I want to join the FIRE movement, where do I start?
At age 30, I make a resolution to myself that I’m going to retire within 10 years (i.e. by age 40).
I started with reading a lot of the FIRE related books and blogs and information online about FIRE, but reading a lot doesn’t give you result. A doctor doesn’t become good at operation by reading books. What we need is an executable plan.
If you’re also looking to start your FIRE journey — meaning you want to retire early (with the option to work on whatever you want being financial independence), let me share my plan with you so that at least your have something to work on.
Step 1: increase your income
Think about ways to increase your income by at least 20%.
The easiest way I’ve found, is to leverage on what you are doing.
If you are working in a corporate job, you can negotiate salary or jump to a company that are willing to provide you with the increased level of salary.
This can be done relatively quickly and easily — I have quitted my way to riches, I changed 5 jobs in 6 years and increased my salary from $18,000 to $110,000. That is, I increased my salary more than 6x times in 6 years by choosing the company that I work for and actively creating the promotion that I desire (rather than waiting to be promoted passively). Every time I quit; I am able to get at least 25% increase in my salary.
That’s absolutely possible for anyone working in corporate and require only 2 skills: resume marketing skill and interview presentation skill. Currently I am doing live classes and private consultations to help people create persuasive professional positioning, brush up their resume and interviews and achieve at least 20% salary bump in as little as 3 months.
If you are working in your own business or freelancing, you have mainly 3 ways to increase your income by 20% -
№1 increase your prices
№2 find more clients
№3 expand your service or product
The first way would be the easiest — it is just like negotiating salary, if you are doing a good job, your client would happily agree, or you can simply retain only those clients who can pay for what you offer. You may even end up with more time on hands too!
Reason why we need to increase income first:
1. if you currently have a low saving rate, at least that extra 20% will help you bump your saving rate and give you more resources and room to invest.
2. there is only so much you can save but there is no ceiling how much you can earn.
Step 2: Save as much as you can (without sacrificing happiness)
I intentionally put increasing income before saving, because it would be easier for me (and for most people).
With a 20% increase or any increase in income, you can directly save the extra increment and contribute that to your saving.
Generally, to prepare for FIRE and early retirement, you would need to save as much as you can without sacrificing happiness. Here’s what I do exactly:
1. I record every one of my spending (big or small) in 3 months
2. Then I review the spending items to see which one actually improve my life and bring me joy and which one is just impulse purchase
3. I create a budget plan on how to use my income based on my spending preference
IMPORTANT: many people create budget and try to fit self into the budget, I found that this is one of the biggest reasons why budgeting fails.
To make a good budget, we need to first understand ourselves and understanding our spending pattern and preferences. If we try to save painfully, this would be against human nature to persist. Only if we can find a way to balance our happiness from spending money and achieving our financial goal can we sustain the habit.
Following this method, I successfully increased my saving from 20% to 60% in just 3 months, without sacrificing on happiness or life satisfaction. And I am able to sustain this high saving ratio every month since then with the personalized and realistic budget plan that fit my spending pattern.
Step 3: passive investment
Why invest passively? Active investment requires at least 10 times the effort, experience, knowledge and time to learn, analyze, and keep track of news, changes in both internal and external factors, look at annual reports and statements etc.
Ask yourself honestly: are you willing to spend all these hours and effort dedicated to learning investment? Are you good at maths and analysis and you want to get to know a thousand companies inside out to see whether to put your money? Can you dedicate to long term analyzing and tracking for 10 years? It would only take a few hours to learn how to invest passively compared to the thousands of hours over the years needed for active investment.
If you are lazy or busy just like me, and your goal is to FIRE, here’s the truth: you don’t need to be the next Warren Buffett to FIRE. You just need a modest return.
A modest return coupled with the power of compounding is all you need to get amazing return for your investment. It may not be obvious at first, but in the timeframe of 8–10 years the result can be mind-blowing.
My passive investment portfolio mostly consists of etfs which are low cost and easy to transact. You can start with as little as $100 and spend as little as 5 mins a month to build and manage a balanced investment portfolio.
I have a course on passive investing which just take you a few hours to learn and you will know which etfs to invest in and how to set up your investment portfolio and utilize it for FIRE purpose. You can learn it in your own time and immediately get started with investing for FIRE right after.
Easy passive investing for busy professionals: https://bit.ly/3D3J1U6