We didn’t start the F.I.R.E.
But wouldn’t it be to be financially independent, or retire early?
We’re finally putting it all together. We’ve spent weeks exploring the FIRE movement and we know there are many Equity Mates who love the community and the ideology. Today we ask, what exactly is FIRE, and what are the elements that we might borrow, or steal, to implement on our own journey to financial freedom?
Figure out your goals
I mean, sipping a piña colada on a beach in your late thirties sure sounds nice, and I think many of us wouldn’t say no, but the idea of financial independence is much more nuanced than that. It’s really about taking control of your life. It’s about crafting the future you desire, whether that means the opportunity to lean out from the hustle culture for a while, the option to work for a non-for-profit, standing up to a difficult boss, or taking time off to raise children. Money, in essence, serves as the great enabler for these aspirations.
Do the sums
That’s all well and good, but what actual numbers do you need to achieve financial independence? The FIRE community often talk about the rule of 25. It offers a simple guideline: you should save 25 times your annual expenses. You might have heard a variation of this (the inversion actually) called the 4% rule, which helps retirees determine how much they can safely withdraw each year. Listen to the episode to hear us break this down more carefully. It’s really really important to note that all these sums are based on a 30-year retirement, and when so many of us are living for longer (and with higher costs a part of that), you might want to be more conservative.
Home is where the heart mortgage is
Calculating your FIRE number involves careful consideration of mortgage payments. For those who have paid off their homes, the calculation may look like $60,000 annually multiplied by 25, resulting in a target of $1.5 million. However, if you still have a mortgage, the number becomes significantly higher.
I’ll take FIRE with a side of…
Like all communities, there’s variations on FIRE as well. Lean FIRE for minimalists, Barista FIRE for those who want to work less but not necessarily retire, Coast FIRE for those whose investments can sustain their current lifestyle, and Fat FIRE for those aiming to enjoy a more luxurious retirement. It’s a choose your own adventure really!
At the end of the day, thinking about investing for FIRE is very similar to the messages we speak about all the time at Equity Mates. It should involve diversification, low costs, and eventually, these dividend-paying investments will compound and passively build your wealth. It’s all about simplicity. Your journey to financial independence doesn’t have to fit into a specific category or style. What matters most is developing sound financial habits, saving diligently, and investing wisely.
3 financial calculators you need to bookmark
There’s so many tools online now that make navigating challenging finances a little bit easier. Here’s three we have bookmarked on our desktops to help us manage things.
We’re assuming you’re based in Australia (apologies to our o/s readers) but this is a go-to for Australians to estimate tax based on income. It’s aligned with the Australian Tax Office rates, offering insights into tax obligations, Child Care Subsidy estimations, and the impact of inflation on your salary. You can even look at what implications a pay increase would have on your tax.
2. Equity Mates Compound Interest Calculator
If you’re trying to convince someone (or yourself) to invest, this tool demonstrates the growth potential of investments using compound interest. It allows you to adjust variables like initial investment and interest rates to project long-term financial growth.
3. Investment Frequency Calculator
We’re often asked about the impact of brokerage fees on returns, and this is a must-visit for regular or beginner investors. This calculator helps determine the most effective investment frequency. It takes into account brokerage fees and interest rates, aiding in maximizing investment returns.
Tell us what calculators are essential for you when you’re streamlining your finances. Remember, if you’ve any questions or feedback, let us know at ask@equitymates.com.
Happy investing!
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