• Retiring Early: How I Achieved FIRE Without Ever Being a High Earner

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    FIRE acronym - financial independence, retire early, handwriting on a napkin with a cup of coffee

    We’ve all probably daydreamed about retiring. Some of us see our mid-60s as the target date to hang up our hats. Others of us aren’t so sure we’ll be financially prepared to leave the workforce at all. 

    Some of us have our sights set on a much earlier departure from being financially dependent on a job — I’m talking 20 to 30 years earlier. We’re part of the FIRE movement.

    As you can imagine, retiring decades before the conventional retirement age of 65 requires a substantial nest egg. But although this is true, a common misconception is that you need to be a high earner to build that nest egg.

    I achieved FIRE without ever being a high earner, and I’m going to share with you how I did it. But first let’s talk about what the FIRE movement is and isn’t.

    What is the FIRE movement?

    If you haven’t heard of the FIRE movement, don’t worry. According to a FinanceBuzz survey on early retirement, most people have never heard of FIRE. But once you learn about it, it’s hard to deny its appeal. 

    FIRE is an acronym that stands for “financial independence/retire early.” When you achieve FIRE, you’ve reached financial independence. That means you can live 100% off your passive income, stock portfolio, mutual fund portfolio, or other investments. You’re at a point where you’re able to live your lifestyle without relying on income from a job. 

    Once you reach this point, there’s nothing preventing you from retiring. If you hate your job, you can quit. If you enjoy your work, you may decide you don’t want to retire early. The difference is you now have the freedom to choose.

    Generally speaking, there are three ways to achieve FIRE:

    1. Make more money
    2. Cut expenses and save more money
    3. A combination of both

    That means that in order to retire as early as your 30s or 40s, you have to be willing to put in the work. A lifetime of saving now has to be accomplished in years. How is that possible and what’s the motivation behind retiring this early? The answers to these questions may not be what you think.

    Let’s bust some common myths about FIRE

    1. You need to have a high income

    A common misconception is that you need a high income to achieve FIRE. Obviously it’s easier if your salary is $200,000 a year. You could save 50% of your income and you’d still have more leftover than someone who earns $50,000 a year and saves 100% of their income. A high income is very helpful, but it’s not required. I know this because I, along with others in the community, achieved FIRE without ever having one.

    2. FIRE is about quitting your job and doing nothing for the rest of your life

    You might assume everyone who seeks to achieve FIRE is about quitting work, plopping on the couch, and doing nothing for the rest of their days. Although some may celebrate early retirement this way, many of us don’t see the appeal. Others may try this approach at first, but they often find they lack a sense of purpose after a while. 

    The truth is FIRE isn’t about being lazy or never working again. It’s about doing what you love, which could very well be continuing to work, focusing on expanding your investments, or starting down a new career path. Some use the opportunity to take their skillset and put it toward something good like doing low-paying work for a nonprofit or pursuing charitable endeavors. 

    If this sounds like the life you want to live, but you aren’t convinced it can be done without a high-paying job, here’s how I achieved FIRE without a high income.

    How I achieved FIRE without ever being a high earner

    I committed to the FIRE movement back in 2011. I knew going into it that I would probably never earn a six-figure salary, so I started working three jobs to increase my income. I also knew there were some  additional steps I needed to take to reach my goals. 

    Here’s the three-step strategy I took to achieve FIRE:

    1. I determined how much money I would need in retirement

    Without knowing how much money you’ll need to retire early, you’ll be trying to hit a moving target. Start with the idea that you may want to maintain your current lifestyle in retirement. How much would that cost? 

    A common rule of thumb is that a retiree will need roughly 70% to 85% of their preretirement income after they retire. This is based on the likelihood that your expenses will be lower in retirement. For example, you might no longer be paying a mortgage. Once you’ve determined your monthly or annual retirement expenses, you can figure out how much of a nest egg you need to last you through your post-career years.

    According to the study, “Retirement Spending: Choosing a Sustainable Withdrawal Rate,” a portfolio with at least 75% of investments in stocks allows you to safely withdraw 4% to 5% from your portfolio annually without running out of money. Many in the FIRE community use this as a savings benchmark. 

    To make the calculation, divide how much money you’ll need for your annual expenses by .04. For example, if you need $40,000 per year to live on, divide that by .04 to get 1,000,000. You will need at least $1 million in investments to retire.

    The idea behind the 4% rule is that your portfolio is likely to return around 4% in earnings on average, which allows you to safely withdraw 4% to live on. If you’re worried about running out of money, you might decide to choose a more conservative withdrawal rate.

    2. I cut my expenses and saved my money

    Early on in my life, I was terrible at saving. But I knew that to achieve FIRE, I had to make some important decisions. For example, I realized I didn’t need the most expensive car. Instead, I paid cash for a $1,500 1995 Toyota Corolla. This allowed me to ditch monthly car payments, interest charges, and higher auto insurance costs. Cars were my passion, so being able to do this showed me I could make less painful cuts in other areas of my life, such as eating out, clothes, and frivolous spending.

    My wife and I also got into couponing. That turned into a game of who could save the most money each month. For months we tracked our spending and savings. But we eventually realized we had to be more efficient with our time. Our time was worth more than the small savings we’d get from trying to use every money-saving strategy. 

    We decided to stick with a few highly effective tools — such as making all our purchases using the best cashback credit cards — instead of crunching every single penny.

    3. I started hustling on the side for extra money

    I’d be lying if I said all the side hustle ventures I explored were fruitful. As a lover of cars, I first tried my hand at buying and reselling cars. Unfortunately, there were times that I didn’t make any extra cash. But that’s OK; I just moved on to another side hustle. 

    By 2017, I had saved enough that I reached what is known as LeanFIRE. Simply put, I had enough in retirement savings that I could retire on a lean budget, which was $24,000 a year at the time. But I was also eager to get into real estate investing. After a handful of successful projects, my real estate investments produced enough passive income that I could cover my day-to-day expenses without needing to touch my retirement accounts. So although I had the 4% available from reaching LeanFIRE, I was bringing in enough new income from real estate that I could keep my retirement accounts solely as back up.

    Today, my wife and I are working toward achieving FatFIRE, which will allow us to enjoy more luxuries in retirement. 

    Bottom line

    If you don’t want to retire early, there’s nothing wrong with that. But if the thought of retiring early gets you fired up (pun intended), this guide to the FIRE movement can help you start implementing the steps you need to take to reach your financial goals. 

    Achieving FIRE takes work and discipline. Tracking and budgeting your money will do wonders. But remember that you don’t need a high salary so don’t let that stop you. Determine how much money you need to retire, and start making the necessary moves to get there. 

    Brandon Neth is a credit card and award travel expert. He runs social media and audience growth for FinanceBuzz, including the FBZ Elite Facebook travel group. He’s spent the last 11 years using credit card points and miles to travel the world, taking him to 600 cities in 76 countries and counting. He’s well-versed in credit cards, early retirement, real estate investing, and frugal living. He’s been featured in Business Insider, Yahoo, MSN, Credit.com, U.S. News, Reader’s Digest, and The Wirecutter (A New York Times Company).

    How To Achieve "FIRE"

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