Aditya Birla Sun Life AMC Limited


Has the FIRE movement caught on to you yet?

Mar 26, 2019
4 mins | Views 5312

There was a movie where the protagonist was a workaholic who wanted to earn enough so that he can retire by the age of 40. Many books also stresses on the ways in which you can make your money work for you so that you can become rich and retire early. Then there is this latest FIRE (Financial Independence Retire Early) movement which stresses on financial independence and early retirement. Have you caught on to this concept of early retirement which is being populated everywhere?

Concept of the FIRE movement

The popularity of start-ups, the lure of growth and high ambitions see individuals considering non-traditional ways of making a living now a days. There are frequent job changes where employees move on to other employers promising them a better growth opportunity. Many individuals also leave their jobs for establishing their own start-ups while others want to make a living following their own passions. These mind-sets have given birth to the FIRE movement which stresses on individuals attaining financial independence at a younger age so that they can retire early and do what they want to do.

FI – Financial Independence

The first two letters of the FIRE movement stress on financial independence. It is only after you achieve financial independence that you can think of retiring early. What, exactly, is financial independence, don’t you wonder?

Financial independence is when you have enough wealth to take care of your financial liabilities and any unplanned contingencies which might arise. Financial independence signifies a freedom from money related concerns.

You can achieve financial independence if you do the following –

  • Save religiously

  • Cut down on unnecessary expenses

  • Invest your savings

  • Allocate your savings to different assets for diversification

  • Follow a disciplined investment approach

If you save and invest considerable amounts regularly in investment avenues which give reasonable returns, you can build a corpus sufficient enough to give you financial independence. Take the example of mutual funds for instance. If you opt for regular SIPs in a mutual fund scheme and continue the SIPs for a longer period, you can save in a disciplined manner. Moreover, since mutual funds aim to give reasonable returns, your corpus can grow and also be inflation proof.

RE – Retire Early

When you have achieved financial independence you can give up your regular job as you know that your accumulated corpus could help you take care of your financial obligations

Retiring early is not equal to quitting your job

When you talk about giving up your job, most of you consider take ‘RE’ at its face value and believe that it means retiring from work. Well, you are wrong! Retiring early does not mean giving up your source of income. It can be interpreted in different ways. It can mean –

  • Giving up your employment to start your own business venture

  • To indulge in activities which you are passionate about and which also bring in an income

  • Giving up full-time retirement to work part time, etc.

Start-ups and innovative business ventures are all the rage among the new age millennials. They no longer believe in working in a dull 9 to 5 job and making a living. They want to fuel their ambitions and their passions and at the same time make an income. However, bootstrapping a business or indulging in your passions require a financial net to help fund the expenses involved and also meet the daily living expenses. This fund can be created when you try and achieve financial independence. As you work towards a financially secured future, you can create investments and these investments can give you the required funds.

Interpreting the FIRE movement

Interpret the FIRE movement to your advantage. Don’t think it to be related to retirement. Let go of the ‘RE’ part and concentrate on the ‘FI’ part of the movement. Strive to achieve financial independence early on in your life. While you work day-in and day-out to make financial ends meet, try utilising your income to save and create investments. Investments could help you create funds for your financial goals and if you are savvy with your investments, you could also build a sizeable corpus early on. You can choose mutual fund schemes for investing your savings. You can get a variety of investment avenues suitable to your risk profile. Mutual fund investments could diversify your risks while at the same time aim to deliver reasonable returns.

Don’t wait to be a senior citizen to retire and live your dreams. Give yourself the extra push. Join the FIRE movement. Increase your investments, build a good corpus while you are working so that when you hit your 40s you would have sufficient financial cushioning to do something unconventional and start a business or a start-up. Try and live your dreams as early as possible. Aim to achieve financial independence as early as possible. Life is too short and you don’t want to be late for realising your dreams, do you?

Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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