One of the first things you hear about when you start learning about budgeting is a movement of intense savers called FIRE. Some of these people will save 90% of their income with the goal of retiring in 10 years. That kind of lifestyle is definitely not for everyone, and I think you would have to enjoy the journey to go that extreme.
FIRE means Financial Independence, Retire Early. In this day and age, there seem to be two camps of people. In one camp, we have people who believe in saving for retirement, and in the other camp, we have people who think retiring is out of reach and are fine working for the rest of their life.
Whether or not you believe in retirement, I believe reaching for Financial Independence is a good goal to have. The future is indeterminate, meaning we have no way of knowing what life will be life in 10+ years from now. Maybe some of us don’t even know what our lives will be like in 1 year.
Another question that helps us frame the intrigue of Financial Independence is, “What would you do if all of your living expenses were covered?”. This question helps us think about what we are passionate about. Many times our passions can lead to businesses that still earn money — other times it can lead us to support causes that we care about, appreciating a simpler lifestyle, or traveling the world.
Here are some reasons why you might start saving to be financially independent:
- Quit working a job you are not enjoying
- Quit working due to your health/age
- Peace of mind
- Plan for future generations
- Prepare for the worst
- Take care of your parents
- Focus on your health
- Create art
- Spend more time with loved ones
- Spend more time on things that matter to you
- Flexibility of schedule
- Bake or cook more
- Move to a destination
- Rescue animals
- Research fields of interest
- Learn a new subject or skill
- Live a different lifestyle
- Be more active
- Do ministry
Many of these reasons to pursue Financial Independence are things that you should not wait until you are financially independent to begin. But with the additional time and freedom that FI provides, you can deepen your passions and ability to find those.
How to find your why
Here are 4 extremely deep questions, in this article from Forbes, that can help frame your purpose in life. Many people might have n
- What makes you come alive?
2. What are your innate strengths?
3. Where do you add the greatest value?
4. How will you measure your life?
If you’d like to hear Derek and I share our answers to these questions, we discussed them on our Podcast #4: http://podcast.budgets.money/872383/2927329-the-why-of-fi
Also, I haven’t read his books yet, but Simon Sinek has a lot of good content of purpose and finding your why. I have them on my audible wish list!
If you are just now beginning your new financial journey, here are the first steps that are universally agreed upon and essential to starting strong.
1. Save $1000 dollars for an emergency.
Like a real emergency. Not for the time you need some money to get drinks with friends, but for the time your car breaks down and you have an unexpected expense that needs to be addressed quickly.
2. Get out of debt.
Credit card debt, student loans, whatever your debt is, tackle them headfirst. There are a few strategies (typically called SnowBall or Avalanche), but it doesn’t really matter your strategy as long as you are committed to your plan.
Do steps 1 and 2 as quickly as possible. Some of the more extreme FIRE members would suggest that you live on the bare minimum during this time. Eat at home for every meal, cut out all of the extraneous expenses in your life so that you can get back to positive as quickly as possible. Having $1000 in savings helps mentally and practically. Just knowing you have that safety net in case something happens will help you push forward with your next steps financially. Getting out of debt is one of the best financial moves you can make, because not only does debt take away from your monthly cash flow but the interest adds up and destroys any financial momentum.
3. Build a lifestyle that lives within your means
Too many people have lifestyles that do not let them save. According to this CNBC article, nearly 1 in 3 American workers run out of cash before payday across all income levels. It doesn’t matter how much you earn, your lifestyle tends to creep higher what allows for saving. Knowing your Why of FI will help you build a lifestyle of balance so that you can start reaching for your goals.
Here are a few other great resources to get you started on your financial journey:
Also, if you’re looking for a tool to help you budget. Check out our app at https://budgets.money.