If you talk to millennials, you will find most of them planning to quit their jobs early in their 40s and live rest of their lives on their own terms. These millennials do not want to work till 60 years of age, instead they want to retire in their 40s so that they can spend time with their family and pursue their passions. However, this can only be possible when one has financial freedom. There is one strategy called FIRE (Financial Independence, Retire Early) that can help in achieving an early retirement goal. Let’s understand this FIRE strategy.
What is FIRE strategy?
FIRE strategy is an effective saving and investment method. In this, the person saves up to 50-70% of his annual income. However, this is not possible for everyone because it requires too much self-discipline and focus to stick to aggressive investing approach for a long time. Also if living frugally is not part of someone’s lifestyle, FIRE strategy is not sustainable for that individual.
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FIRE strategy tips:
Funds required for retirement
Saving 50-70% of your monthly income is a must. For this, you need to create a fund of 30 times your expenses.
Increase income sources
Saving a large part of your income can be challenging. For this, take up a part-time job or switch to a better-paying job. Also, focus on passive income, such as dividends from stocks, interest from fixed deposits, or income from rent.
Reduce your expenses
Choose old things instead of new things to control expenses. Use public transport and use credit cards carefully.
Invest as much as possible
Invest as much money as possible for early retirement. Invest in safe and profitable schemes like mutual funds, PPF, and bank FDs for high returns in the long run.
Tips for the right investment
Invest as much as possible for early retirement. Invest it in instruments that give good returns in the long run. The sooner you start investing, the better. In developed countries, low-cost index funds or exchange traded funds are used, and these options are increasing in India too. Thus, by taking your planning in the right direction, you can make your dream of retirement at the age of 40 a reality!