Its never too late to join the FIRE Movement and avoid career burnout. Reaching financial independence is a goal thought to be out of reach for most, but it can be done, and just requires a lifestyle change. A few simple changes that often can dramatically improve your life now and far into the future.
The world is a very different place then it was just 100 years ago. Your grandparents generation had known stability in their career, family life, and they knew anything was possible with hard work.
Today, the world is filled with stresses from everywhere. Globalization is outsourcing jobs, and ever increasing time at work make it very hard to avoid career burnout. We are so focused on today’s image and lifestyle that we give up on our plans and dreams for tomorrow. Robert Quillen in 1928 realized where we were heading as a society and called this “Americanism”.
Why are Americans willing to exchange their limited time to buy things they don’t need or want? Here is the definition of Advertising:
Advertising—”The gentle art of persuading the public to believe that they want something they don’t need.”
We are constantly being programmed by advertising and social media to behave a certain way. The first step to break away and regain control from this trap is just to recognize that its happening. Then we can make better decisions on what is more important for ourselves and not be influenced by advertising.
In order to recover our dreams of tomorrow, we need to face the reality of today. The reality is we live in a world with no job security, our food supply had stripped all the nutrients from our food to make it cheaper, and we are consumed in debt because we spend way more then we make.
Our enhanced lifestyle is the source of all our problems and stresses. We all live beyond our means, but there is a very simple solution to this if we want to avoid career burnout.
Change Your Lifestyle
There are a lot of movements being talked about today that have great potential to change your life for the better. Most of these new movements are restoring the peaceful lifestyles of the past.
To learn more about improving your lifestyle, there are a lot of books that help with avoiding career burnout and teach you all about how to live a simple, financially responsible life. Here are just a few of them and I will talk a little more about each one later.
- Your Money or your life, by Vicki Robin
- The Total Money Makeover, Dave Ramsey
- The 4-Hour Workweek, by Timothy Ferriss
- The Richest Man in Babylon, By George S. Clason
- The Year of Living Danishly, By Helen Russell
- Money: Master the Game, by Tony Robbins
- The More of Less, By Joshua Becker
Each of these books talk about how to get your financial life in order, how to avoid career burnout, or just how to live a simpler and more enjoyable life. The FIRE movement tries to improve all 3.
Let’s get started with what exactly the FIRE movement is all about?
What is the FIRE Movement?
The FIRE (F.I.R.E.) movement stands for Financial Independence / Retire Early. The whole point of FIRE is to get to your Financial Independence number in a shortened time period. It really doesn’t mean retire early, but could if you want.
Traditionally, there have always been 3 sources of income in retirement: Pension, Social Security, and your savings. Today, there are only 2, your savings and social security, and this last one is so unstable many people question if it will be available in the future. Therefor, your retirement is not determined by your age, but rather how much you have saved in your retirement accounts.
Also, the FIRE movement is not about an escape from your career, but rather an all-around lifestyle upgrade. Most people can probably avoid career burnout if they work their 9-5 job for just 10-15 years, but not for 30-40 years which is the current plan for most. If you follow Tim Ferris’s idea of mixing in Mini Retirements along the way, you should be able to avoid career burnout and stick to the FIRE plan for as long as needed.
Owning your time is a very good reason to retire early and most FIRE movement followers want to spend their day doing what they love, rather then earning money just to pay the bills. Most people cannot focus on doing what they truly love because their bills are often too high and then they settle into the rat race exchanging time for money to buy stuff they think will make them happy.
The FIRE movement takes a very different approach. They follow the minimalist lifestyle approach and have learned to distinguish the difference between a want and a need. They buy what they need and have learned not to want anything more.
Let’s take a look at where the FIRE movement came from in the first place. By many accounts, the beginnings of the officially dubbed FIRE movement can be traced back to 1992 in a book called “Your Money or Your Life” by Vicki Robin.
In the book, Vicki has many great quotes teaching us the simple fact that we have been tricked to become expert consumers and to trade our time (our happiness) for money to consume things that will never make us happy. She tries to teach us that our time is way more valuable then money.
