Gain Financial Independence Through FIRE Movement Canada
Many people dream of the day they can leave work behind and start pursuing their lifelong dreams. But for most people, you’ll need to achieve financial stability and independence before you can leave behind your day-to-day job in exchange for a more fulfilling path. This is where the increasingly-popular financial independence, retire early (FIRE) movement comes in.
The basis of the FIRE movement is quite simple: Save and aggressively invest a large percentage of your income (somewhere from 50 to 75%) in order to gain financial independence and retire early. While saving this much may be extremely difficult or impossible for some, there are principles within the FIRE movement that can help everyone on the path to better financial health.
Make a Plan
Whether you want to retire at age 45 or age 70, you should have a good idea of how much you’ll need to save in order for you to live comfortably. Chat with a financial professional to figure out what your savings goal is according to your desired retirement age, current income and savings, and estimated monthly expenses after retirement. With a savings goal in mind, you can calculate how much you’ll need to save per month in order to retire at your desired age.
Cut Down Debt
One of the best ways to start saving money is by eliminating debt as quickly as possible. Whether you have student loans, credit cards or other debts, it’s hard to save and invest when a portion of your income is going towards debt every month. Debt will only grow the longer you put it off, so focus your financial resources on eliminating your debts first and foremost.
It’s also important to evaluate debts that you consider essential, like your mortgage or auto loan, to see if there’s room to cut back. One option is to refinance to reduce monthly payments. If you’re serious about saving, you may even choose to move to a more remote area with a lower cost of living overall.
Evaluate Your Expenses
One key component of the FIRE movement is cutting down drastically on spending. By eliminating unnecessary expenses, you’ll be in a better position to save and invest money to work toward financial independence. Take a close look at your expenses over the past few months and evaluate where you may be able to trim your spending; from going out to eat less to canceling a subscription service you never use.
FIRE movement followers are also careful to avoid lifestyle creep. Instead of spending more money when they get a raise, promotion, or bonus, they funnel the extra income into their savings. One way to avoid lifestyle creep is to simply set a budgetary goal of living within or below your means. You’ll ensure that any extra funds will be funneled into savings while also avoiding debt from overspending.
Passive income is key for followers of the FIRE movement. One of the best ways to have your money work for you is by investing it. You can do this through traditional retirement accounts, like an RRSP, but if early retirement is your goal you may want to look into other investment options to be sure that you can withdraw from your accounts without penalties. It’s generally a good idea to diversify your investments, so you may want to consider putting your dollars in an exchange-traded fund or mutual fund.
You may also want to consider strategies to generate extra income to go into your investment accounts. This may involve monetizing a hobby such as crafting or blogging. If you have a website or other online platform, you can take advantage of that space to make a passive income with affiliate links, ads or bespoke digital content.
It’s important to remember that the FIRE movement isn’t right for everyone. If you’re interested in overhauling the way you budget and save, be sure to chat with a financial professional to set up the right plan for your needs and lifestyle.
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*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2022 Advisor Websites.