In today’s world, it is not just enough to earn. You need to also have strategies to save that money so that you can retire early and live luxuriously. This has been the motto of several millennials nowadays who believe that it is better to spend less whilst earning, to make a nice nest to retire later on. This is called the FIRE strategy or Financial Independence, Retire Early strategy, wherein you are financially independent enough to retire early. While that would mean you have to live on beans, for the time being, it’s worth it in the end.
What Is FIRE?
Interestingly, this philosophy came out in the late 80s and early 90s, but the major proponent of this has been the present decade. Lawyers, bankers, school teachers all between the ages of 25-35 have decided to follow through on this. While some do earn a six-figure salary which allows them to retire early, the rest work a bit harder and longer with their five-figure salary. The FIRE strategy asks us to let go of our desire to splurge on expensive shoes or clothes and save money for the future.
In a way, the present generation is perfectly suited for this financial planning. Employment is going down, resources are drying up, degrees and other certificates hardly matter. In that scenario, it would be extremely beneficial for someone to work hard for a decade or two and earn enough money to last them their entire life. In the meantime, someone else would take up their job and do it for ten more years and then, settle down for life. While it doesn’t necessarily handle the employment crisis in a way that there is NO crisis hereon, it must be something to think about. As it is, people are spending less, even if they have the money to do so.
Warren Buffet – An Example
If you need to look at examples, the best one to advocate for FIRE Strategy is Warren Buffett. It isn’t exactly hidden that this billionaire lives in a simple home in Omaha and doesn’t spend much on anything – including a ring to his wife. He believes in frugality, and not spending enough whilst you are earning. For, if you do spend a big chunk of your money while you are still earning, how would you care for yourself and your family when you don’t have the cash flow anymore?
There have been several studies that focus on what makes the wealthy, wealthy. And out of the major factors that came up, the one that tops the list is frugality. Don’t spend any more than is absolutely essential. Don’t buy that Prada bag when your own cheap bag is serving you well. You don’t always have to order the most expensive bottle all the time. If your shoes have holes in them, fix them instead of buying a new one. At the end of the day, it would be you reaping all the benefits. The FIRE strategy doesn’t fail as it accounts for the struggle an individual puts in to live happily in the future.
So, if you get a big check from your job, don’t spend it all in one go. Let it grow in your bank account, and when you retire you will find a nice little wealth pot waiting for you.