What I've learned from Mr Money Mustache on Financial Independence Retire Early (FIRE)?

For those wondering what is FIRE, it is basically Financial Independence Retire Early. I knew I asked this question back then before I ever heard of this movement.

The main idea is to work hard, live below your means, and retire in your 30s (or whenever you hit your FIRE number) while maintaining a reasonable lifestyle. Disclaimer, this lifestyle isn't for everyone.

Why FIRE?

To put it one way, you can live nearly paycheck to paycheck, putting away very little in savings until you retire in your 70s, or you can concentrate all your hard work and sacrifice early on to live off interest the rest of your life.

The main idea of FIRE is:

Delayed gratification

There is actually a community of FIRE enthusiasts including Mr Money Mustache, by Pete Adeny, Sam Dogen's Financial Samurai, Brandon Ganch's Mad Fientist and so much more.

One of the early articles I stumbled across was Mr Money's moustache. What's really interesting is that the origins of FIRE can be traced back to Vicki Robin and Joe Dominguez, who published the book "Your Money or Your Life" in 1992. While the idea originated in the early '90s, it took more than two decades for the idea to spread to others looking for alternatives to working as they got older.

But how can you save so much?

Mr Money Mustache conveys this key message which is by focusing on happiness itself, you can lead a much better life than those who focus on convenience, luxury, and following the lead.

Some of the advice he suggested that I found really useful is:

• Live close to work
• Move to a different city
• Cancel TV service
• Lose the expensive phones
• Don't borrow money for vacations and material items
• Find alternative ways that cost less

According to Mr Money Moustache by doing this you can save closer to 75% of what you make especially for those with above-average incomes. The average American saves less than 5 per cent of his or her disposable income. So if you save more than 5 per cent of your disposable income you are ahead of the majority of average Americans that only save 5 per cent.

So if 75% is too large of a number, start with 10%, or 30% or even 50%. The key is to have an awareness of how to get to your desired lump sum figure and make sacrifices now so that you have it easier later on. 

What do you do with all that money saved?

Mr Money Mustache and most advocates of the FIRE movement recommends that you invest it.

You can invest it in:

1. Stocks, ETF, bonds
2. Rental properties
3. Investment vehicles
4. Other income-generating assets

Stocks and ETFs are popular options because they are diversified in terms of the assets that they hold and they provide returns in the form of dividend payments and capital appreciation when the ETF go up in value.

How long will the money last?

The idea is that if you can get 25 times your annual spending saved up and working for you, that is enough to live off forever.

You don't need to worry too much about the details. 

• So eg if your annual spending is $40,000 a year you need $1,000,000 ($40,000 x25).
• If your annual spending is $80,000 a year you need $2,000,000 ($80,000 x25).

You get the idea. Finding ways to grow your money and compound is crucial in getting to your FIRE number in the shortest time possible.

FIRE is a movement and this lifestyle may not be for everyone so it's important to bear this in mind.

Conclusion

The FIRE journey is a remarkable journey despite the challenges. As I work through this FIRE journey, seeing the success of other FIRE individuals that have succeeded has been inspirational to helping me press on. And believe it or not, your attitude determines your lifetime wealth much more than your knowledge of financial nuts and bolts. Keep on going, you've got this.

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