The Secret to Achieving Early Retirement: 3 Essential Strategies from FIRE Experts
Saving enough money to enjoy a comfortable retirement later in life may seem like a far-off fantasy, but some visionaries are challenging themselves to reach the goal early. Through the FIRE (Financial Independence Retire Early) movement, it’s possible to understand that financial freedom and retirement can be achieved in just a fraction of the normal timeline, through efficient money management. At a session during CNBC’s Financial Advisor Summit, two FIRE leaders offered a glimpse into their strategies for achieving a better life through financial independence.
1. Boost Your Savings Rate
Unless you’re willing to accept a standard retirement later in life, a high savings rate is a must. Grant Sabatier, author of “Financial Freedom”, managed to save a whopping $1.25 million before hitting 30, mostly through a savings rate of 82%. According to Sabatier, the average savings rate in the US falls between just 2-5%; if you want to achieve financial independence in a little over a decade, a 50% rate is far more realistic.
2. Reduce Your Cost of Living
In order to save significant money over time, it’s crucial to reduce the outgoings on necessary purchases. Sabatier speaks from experience here, upgrading from an $1,700/month apartment to a $800/month model, and opting for a used car over a new one. Alex Trias, who also attended the Summit, managed to retire at 42, mostly through intensive savings and a real estate investment. That being said, Trias also relocated to Portugal, where he found property taxes and health care costs to be significantly reduced as opposed to what he expected to pay in the US.
3. Increase Your Income
Although increasing the money in your pocket is often easier said than done, it is certainly possible. Sabatier himself made sure to hit a certain income level of $23,000/year and beyond; with multiple side hustles, Sabatier upped his income to around $250,000/year and started to see more significant returns. It’s also possible to take a more traditional route, like Trias, who managed to increase his money through portfolio management and self-employment.
The FIRE lifestyle comes with its own sacrifices and risks, and it’s worthwhile to check in on your progress each year to make sure it’s really working for you. Ultimately, if you wake up at 45 with $1 million saved in the bank, you won’t regret the risks taken.