You want Financial Freedom today if you are like me. No worries! There are many ways to achieve Financial Independence and Retire Early (FIRE), just like there are many ways to Rome.
Are you interested in learning how to join the FIRE movement? For the basics, it is a good idea to read the ultimate guide for financial independence.
Do you want to retire early and be financially independent in X years? You can trust me when I tell you all about how you can achieve Financial Independence and Retire early!
You can reach FIRE using a variety of strategies, such as winning the lottery or having a wealthy aunt. Below, I will concentrate on the most realistic and popular paths to FIRE.
You don’t need to choose! At the moment, I am using two of the three methods. I plan to start with the third this year.
To FIRE, save or invest
Savings and investing are the best ways to achieve FIRE. This is the easiest way to achieve FIRE. It is crucial to keep half of your after-tax income.
The first is to use the savings to pay off high-interest debts like credit cards or car loans. You don’t have to pay off low-interest debts like student loans or a mortgage. This money can be better invested than borrowed, with a historical average return of 7%.
After you have paid off your high-interest debts, you can start building an emergency fund. This is crucial as you need to be able to replace your car or house without having to touch your investments. A rule of thumb is to have around 3 to 6 times your monthly expenses in an emergency fund.
We now invest
All the money that you save after you have created your emergency fund can be invested. Investing is about putting money aside consistently. This does NOT involve day trading, managing stocks, or timing the market. You are more concerned about getting money into the market through low-cost index funds.
If you are looking to make a long-term investment, I believe you should avoid major fluctuations and work towards retirement. It is important to remember that different index funds have significant differences. Over 40 years, the difference between 0.1% and 1% fees can be dramatic.
If you invest EUR100 per month over 40 years, with 0.1% fees you will get EUR431.200. You will get EUR339.000 if you invest EUR100 monthly over 40 years with 1% charges. You will only be paying EUR92.200 in income over the next 40 years. This is why? It is because of compound interest. It is the 8th Wonder of the World, according to Albert Einstein. Reinvest your return to generate a second return. You receive a return on your return.
No matter what the stock market is doing, investing in the stock market is one of the best ways of achieving financial freedom.
Many FIRE members are working to increase their savings rate. They reduce their expenses by a lot. Many of them move to cut down their expenses. If you are a Filipino citizen, your monthly expenses can be significantly lower than those in Europe and the US. The amount of money you can afford to live comfortably is reduced if you reduce your annual expenses.
Apart from the bond and stock market, there are many other investment options. However, Peer-to-Peer investing is becoming more popular.
Peer-to-peer investing is where you lend money to others, with higher interest rates. I have invested with Mintos, which lends money out to individuals and businesses. Interest rates range from 5-20.5%. The best part about this is the buyback guarantee. This means that if they are unable to repay the loan, you get your money back.
Mintos is the platform that I recommend, but Crowdestor is a platform that provides higher returns. Crowdstar currently offers a 15% average return.
Businesses to FIRE
All things business can also lead to FIRE. Many businesses exist on the planet and they all have the potential to make a living. This path can be challenging so you need to be motivated. You can also build your FIRE foundation within years instead of decades.
Starting a business has never been easier. Bluehost makes it easy to create a website in minutes. You don’t have to quit your job if you are like me and want to check out what’s new. You can find a lot of side-hustle ideas in my list.
One thing I can recommend is to start a blog. I have listed three simple steps to get your blog started with Bluehost for cheap. How to Start a Blog.
Real Estate To FIRE
At the moment, I do not own any real property. To earn passive income, it is my dream to own some apartments. real property is my favourite because it can provide a steady stream of passive income with very little effort.
It is possible to find a property that will generate enough cash flow, but it takes time. Learn what is important. I learned my first lesson about real estate investing in Rich Father Poor Dad. Be educated, but don’t go overboard! When you feel good about something, take action.
Alternative vehicles are also available for those who don’t have the lump sum necessary to become real estate investors. This can be done through REITs (Real Estate Investment Funds), or crowdfunding.
The housing market is currently too hot for me to invest in. I would love to live in an apartment in a major city but it is currently too expensive. So I am patiently waiting to see if the market opens up, hopefully in a few years.