themes in law of attraction forums is that of money. Since money and wealth are so central to living a satisfying life in the modern world, we intend to dedicate a lot of time to getting the subject right. FIRE is a nice place to start as it combines both wealth and freedom in one slogan.
None of this is financial advice. Always consult your financial advisor.
Retire early to a fabulous new journey
This is the easier part, so let’s begin here.
Early retirement means lots of things to different people, but in practice, it usually ends up being temporary. Mostly everyone willing to achieve financial independence retire early status doesn’t find much satisfaction in laying on a beach all day. At least, not for very long.
The most prolific authors on the subject remain just as busy post-retirement as they were pre-retirement. Mr. Money Mustache is probably the best-known financial independence retire early author, and he certainly hasn’t slowed down. Early Retirement Extreme quickly traded retirement for a Wall Street job. Mr. 1500 days stays home with the kids, but Mrs. 1500 days works for a financial independence education company. The MadFIentist went on to create a best selling music album. These are only the first examples coming to mind; there are many many more.
The Early Retirement Extreme blog was eventually turned into possibly the single greatest book we’ve ever read on saving, career, and problem-solving in general.
Financial independence buys us optionality. When we have the option to jump at life’s wonderful opportunities, things only get better and better. The examples above show how financial independence retire early is often the start of an exciting new journey.
Financial independence for economic stability
Financial independence, or just “FI”, is where someone’s living expenses can be covered by their savings. We misuse the word savings a little here to mean income-producing assets (cars and non-rental houses don’t count). When invested properly, one can withdraw 4% of the savings annually while the rest will continue to grow fast enough to replace the withdrawal and typical inflation.
The 4% rule, as it’s known, works around 95% of the time given the last 40 years of market returns and inflation rates. In fact, it’s generally regarded as a conservative approach to retirement planning, and it’s often called the “safe withdrawal rate (SWR).” However, it only “succeeds” 95% of the time, and we suspect the current 2020s decade is part of the other 5% as valuations are stretched and secular inflation will persist. Despite the pessimism, with some flexibility, the FIRE paradigm is still extremely useful.
Your savings are sufficiently large when it’s 25 times your annual expenses, or said another way, 4% of your savings covers your annual expenses.
There are as many ways to save as there are people on the planet. Most start with a budget. From there, we want to optimize, in parallel, along three independent topics.
- Make more
- Spend less
- Invest appropriately
The difference between your monthly income and your monthly expenses is your monthly savings. Those savings can and should find their way into your investment account. It’s simple, but it isn’t necessarily easy.
The financial independence retire early grind
Lots of FIRE folks treat the process like a grind, but it doesn’t have to be. As with anything, lining up our energy makes everything easier and more effective. But even when the LOA isn’t consciously incorporated into the process, the FIRE folks often see their results snowball as their beliefs shift for the better. It’s another great example of action inspiring better and cleaner vibrations.
Imagine for a moment you’re able to save half your take-home pay. Don’t scoff, lots of folks do it. Some people live happy, fulfilling lives on 20k per year while other folks live unsatisfying lackful lives on 200k per year. Anyone with access to this website can do it.
When we save half our take-home each month (save 50%), we’re saving as much as we’re spending. Another way to say this is that we’re stashing away one month of freedom for every month of working. When we collect 300 months of freedom (25 years x 12 months/year), we have 25 years of living expenses saved. With a 50% savings rate, the process actually takes less than 25 years since the intermediate savings grows on its own during the process. At a 50% savings rate, we’re usually able to retire in 17 years starting from zero.
This post says quite enough, but in general, starting from zero takes N years for savings rate p (e.g. 50%)
Again, the three pillars of FI are to make more, spend less, and invest the difference. Technically, it’s possible to achieve FI with only one or two of those, but tending to all three simultaneously produces the quickest results. Adding the principles covered elsewhere on Hack the Verse should supercharge anyone’s progress.
Invest appropriately
This can actually be the easiest of the three. A few clicks is all it takes. We recommend The Simple Path to Wealth to fill in the details of investing in broad-based index funds.
Alternatively, starting a business is another way to invest your savings. Entrepreneurs who find ways to deliver the most value to the most number of people do very well in this regard.
Ironically, lots of post-FIRE folks end up starting businesses because they enjoy providing value to society but on their own schedules. Financial independence mitigates entirely the risk associated with being an entrepreneur.
Spend less
Spending less is an obvious and effective way to save more. If making more is your thing, then you can skip this step entirely. For those of us with mental blocks about earning more and attracting wealth, then spending less is quite good enough.
Of course, mental blocks are temporary. Beliefs can be updated. We can start playing the actual game according to the actual rules.
Make more
We saved this for last since almost everyone reading a law of attraction website is probably looking for exactly this kind of thing.
There’s really much to say on this subject with and without the law of attraction in mind. Earning more money means delivering more value to society. Leveraging your strengths is always recommended, but shoring up your weaknesses is equally important. Choose a career field that’s at the intersection of the following conditions, but also consider the price tag of any potential education divided by the length of time it would be useful.
- Aligns with your interests
- Plays to your strengths
- Pays well (i.e. delivers lots of value to society)
- Is future proof
Attracting wealth demonstrates the correct utilization of the law of attraction to achieve what you want. Practically everything discussed elsewhere on this website is designed to be helpful in this regard, and we intend to say much more in later posts.
The financial independence retire early movement
Anyone can find plenty of material on the financial independence retire early movement, but a great place to start is ChooseFI.com. Their podcast provides nearly endless strategies and success stories. Such podcasts are an excellent way to install some very productive guardrails along the daily commute.
Our interest in FIRE mostly leans toward attracting more wealth into each of our lives. But since we admit to being math, economics, and personal finance nerds, we may cover other aspects when they dovetail nicely into a law of attraction discussion.