The goals of the FIRE movement are very similar to the lessons in this book and minimalism. It is learning to become an anti-consumer and discovering the difference between a need and a want.
Goal of the FIRE Movement
- Never go into Debt but if you owe money, pay it off ASAP.
- Work Hard at something you love, earning as much money as you can.
- Save as much as you can, over 50% is the goal. This means living a minimalist lifestyle.
- Learn how to invest and diversify it to make sure you are earning a good return.
People who follow the FIRE movement are not anti-work. Most often once they reach their Financial Independence number, they quit the rat race and earn a much smaller income doing what they are passionate about. Some start their own business, work for a charity, or maybe just focus on a job they really love.
The point is they can now choose how to spend their time.
Why Most People Don’t Save Enough Money?
Here are some interesting facts that may surprise you:
- A recent study finds that one third of Americans have no financial plan
- About 6 in 10 Americans don’t have $500 in savings
- People between 32 and 61 years old only have $5,000 saved for retirement.
- Average personal debt exceeded $38,000 in 2018– not including mortgage loan balances.
- A survey by Americans for Secure Retirement notes that 88% of all Americans are worried about “maintaining a comfortable standard of living in retirement.”
- Most people believe a “millionaire” is someone who makes one million dollars a year. Only .1% of the United States population make one million dollars or more in any given tax year.
- A Millionaire is actually someone with a net worth of over 1 Million dollars. About 12 percent of the U.S. population — 14 million households — are millionaires. For the purpose of FIRE, this should be in investments and should exclude your primary residence.
- Most millionaires can be considered Financially Secure, because they can withdraw about 40K a year and never touch the principle for their whole life.
- There are 7.5 million households (6% of Americans) with a net worth over $2 million, and 4.6 million households (3.7% of Americans) with more then $3 million in net worth. To be Financial Independent, you should have about $2-3 million in investments allowing you to withdraw more then $80,000 a year. An income of about $75K will bring you peak happiness and is all anyone should need.
The simple fact is Americans spend too much money on buying stuff they don’t need. Our consumerism lifestyle is killing us.
The brain is programmed to look for pleasure. People who eat too much get fat, and to correct it, we go on a food diet, focusing on eating less and exercising more, to get ourselves back in shape. The same approach is needed for our finances.
When we spend too much, we go into debt, and in order to get back into shape, we need to spend less money and earn more income through side hustles and work promotions.
Debt and over spending are the fats in our financial wellbeing and we need to cut it all out if we are to survive in our retirement years.
To make financial fat (debt) worse, when you borrow money, you need to start paying very high interest on your loans making it much harder to pay off.
A financial diet is simply called a budget, and we all need one.
There is an interesting article from the NY Post titled Americans waste $18K on ‘non-essential’ expenses a year. If the average household salary in America is around 63K, then most people waste 1/3 of their income buying stuff they don’t need.
By spending just 2-3 years of our non-essential money to our debt, most Americans can be debt free (not counting their home) in less then 3 years.
If we have no debt and we save that money instead, we could buy back 1/3 of our lives and retire at 50. This is with no other adjustments to our lifestyle.
Minimalism and the FIRE Lifestyle
Some people when trying to get their financial house in order create a budget to control their finances, and a FIRE lifestyle is no different.
But in addition to a strict budget, a FIRE lifestyle also works to increase their income. If they can cut 25K from their budget, and maybe earn another 25K on a side hustle, they are now able to save and invest 50K a year!
If you are able to add 50K a year to your retirement savings, you will likely be able to retire in your 40’s, only after about 12 years of work (assuming you start right after college). This would be about 500K in principle earning about 10% interest over 12 years would produce about 1 million.
There are countless ways to figure out your financial plan towards your FI number. In order to calculate your max savings to see how long it will take for you to hit financial security, use an Investment Calculator like this one.
There are several different approached to reaching your FIRE goals depending on where you are in your financial journey. Here are just a few ideas to get you started.
(low income, high debt and expenses)
There are many people in society who only currently work minimal wage jobs and it will be impossible to earn enough money to reach retirement. I actually have several good friends who work several minimal wage jobs in order to support their family.
