- There's quite a few things you need to know
before beginning your journey down
the Financial Independence Retire Early path.
Don't get discouraged, though,
because the more you learn
about the different components to the FIRE movement,
the more you'll realize
that these are all things you should know
whether you wanna retire early or retire on time.
In this video, I'm gonna go through
a few of the main components that will determine
how quickly you can declare financial independence
or early retirement.
If you're clueless about what the FIRE movement is all about
then I suggest watching a video I made
that will break it all down for you.
Link is in the description or somewhere around my head.
As I mentioned in that video,
most people will naturally gravitate
towards financial independence
since it doesn't appeal to most to just retire early
and not do anything with the rest of their lives.
Hey, I'm Jarrad from Debt Free Blueprint,
where I show intelligent people like you
how to get out of debt and create freedom
through your finances using the Debt Free Blueprint.
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leave a comment down below,
asking me any additional questions you have
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Let's get into it right meow.
First up is your age.
Just like anything, the earlier you get started, the better.
Unfortunately for most of us,
we weren't made aware of this movement
until a time when it would seem like it was way too late.
Now, this isn't to say that someone who's in their late 30s
or 40s can't pursue FIRE.
You definitely can.
But the advantage younger people have is time.
More time to actually focus
on pursuing financial independence
and more time invested in the market.
One advantage people in their 30s and 40s could have
is that they've already been investing up until this point.
If that's the case, then changing your current path
to a more Financial Independence Retire Early path
is going to be a lot smoother.
On the other hand, if you are in your 30s and 40s
with next to nothing invested,
then you still have time.
But you're essentially going to need a bigger shovel.
You're going to have to really maximize
some of the other areas
we're gonna talk about later in this video.
Keep in mind that financial independence
is basically having enough in investments
that are generating you money
to pay for your expenses forever.
Most people who are considered financially independent
are still doing some sort of work for money
but they don't rely on that money
to cover their normal expenses.
Technically, this means that
someone starting this process a little later
can save up enough to withdraw $30,000 per year
to cover their basic needs
and work a job that they really enjoy
that only pays $20,000 per year
because it hits them right in the feels.
And if I know you, you love those feels.
And I think we all like to get hit in the feels sometimes.
Next up is your income.
The more you make, the easier it'll be
for you to max out all of your retirement accounts
and invest in other areas to hit your FIRE number sooner.
Now just because you make $200,000 per year
doesn't mean you can automatically save and invest
more than a person making half that.
We'll talk about that later in the video.
If you wanna retire in 15 years,
then you need to focus on squeezing everything
out of your earning potential for those 15 years.
Think of those 15 years as life or death
and take advantage of all of them.
Go really, really hard.
That way, you can feel comfortable letting up on the gas
when you do finally decide to retire
or declare financial independence.
You're sacrificing today
so that you can live a more enjoyable life tomorrow.
Delayed pleasure is the key.
I made a video about increasing your income
and making money online
to help you out with this.
I'll throw links in the description.
Free to check out after this video.
There's a lot of debate surrounding the income topic
when it comes to Financial Independence Retire Early.
Some people will trash on the higher earners
like individuals in the IT industry or engineers
because on average, they have higher incomes.
And naysayers might say something like,
of course they can do it,
it's so much easier for them
because they make more money.
Okay, and?
Those individuals are making sacrifices to achieve FIRE
just like everyone else.
I honestly think that having that view
is extremely close-minded.
Of course, it helps they make more money.
But what does that have to do with you and your situation?
If you don't make as much money as them,
and you wanna be able to
so that you can start investing more,
then what is stopping you from doing that?
The sky is the limit
when it comes to how much each of us can earn.
We need to remove those limiting beliefs we have
about why we can't do this, why we can't do that,
and why they have it so much easier than the rest of us.
Sure, they might be able to declare financial independence
or early retirement sooner than you, but who cares?
This FIRE journey is about you.
How you're going to do it
and most importantly, why you're trying to achieve this.
It's not about them.
Another extremely important factor
when it comes to financial independence
and early retirement is your savings rate.
You could be 21 years old making $150,000 per year
but if your savings rate is trash,
then this whole thing will never work.
Your savings rate is how much you're saving
in regards to how much you're earning.
If your take home pay is $100,000 per year
but your expenses total $93,000 per year,
and you're actually saving and investing the difference,
then your savings rate is $7,000 or 7%.
If you're working towards financial independence,
and only saving 7%,
then you need to get that number up.
It's just not going to be enough.
Let's look at three scenarios and break down the math
if you wanted to leave your job
and live off your investments in 15 years.
In scenario one, if you invest $583 per month,
or $7,000 per year,
we'll just assume a 7% return on your money.
Then your investments have the potential
to be worth $175,000.
Yes that sounds like a lot of money because it is,
but it's not enough to declare financial independence.
In scenario two, let's assume you decide
to make it a point to optimize your spending
and you got your savings rate up to 21%.
That would mean you would be investing $21,000 per year
for 15 years,
or $1,750 per month.
Your investments could potentially be worth
over $527,000
in 15 years.
Once again, yes that is a lot of money,
and some people may be able to survive
living off that amount.
But I would personally want more than that
if I was declaring financial independence today.
In scenario three,
if you decided that declaring financial independence
or early retirement was extremely important to you,
and you nearly double that 21% savings rate
to a 40% savings rate,
then your money has the potential
to be worth over $1 million.
I can't stress enough how powerful your savings rate can be
if you make it a point to focus on that in your life.
You decided that you wanted to add
another five years to that
so that you would retire in 20 years
and you invested at the same rate of $1,750 per month,
then your investments have the potential to be worth
over $860,000.
Just by adding an additional five years to that timeline.
Optimizing your spending in the biggest areas of your life
will help you achieve a higher savings rate.
The three biggest expense areas for most people
are housing, transportation, and food.
Those are the main three that you should focus on reducing
to find some extra money to put towards your retirement
if you truly want to be working towards FIRE.
If you do want to eventually reach
Financial Independence Retire Early,
then I would go as far as saying
that it is a requirement to reduce your spending
in all three of those areas.
The thought of actually making this happen
might sound outrageous to you and I get it.
But pursuing FIRE is not something
that's only for the privileged,
it's for the average person like you and me.
Being able to pursue Financial Independence Retire Early
is sort of a luxury,
but it's only a luxury
because if you're focused on pursuing FIRE,
then you've already made smart money decisions
leading up to this point.
Or you chose to correct your past money mistakes
to get on the right track with your money.
Kind of like my past huge mistake
of racking up $82,000 in debt
and eventually getting it all paid off.
Your financial independence, early retirement journey
is waiting for you.
But the first step is to focus on getting rid
of your bad debt as soon as possible.
Leave a comment down below,
asking me any additional questions
that you have about the FIRE movement.
And I'll make sure to get them answered for you.
As I make more videos on this topic,
I'll create a playlist
and put the link in the description of this video
so you can find them a whole heck of a lot easier.
Sign up to get on the money management course waiting list,
link is in the description.
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I'll see you in the next one, friends.
Adios!