The rule of 25.
Just what is the FIRE movement?
For those who dont know, it stands for: financial independence,retire early.
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You might be wondering how thats possible.
It comes down to math.
But dont worry, its pretty simple math called the rule of 25.
It gives you a rough estimate of a retirement savings target.
This number is also known as your financial independence number.
For a quick example, say you want to live off of $40,000 a year in retirement.
Take 40,000 and multiply it by 25.
You get 1,000,000, which makes your financial independence number $1 million.
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Thats because the greater FIRE movement has a couple of core characteristics.
But, there is one that is the single most important above all else.
That characteristic is simplicity.
It rears its head in the manifestos of numerous FIREwalkers.
And, its clearly whats valued by just about every FIREwalker.
People want to make their lives easier.
They want to save time.People dont want to work forever doing something that they loathe.
So how does this work with money?
Cut out all the noise and all the unnecessary expenses.
That is your defense.
Defend your finances from creep and lifestyle inflation.
Simplify what you are spending money on.
Look at your budget and ask yourself: Where can I make cuts?
Your three biggest areas you are likely spending money on will be housing, transportation and food.
Save money on housing by getting a roommate.
Spend less on transportation by buying a more fuel-efficient car, carpooling or using public transportation.
Save money on food by eating out less, shopping at inexpensive grocery stores and meal prepping.
After the big three expenses, look for areas where you are probably spending too much money.
There is marginal utility, and therefore marginal uselessness to some things.
Is another piece of clothing going to bring you closer to your overall goals?
Are you swapping it out with an old or unwanted piece?
We all collect things.
I am no different.
I am a sucker for video games, trading cards, LEGOs and books.
But I have a pile of books that reach my height that I havent read.
Will my $150, $200, even $500 be better spent on those items?
to make it FIRE, specifically to reach financial independence, you have to make sacrifices somewhere.
Enter the savings rate.
Your savings rate is how much you are saving each year divided by annual income, multiplied by 100.
FIRE encourages more aggressive savings rates.
Typically thats closer to 75%.
Its extremely difficult to reach a 100% savings rate, if not impossible.
Lots of FIREwalkers mention the highest they ever had their savings rate was around 80%.
One prolific FIREwalker, Paula Pant, pioneered a very simple one that she calls theanti-budget.
Your expenses are $1,700 a month.
Now, decide how much you want to save.
Say its $500 per month.
(That would be a 20% savings rate.)
And that works because $2,500 minus $500 minus $1,700 leaves you with $300 left over.
So now, every month you ought to have $300 left over.
So, for a 20% savings rate, it will be 37 years.
If you started at the age of 25, that would mean you could retire at 62.
It will take years, but it will work.
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Retire Early?
When people retire early, they dont exactlyretire early.
Youll have to do something with your life after you retire.
If you retire super early, you could be looking at 30 to 40 years of retirement.
And that thing is: hating what you do for work.
And maybe they realize they can FIRE.
So they do it: They reach financial independence and retire early.
Lets say they reach their financial goals by 45.
Suddenly, they realize they have to do somethingwith the rest of their lives.
But they do notice when theyre on the other side of it.
So, the simple question is:Why not just do work you like?
As long as you make enough doing work you like, you dont even haveto escape.
You likely wont even wantto FIRE.
Yes, financial independence is absolutely a goal that everyone should strive for in whatever capacity they can.
But the retire early part?
The biggest dragon in question is the stereotype of what followers of the FIRE Movement want with financial independence.
Most of those who FIREd and retired have found out that there is a good component of work.
So, say you did reach FIRE at the age of 30.
You are expected to live until 80, but many live longer.
You have to do somethingin those 50-plus years.
Thats more life than youve lived up until now.
Honestly, thats just a caricature.
There is some genuine evidence of this exact kind of person pioneering FIRE early in its embers.
FIRE most likely stems from three important people of the early FIRE movement.
They are Early Retirement Extreme, Mr. Money Mustache and the Mad Fientist.
Jacob was a nuclear astrophysicist.
We have a word for this: optimization.
Jacobs manifesto shrieks of two ideals simplicity and enough.
Now, someone masterful at media created the misconception that you must be a lentil-eating monster to FIRE.
Pete from Mr. Money Mustache worked in the tech industry throughout the late 90s and early 2000s.
He has a degree in computer science and engineering.
But he lived simply and spent as much as 50% less than all of his colleagues.
He then started the FIRE blog (which he is well-known for) in 2011.
He created a character thats him, but a bit sillier.
This resulted in a larger outreach than what might have happened if he was not as fun to follow.
He, too, was a developer and coder.
But when you listen to him, he is a very humble, calm and reasonable guy.
Honestly, Brandon is probably the most regular out of these three early FIRE practitioners.
Swipe Like a Millionaire No Gold Card Required
Ever wondered how millionaires get to be… millionaires?
So we looked into it.
What we found aresimple, millionaire-approved tipsthat anyone can use to manage their money.
you’re able to find Dennis over at colossicus.com between his freelance ventures.