Some of these friends have asked my advice on how they can get to financial independence, and I always give the same answer. The advice is very simple, but very hard, and it’s the approach I used in my early years so I can say for certain it works!
- Teach yourself a new skill every week. Audio books are great for this purpose. I recommend financial skills to start so you can manage your money with a proper budget and create a short and long term financial plan. I recommend starting with The Total Money Makeover, by Dave Ramsey.
- With these new skills, create a side hustle to earn money and build experience. Make sure the side hustle has great income potential and something you love and are passionate about.
- Cut back hours on one of the minimal wage jobs to make the same or more money in the side business.
- With these new skills and business experience, find a better paying job that will replace both minimal income jobs.
- While working your new job, grow your side hustle business, developing your skills further, and earn more money.
- Since both your side hustle and your professional career are in the same field, your skills will make you more valuable in both, increasing your wages on both fronts. In a few years, you should be earning well over 75K a year.
- If married, both spouses can follow this plan to increase household income even more.
- Don’t change your lifestyle, save and invest all the extra money this plan brings in towards retirement savings. Before investing it, learn all you can about investing to make sure you don’t lose a dime of your hard earned nest egg.
This approach is hard work but very doable with the right opportunities. Improving your skills with audiobooks is a critical first step and cannot be overlooked. Knowledge is the key to success and changing your life for the better.
The Dave Ramsey program is all about creating a budget, paying off all debt, earning and saving with maximum intensity, and enjoying your outcomes using core Christian beliefs.
Before you go out and start buying his books, try his radio program and podcasts. Make sure you are willing and committed to the hard work required to get out of debt. It’s totally worth it in the end.
Dave Ramsey 7 Baby Steps (Link to his site)
Baby Step 1: Save $1,000 for Your Starter Emergency Fund
- In this first step, your goal is to save $1,000 as fast as you can. Your emergency fund will cover those unexpected life events you can’t plan for. And there are plenty of them. You don’t want to dig a deeper hole while you’re trying to work your way out of debt!
Baby Step 2: Pay Off All Debt (Except the House) Using the Debt Snowball
- Next, it’s time to pay off the cars, the credit cards, and your student loans. Start by listing all of your debts except for your mortgage. Put them in order by balance from smallest to largest—regardless of interest rate. This is called the debt snowball method, and you’ll use it to knock out your debts one by one.
Baby Step 3: Save 3–6 Months of Expenses in a Fully Funded Emergency Fund
- You’ve paid off your debt! Don’t slow down now. Take that money you were throwing at your debt and build a fully funded emergency fund that covers 3–6 months of your expenses. This will protect you against life’s bigger surprises, like the loss of a job or your car breaking down, without slipping back into debt.
Baby Step 4: Invest 15% of Your Household Income in Retirement
- It’s time to get serious about retirement—no matter your age. Take 15% of your gross household income and start investing it into your retirement. Start with your company’s 401(k) plan and receive the full employer match. Invest the rest into Roth IRAs—one for you and one for your spouse (if you’re married).
Baby Step 5: Save for Your Children’s College Fund
- By this step, you’ve paid off all debts (except the house) and started saving for retirement. Next, it’s time to save for your children’s college expenses (that is, if they make it through Algebra II and Chemistry unscathed). We recommend 529 college savings plans or ESAs (Education Savings Accounts).
Baby Step 6: Pay Off Your Home Early
- Now, bring it all home. Baby Step 6 is the big dog! Your mortgage is the only thing between you and complete freedom from debt. Can you imagine your life with no house payment? Any extra money you can put toward your mortgage could save you tens (or even hundreds) of thousands in interest.
Baby Step 7: Build Wealth and Give
- You know what people with no debt can do? Anything they want! The last step is the most fun. You can live and give like no one else! Keep building wealth and become insanely generous. Leave an inheritance for your kids and their kids. Now, that’s what we call leaving a legacy!
