Could You Stick to a FIRE Lifestyle?
Spending mindfully, saving regularly, protecting your assets and asking for help are essential components of the Financial Independence, Retire Early (FIRE) lifestyle – a collection of behaviors designed to promote financial independence and allow for early retirement.
Living according to the FIRE lifestyle will look a little different for every individual, but it always requires that you spend much less than you bring in, while you save as much as possible.
Four Main Components of a FIRE Lifestyle
Living a FIRE lifestyle requires four major strategies:
- Spend mindfully. Consider every expense carefully. Ask yourself if you’re spending money on something necessary or very important to you. If the answer is no, skip the purchase and stay focused on your goals.
- Save regularly. To live the FIRE lifestyle, you must save as much as possible at all times. Think about small ways to save – as well as about more significant strategies, from setting aside extra change and using coupons at the grocery store, to exploring your financial institution’s savings-focused products and services.
- Protect your assets. Move “extra” money to your savings account, retirement account or an investment fund. This will allow you to set funds aside that you won’t touch for everyday spending and potentially earn some interest. By managing and minimizing your debt, you’ll also protect your assets and maximize savings.
- Ask for help. Consult financial advisors and experts at your financial institution and explore financial tools and resources available there and through other trusted sources to find support for your FIRE lifestyle.
How Can You Start Living the FIRE Lifestyle?
A FIRE lifestyle may be within your reach; however, it will take planning, commitment and consistent, savings-minded decision-making. Here are six tips for getting started:
- Identify your goals. Write down three things you would like to do in 10-20 years if money wasn’t an issue.
- Calculate the amount you’d need for financial independence. How much do you need to cover your monthly housing and utility bills, healthcare, transportation and other basic living costs?
- Pay off debt aggressively. Take steps to pay off significant chunks of debt each month, whenever possible.
- Track and cut back on your spending. Is there a subscription, luxury or leisure activity you can give up this week to save some money?
- Explore opportunities to generate multiple streams of income. Would your expertise and ideas translate well to a lucrative side gig?
- Stay focused on the long term. Use our savings calculator to get started with the FIRE lifestyle, and regularly remind yourself of exactly what you’re striving for.
How Can Your Current Cost of Living Affect Your Retirement?
It costs more to live in certain areas of the country, and some people who have committed to the FIRE lifestyle have found it necessary to move to a region or type of housing where the costs are more reasonable. Consider both how much your current living situation is costing you and where you plan to live when you retire.
What Resources Can Help You Reach Your Financial Goals?
Consider what savings and investment tools are aligned with your goals. While investments may earn more interest than traditional savings accounts, many also carry some risk. Options include:
- Savings accounts. These basic accounts help you store money safely and offer a low rate of interest earnings.
- High-yield savings accounts. These accounts often offer higher interest rates than traditional savings accounts, but those rates may be variable and the accounts may require a higher initial deposit.
- Certificates of deposit (CDs) or share certificates. These investment options pay a higher interest rate, but your money is locked in for a certain time period – typically six months, one year or five years. Withdrawing before the CD matures often means you will pay penalty fees.
- Money market accounts. These offer more flexibility than CDs, so your money is more accessible, though they typically have lower interest rates. They also have certain transaction limits.
Are You Ready to Lead a FIRE Lifestyle?
Has learning about the FIRE lifestyle ignited a passion to achieve financial independence? You can start now by taking steps to accelerate your debt payoff and increase your savings. Even a small step, like saving an extra $200 each month for five years, will garner big results – $12,000 in savings, not including interest.
Talk to an expert at S&T Bank to determine if the FIRE lifestyle is a viable option for you – and to learn how to get started on a lifetime of saving.