HOW MUCH MONEY DO I HAVE TO SAVE TO RETIRE EARLY?

Get smarter with your money.

How to achieve Financial Independence and Retire Early (FIRE)?

FIRE journey has given me the freedom to spend my time how I want to. I feel like I have so much more free time because I don't have the stress of work.

Steps to speed up your FIRE journey:

Money Mindset

Are you going to change your bad habits? Have you discovered that sometimes we don't need new products at all, but there will always be a pair of new shoes or a new bag in the cabinet or discover some things that have never been used before? People often use vanity to prove their success. To satisfy ourselves, we will spend on these things, even if we are not very rich yet. But in fact, these are short-term satisfactions, and they disappear very quickly.

Can you try to change the satisfaction of shopping, games, parties, and TV into good habits of investment, reading, exercise, or meditation? And always have optimistic and positive financial thinking.

"I can't become rich unless I win the lottery", 

"Investment risk is very high, it is impossible to make money ", 

"I'm lazy to manage money", 

"Financial management is too difficult, I can't do it"...it is impossible to do so " Throw away those thinking.

Believe that your resilience can achieve financial freedom, and changing your mentality can help you move towards smart financial management.

Write down your problems

Face your problem write down all the problems and find solutions. On a piece of paper, write down one by one according to the important order of the problems. You can clearly see all the problems face them, and start to think about what obstacles prevent you from moving forward.

"Why can't I find a good job", 

"Why can't I save a lot of money", "Why do I always work overtime", 

"Why don't I have enough time to do other things"...

Everyone will face many WHYs in their lives. The point is how you can solve these problems after you know them!

It is okay to ask for help if you can’t handle or figure out the problems. Seek opinions from professionals, colleagues, friends, and family members, absorb their ideas, and choose the solution that suits you from the suggestions of others.

When you dare to face your problems, every positive action will eliminate your worries, and your life will produce more self-confidence.

Budgets

If you want to achieve a FIRE life, you must have the habit of recording and tracking every expenditure. If you don't, how do you know your monthly consumption? How do you know where most of your money is spent? How do you know how much money you need to save up for a lifetime? If you hate tracking budgets, you must overcome it.

Calculate FIRE Number

The formula of the 4% rule of Financial Independence and Retire Early(FIRE)：

Annual consumption amount * 25 = your FIRE number

Enter your numbers, test different scenarios, and see  how long it takes you to achieve Financial Independence and Retire Early(FIRE) : https://grantsabatier.com/calculators/years-to-fi-calculator/

This is the number that you add up all of your investments, and withdraw 4% of that total during every year of retirement.

When you develop your budget notebook, you can start calculating your FIRE figures.

Calculating the FIRE number is a very powerful initial financial management action. Even if you are decades away from retirement, this number can let you an idea of how much money you need to retire comfortably. 

Some people spend $40,000 a year, some need $50,000, some have a family, some are single, some are more luxurious, and some are more conservative, so everyone’s FIRE number must be different. You don’t need to compare with others.

For example, your annual consumption is $20,000, multiplied by 25 times. Calculating the number of FIRE is $500,000. This means you need to have this much money in your retirement or investment account before enjoying happy early retirement.

When you have the concept of this number in your mind, you can execute your own financial planning. You will not be like a headless fly because you don't know how much money you need to save up, or you may find that your current savings have already reached the FIRE number.

When most people see their FIRE number, they might think about how it is possible to save this number? The next action can bring you closer to FIRE life.

Reduce expenses

How many unimportant recurring expenses do you have?

Check all the expenses in your budget sheet, and what are the expenses that are not important and can be saved. It is recommended to start with the largest expenditure item and think about how to reduce expenditure.

For example, rent or mortgage, how can you save more money? Have a tenant as a landlord? If you have two rooms, would you choose to live in the cheaper one and rent the better room at a higher price? Would choosing an apartment without an elevator be much cheaper than a building with an elevator?

For example, a car, do you really need a luxury car? Do you really need a large new car? Maybe change to a small car or a second-hand car or take public transportation? Some expenses accumulate more, such as the annual fee for Netflix? The annual fee for a gym?

If you can challenge yourself and save 2% of expenses every month, you will save yourself 24% of expenses throughout the year.

If you read Rich Dad Poor Dad financial book, Rich Dad said that every month received their salaries do not rush to pay the bills, to invest (Pay) yourself first. 

If I pay myself first, I get financially stronger, mentally and fiscally.

If I pay myself last, I would have felt no pressure, but I'd be broke.

What if you have no money to pay the bill later? Rich dad said that this pressure of payment will become your motivation to make more money, and you will start to think seriously about how to lessen your debts or how to do it to generate more income.

Increase your salary

What should I do if my salary is too low? Then you should first ask yourself what do you usually do after getting off work?

