FIRE: How to Prepare for Retirement

Blog, Challenges, Wealth
Mica

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Let’s get more personal… In the past posts I’ve been sharing snippets about my life like how I managed to do my pullups or what I do every morning. but this time I’m getting more personal.

In a previous post, I talked about my vision board, but I didn’t really specify what my goals were, but here, I’m sharing one of my life goals: FIRE. FIRE what?

FIRE stands for Financial Independence, Retire Early.

I’ve always been frugal but came to a realization that if I’m not enjoying the fruits of my labor then when will I? Because of this, I spent more than what I used to on eat-outs, convenient transportation choices, or anything fun.

I never thought about retirement ever, and I also didn’t know until what age I’ll be working. The FIRE vloggers, Our Rich Journey, inspired me to pursue FIRE. They’re a couple with two daughters and retired at age 41. I think I watched a video or two each month since last year, but still never thought about retirement. I was after the financial learnings I can get from them. Then it dawned on me, maybe I should consider early retirement, too?

Going for FIRE

Yes, I’m going for FIRE. I want to retire in 10 years to do something I love doing: maybe I can open my own gym, be a Yoga instructor, or write every day in my blog. Who knows?

It sounds difficult, but I’m up for the challenge. Since this is a new goal for me, I wrote down the steps I’m taking to achieve it, and these are the things you can do to prepare for retirement too, whether you want to do it at 40 years old or 65 years old.

1. Track every money I spend down to the last cent.

GOING FOR FIRE: Tracking expenses

Tracking my money has been an on-off thing for me. There will be days I’ll track my money and days I don’t until I completely neglect tracking.

The app I use is the Money Lover app. It has always been my app of choice because its design doesn’t make tracking boring.

The free version is great, but I subscribed to the lifetime premium subscription (the irony of saving, I know!) to be more diligent and to optimize the app’s features, which will help me in my goal. The premium version includes features like creating more than two wallets (e.g. cash, debit card, goal wallet), scanning receipts, and downloading reports in Excel files.

2. Start budgeting.

GOING FOR FIRE: Budgeting

Months ago I wrote about building your emergency fund without budgeting, and now, I’m budgeting? Yes! I built a decent emergency fund without budgeting, but imagine how much more I can save if I had a budget?

However, I don’t follow the 50-30-20 budgeting system (i.e. 50% for needs, 30% wants, and 20% for savings). I just set a budget–a specific amount–for certain categories like eat-outs or transportation.

3. Save 70% of my monthly income.

GOING FOR FIRE: Saving money

I got this idea from Our Rich Journey. It’s extreme, I know, but for me it’s feasible because I don’t have debts, and don’t have much expenses. Saving this much allows me to stick to my monthly budget, too.

If there’s one good thing this pandemic brought to me is it allowed me save 70% of my income for the past two months.

4. Educate myself on FIRE.

GOING FOR FIRE: Educate yourself

I joined FIRE movement groups, subscribed to podcasts, and I’m reading FIRE books to learn more about the concept. I’ve half-finished my second FIRE book, Playing with Fire by Scott Rieckens. and I’m already learning a lot.

One of the first few things I learned is computing how much money you should have before retiring. The formula for your FIRE fund is annual expenses multiplied by 25. I’m guessing it’s 25 because retirement usually starts at 65 then plus 25 years, which is 85 or the average life expectancy.

5. Make my money grow.

Saving isn’t enough. If I just save money, it’ll take me more than 10 years to retire. I have to make my money grow.

I’ve been investing in the stock market since 2017, but I’m your less-than-average investor who invests in blue chips only. If I want to optimize the stock market to grow my retirement fund, I should take a different approach in investing.

FIRE Challenges

The good and the bad thing about life is that it’s unpredictable and it’s not easy. My FIRE journey seems easy now, but who knows how it’ll change in the next few years?

1. I have no fixed income.

As a freelancer, my earnings depend on how much I work, but if I really want to make it happen, I should work smart and set a minimum income I should be earning each month.

2. Expenses will change.

Unlike other millennials, I don’t pay rent, water bills, and electric bills because I live with my dad. I think my dad allows me to do this because I spend a lot on my monthly maintenance meds, but that’s a different story.

My expenses are bound to change in the next few years when I get married or have my own place. Since housing loans and utilities are not included in my current expenses, I should estimate how much they will cost to know my FIRE fund.

3. Payment backlogs

I haven’t paid my social security and health insurance in over two years. This doesn’t count as debt though because it’s voluntary. I need to get back on track to prepare myself for early retirement.

Takeaway

FIRE is scary but exciting at the same time. It’s a long journey, and I’m lucky my boyfriend is with me on this journey. Whether you’re planning to retire early or retire at the usual age, everything written in this post will still help you. 🙂

Tell me, what do you think about retiring early?

9 thoughts on “FIRE: How to Prepare for Retirement

  1. John

    Control your spending with a monthly budget and grow your income. You will retire earlier than most just my mastering those two techniques. I would add that you can set your kids to retire early by teaching them the same good money habits and investing early in dividend stocks and mutual funds. If your kids leave your house with the ability to manage money well and with a starter investment account, then they can easily retire in their early 50s, if not earlier.

  2. Tammy Harris

    Very good tips, I have never been one to save for retirement until the past couple of years and I can’t emphasize how important it is. Thank you for sharing!

  3. April Haynesworth

    Your on the right track. Be mindful of what your spending and try not to get things you don’t need just to be cool. Put God in your plans. Save your money continue to budget. Mahe sure before you get married you and your boyfriend is on the same page financially.

  4. Iris Findlay

    I definitely need to work on saving more. Starting a business is pretty costly!

  5. hari

    fire is a new concept to me.
    I always wanted to retire early, but didn’t have a plan on how to do it so.
    this post will be of help to me to come up with a right plan that fits my situation.
    thanks for sharing.

  6. Lilian

    Thanks for these amazing tips. There is nothing as exciting as retiring early with a solid plan. I will implement these tips too since I want to retire early in the next 6years.

  7. Becca

    Great tips! My husband started saving for retirement in high school with his first job and we are aggressively saving in our 20s and 30s. So comforting to know we will be okay down the road!

  8. Jenn Summers

    Until now I had never heard of FIRE. I love the goals you have for yourself and the strong money mindset you bring to the table. Great strategies I might have to give a couple a whirl.

  9. Grace

    Great read, It’s amazing that you can save 70% of your income! Great job, keep at it and you’ll get there!

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