Here is an example a budget of a person living on 60K per year. A 60K a year salary will bring in about $3,800 per month. No one should have a house payment more then 25% of their take home pay, we should be able to afford a $950 payment which should equal around a 250K house with 20% down. This would leave about $2,500 for everything else.
A minimalistic budget should try and be limited to the following:
- Rent or mortgage (25%)
- No car payment, pay cash
- Utilities (gas, electric, Phone) (10%)
- Insurance (Health, Life, Auto, 10%)
- Gasoline and Maintenance (5%)
- Food (10%)
- Shopping (Clothes, Entertainment, Miscellaneous) (Minimalist Lifestyle, 5%)
- Savings (including retirement accounts, can be up to 35%)
This approach has you saving $1,300 every month, 16K a year. In just 20 years, you will have 1.2 Million in retirement savings and be financially secure.
The Anti-Budget approach is to automatically divert your FI saving amount from every paycheck. Stash this in a separate account, which you use for debt payoff, investing, or storing cash reserves. Now you can relax about the rest and enjoy your life with what remains.
This approach is good for high income earners because there will likely be enough to reach your basic living expenses as well as your FI goals. I would think about 100K+ a year would be needed to use this approach.
Another way to do this approach is to automatically divert the earnings from one job to your FI goals while living on the other. You must make sure that you are at least meeting your FI goals to use this approach.
One example is to create a “side hustle,” a microbusiness you run for roughly 5 to 10+ hours per week and grow it to a 50K a year savings towards your retirement fund. The side business should be something you are passionate about so it doesn’t feel like work but fun.
This is the approach I used when I started working. My first job I was earning 18K a year and I was able to save 3K for my retirement accounts each year. I lived with 4 other guys in a house on the beach, drive a 10 year old car, and eat Ramen noodles several times a week. My entertainment was surfing and waves are free.
Taking this approach and slowly increasing your automatic savings is a super easy approach because you never miss money you don’t see. You are happy with your lifestyle and your savings are automatically growing and compounding interest builds your retirement accounts even more.
FIRE Approach to Investing
Working hard to save money and increase your income is only part of the FIRE movement’s goals. Once you’ve saved some money, you want it to work for you and get the power of compounding interest to speed you on your way to Financial Independence.
When it comes to investing, the FIRE movement typically use several reliable investment strategies. Most will invest in low cost index funds, some will take a conservative approach with more bonds, and others like real estate. Personally I like all 3!
The one thing all FIRE people do is learn as much about investing as they can. They become experts in finance which they build and implement their financial plan. They are experts when it comes to budgeting and often know where to find the best deals on everything.
I will be creating several articles about different ways to create a financial plan, recommended tools, where to get the best financial advice, and more in other articles. For now, I recommend learning the basics through books, audiobooks, podcasts, and general research.
The one sure thing is there is no shortcut to investing. There are no make money quick strategies that work so forget anyone who has heard of a scheme to make money quick. Just about all these will do is separate you from your money. Learn from your reading and focus on the fundamentals of investing.
One of the better books I have read on investing is Money: Master the Game, by Tony Robbins. It teaches the fundamentals in an easy to understand way.
Vicki Robin wrote in her book, You Money or Your Life
The FIRE movement recognizes this by focusing all your effort on saving the most money possible, so you can recover years of your life and do what you love in life.
For those who cannot commit to such a long term saving rate, you can also mix in a little of The 4-Hour Workweek, by Timothy Ferriss. In Tim’s book, he introduces the idea of mini retirements.
Every few years, maybe you can take a break from maximum saving and enjoy a mini retirement. Tim recommends taking a trip to enjoy life and see the world. Life is all about enjoying your limited time on this planet so you should never miss an opportunity you will regret later in life.
Everyone knows they need to take care of their health. Eat well, exercise, and avoid stress. But most people don’t treat their financial life with the same importance. Debt is killing their future just like a bad diet kills the body, and its time to focus on getting your financial health in shape.
Spend time everyday loving your life. Love the work you do and the people you do it with. Stop trying to buy happiness with stuff. Save, earn, invest, and enjoy your wealth when the time is right. These are the keys for a successful life.
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Thanks for reading!