When you are on your way to FIRE life, you may often feel that your salary is too low. What should you do? What I want to say is that your full-time job is not the only way you can make money. If you want to make more money, you must choose a company with promotion channels or a side-hustle to increase additional active or passive income. Please create multiple incomes for yourself.

Active income, such as:

• Uber 
• Delivery food
• Sell second-hand items
• Sell artworks (drawings, paintings, photos, stickers...)
• Teach English online

... etc.

Passive income sources, such as:

• Invest in the stock market
• High-Interest Savings Account
• Real estate 
• Run a website
• Operating online e-commerce
• Atomy Online Shopping platform
• Rent your car
• Develop an app
• Create online courses
• Make an E-book
• Be a Youtuber

...etc.

What is Passive Income?

You can use your creativity and professional skills to create additional income after a job. You must be more than just an office worker.

Self-Eduction 

Learning to have money works for you. If you don't manage money, then money will never care about you.

While making money, know to store the money in the right place so that it can make more money for you. You need to understand how to use the money, and understanding financial knowledge will help you to effectively use the compound interest utility to roll your money.

Many people don’t understand financial products and rely too much on others to operate their assets, such as handing over most of the money to bank staff or insurance staff. Usually, they charge relatively high fees. Manage the investing products for you, and the products they choose may not be suitable for you.

Understand investment accounts and investment products. For example, in Canada, there are TFSA tax-free accounts, RRSP retirement accounts, RESP education savings accounts... and so on.

How to choose a financial account and investment product that suits you, you need to spend time researching and learning. Your salary is your hard-earned money, as long as you are willing to manage money, money will naturally help you create good returns.

You can learn by yourself through many sources, such as reading financial books, buying professional courses, watching YouTube channels, communicating with people, and researching online.

If you can learn how to subscript Netflix series account, then you must be able to learn how to open an investment account that suits you and understand your investment products, because both of them require studying product manuals and self-study.

Investment

Creating a stable passive income and tracking your growth.

The most important key to opening FIRE's life is an investment, which is to create passive income.

You know that Bill Gates has been the world's richest man for 13 consecutive years. In addition to his salary, he invested most of his active income, making good use of compound interest to create more passive income. The money earned by investing is more than his active salary.

People with higher income do not necessarily have more wealth. The key is to know how to generate more cash flow.

 

Use the money from your reduced expenses and increased income to make more investments. If you don’t want to spend most of your life making money, then you must invest to make your money work harder to make money for you. 

Even if you are sleeping or stop working, the money will continue to create cash flow throughout the years. It is called sleeping passive income, which is the power of an investment.

Some people will choose to open a separate account, the money in it can only be deposited in, not withdrawn, and compound interest rolls over until you achieve your FIRE number. This is your FIRE life account.

All in all, you must choose an investment product that suits you, and then start investing. The sooner you start financial planning, the sooner you can achieve financial independence and retire early.

The power of compound interest 

Let me give you an example to let you know that value investing will help you create more cash flow:

Suppose in 2000, you saved the money for 5 pairs of Nike shoes in the cabinet, which is about $500. Use this $500 to buy NIKE stock. Until 2020, your investment of $500 has helped you make a profit of $12,500, which is close to a high rate of return of 2400%!

You can buy a lot more NIKE products by investing the money you earn. If you continue to invest the principal regularly for the past 20 years, the return amount will be more than just $12,500, and the compound interest effect will produce an unimaginable amount of wealth.

On the contrary, if you put $500 in a fixed savings account in the bank, you can calculate by yourself how big the difference is in the 20-year return amount.

This is the power of value investment and compound interest. If you have not yet begun investing, the best time is now because the compounding started from the time you put away even a small amount can be a huge impact on growth over time.

If you are not comfortable investing in individual stock, go for Index Fund. An index fund is like buying a group of stocks, rather than investing in only one or two stocks. An index fund provides diversification, less risk, and a time-proven strategy for building wealth.

If you want to speed up your FIRE life, don't just put your current income in the bank. Excessively low interest rates plus inflation may make you need to work even harder for a living.

Conclusion

Find some inspiration.

Another important point is building your friends.

Do you know that there is a saying that the average value of your wisdom and wealth depends on the average value of the wisdom and wealth of those close to you!

To put it simply, getting to know more people who are better than yourself or communicating with more motivated people can motivate your ability to act and learn. Those people may have the same mentality and ideas and can encourage each other on the FIRE journey.

Although sometimes you can’t completely choose the friends you interact with and interact with. They are not all people who are closely related to your life. Some people may be negative or conflicting. But you just need to remind yourself often that this is your own journey, and your journey should not be affected and restricted by others.

If you have FIRE life stories that can inspire others, please share your experience with friends around you, so that more people can absorb financial knowledge and let more people know how to make a better quality of life.

PUT YOUR FIRE PLAN IN ACTION

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