Understanding the Concept of FIRE
This concept FIRE was conceptualized and first mentioned in a best selling book in 1992 called your money your life by vicki robin…but since then there are many that have adopted the method and succeeded while it may not have worked for some. But the core premise is extreme frugality and aggressive retirement.
FIRE is a movement that encourages extreme frugality and aggressive saving to achieve financial independence and retire early. Instead of retiring at 60, you could potentially retire by 45 or even earlier. The core idea is to save aggressively, invest wisely, and create a sustainable income stream to support your retirement.
Calculating the FIRE Number
To calculate your FIRE number, you need to determine your yearly expenses and multiply it by 25. This will give you the amount you need to save to achieve financial independence.
Example:
Yearly expenses: ₹500,000
FIRE number: ₹500,000 x 25 = ₹12,500,000
You need to save ₹12,500,000 to achieve financial independence.
Calculating Monthly Investment/Savings
To calculate your monthly investment/savings, you need to determine how much you need to save each month to reach your FIRE number.
Example:
FIRE number: ₹12,500,000
Timeframe: 10 years
Monthly investment/savings: ₹12,500,000 / 120 months ≈ ₹104,167 per month
Your portfolio should be well diversified across different asset classes like Stock, Bonds, Real estate etc.
i strongly believe investor should invest thru Mutual funds as they provided almost all diffrent asset classes.
Planning for Emergencies and Inflation
To plan for emergencies and inflation, you should:
- Create an emergency fund to cover 3-6 months of living expenses
- Invest in assets that historically perform well during periods of inflation, such as precious metals or real estate
- Consider inflation-indexed instruments, such as inflation-indexed bonds.
- Review and adjust your portfolio regularly to ensure it remains aligned with your goals and risk tolerance
Balancing Current Enjoyment with Future Goals
FIRE doesn't mean you can't enjoy your life before retirement. You can still take vacations and enjoy hobbies, but you need to prioritize your spending and make conscious decisions about how you allocate your resources.
Safe Withdrawal Rate
The safe withdrawal rate is the percentage of your retirement portfolio that you can withdraw each year to support your living expenses. The commonly cited safe withdrawal rate is 3-4% of your portfolio.
Alternate Source of Income
Having an alternate source of income can provide a safety net and allow you to pursue early retirement with more confidence. However, it's not a requirement for achieving FIRE.
Different Types of FIRE Strategies
There are different types of FIRE strategies, including:
LEAN FIRE: A more extreme version of FIRE that involves living very frugally to achieve financial independence quickly.
FAT FIRE: A more relaxed version of FIRE that involves saving and investing aggressively, but still enjoying some luxuries.
COAST FIRE: A strategy that involves saving and investing aggressively early on, and then "coasting" into retirement with a smaller portfolio.
Health Insurance and Life Insurance count as committed expenses
I believe before Saving or Investing for FIRE you need to first consider uncertain events it changes all equations of your Plan, goals or dreams and cannot be achieved.
Remember, achieving FIRE requires discipline, patience, and a well-planned strategy.
If you're new to investing or unsure about how to manage your investments, consider consulting a financial advisor.
Start by assessing your finances, creating a budget, and investing regularly.
Stay informed, adapt to changes, and prioritize your financial goals.
So, Get in touch with me to understand more about F.I.R.E
Ritesh Sheth CWM®
(CHARTERED WEALTH MANAGER)
Tel: 9930444099
Email: ritesh@myfundguide.com
Disclaimer:
*Views are Personal!*
*Consider consulting a financial advisor*
*Mutual fund Investments are subject to market risk please read the offer documents before investing*
*This message is intended solely for learning and understanding purposes This is not an invitation for any investment.*
Ritesh Sheth Amfi registered Mutual fund distributor under ARN-0209 EUIN- E030691. Date of initial registration - 16-AUG-2002 validity of ARN up to - 01-Oct-2027 for Transacting in Mutual Fund's Regular Plans.And IRDAI Registered agent for life Insurance (LIC) Agent Code : 44189C and General Insurance (BAGIC) Agent Code : 10000308.
No comments:
Post a Comment