What is FIRE movement (Financial Independence Retire Early)?
I have been thinking about how to get financial freedom last year and Google directed me to FIRE community. I feel like I see the light of Jesus! OMG. I want to be FIRE too. Who doesn’t want Financial Independence Retire Early (FIRE)? FIRE movement is created by frugal and simple-living people who want to have more time and freedom. The idea of FIRE is appealing to many people, especially millennials who love traveling (including me). FIRE community is apparently happy and creative as they can do whatever they want and be free in any way. I dig into this community and study their secrets to happiness and creativity.
Save massively & earn passively
The first key to FIRE is to save more than 50% of your salary and earn more passive income. Many people who are FIRE reduce the spending on unnecessities and greatly increase the saving power up to 70%. They also find their own ways to build more income streams by freelancing, blogging or building a business, particularly the passive income.
Invest wisely in low-cost index fund
The second key is to invest in low-cost index funds. You may wonder which low-cost index funds do they invest exactly? I dived into their investment strategy and found that most of them invest in Vanguard Total Stock Market ETF (VTI) and Vanguard Total Bond Market ETF (BND) which are the most cost-effective and diversified. They don’t believe in financial advisors so they manage their own personal investment and rebalance the asset allocation consistently. The asset allocation could be 80% VTI and 20% BND and it varies according to the your risk tolerance and age.
Where do FIRE learn the FI secrets from?
The book Your Money Your Life is a bible for the FIRE community. Most of them are influenced by Vicki Robin’s way of thinking about money and life which encourages people to be minimalists and environmentalists. I love Vicki’s interpretation of the relationship between money and life — your money = your life energy/time. When we spend money, we’re actually spending our life energy because we traded our energy/time for money before achieving financial independence. Therefore, have a second thought before purchase: “Is this expenditure of life energy in alignment with my values and life purpose?” After all, life is bigger than a job/money. Don’t equate life with job/money. Another most popular source of FI wisdom comes from The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, which highlights the importance of frugal lifestyle rather than the high-consumption lifestyle. The interesting research in the book shows that multimillionaires usually have frugal wives and these crazy rich people are long term investors who spend a certain time on investment planning but trade less.
Index investing is a strong conviction that every FIRE holds! Interestingly, there are two books about index investing FIRE must read. The first one is The Simple Path to Wealth, which is a good and easy read for beginners like me. I would say it is far more digestible and entertaining to read than the other book The Bogleheads’ Guide to Investing, which is more academic, with detailed explanations.
My favourite FIRE
Many FIRE are personal finance bloggers, podcasters, or entrepreneurs. They form a community online and even offline sharing experiences, advice and helping each other. I love this happy and creative community and I love the below FIRE bloggers the most. You might like other interesting FIRE if you discover more of them.
MMM – Mr. Money Moustache is very optimistic and he is the core advocator of FIRE community. He always shows people the possibility of being FIRE with maths and real-life examples.
Millennial Revolution – This resonates with me as I love traveling and simplicity as they do. I love their investment workshop which demonstrates how to online invest index ETF steps by steps, giving you confidence that you can do it too.
JL Collin – His stock series is the best source for understanding index investing. I love his sense of humour, his deep voice and his great dad image. The way he explains investment strategy is perfect for laymen such as me. Here’s his talks at Google.
Personal finance resource I found helpful & wonderful
Directory – an excellent source of personal finance
Documentary – an aspirational doc about FIRE movement and a retirement calculator for you to see the big picture of how long it will take to be FI
News – an article about FIRE movement