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Get Financial Independence and Retire… Eventually?

Get FIRE’d is a personal finance, investing and lifestyle educational blog aimed at helping you achieve Financial Independence, so that one day you can choose to Get FIRE’d from your job

Financial Independence occurs when your investments generate passive income that exceeds your cost of living.

– Every CPA, ever!

Financial Independence gives you the choice to direct your time and energy into the things that you truly value, rather than the things that don’t (like working that 9 to 5 grind…). It’s about working out what you value the most, and empowering you to have the freedom of choice.

Don’t be afraid to break out of formation with regular 9-to-5’ers – take your first steps towards FIRE by looking at things independently, and reviewing your goals and values.

FIRE has traditionally stood for Financial Independence Retire Early, but for the ever growing FIRE community, this term has also come to encompass:

  • Financial Independence: Reduced Effort 
  • Financial Independence: Redirect Employment
  • Financial Independence: Recreation Enjoyment
  • Financial Independence: Retire… Eventually

Financial Independence Reduced Effort

Being financially independent means you don’t need to work, but many professionals and career minded individuals may still want to work. Having financial independence will allow you greater flexibility to work the hours that suit you, when it suits you. Some people choose to have a 5 day weekend – and if your boss doesn’t like it, well…. There is a reason it is almost universally referred to as ‘F U money’!

Financial Independence Redirect Employment

Being financially independent means you have options to branch out into a new career field, commence a course of study or start a business without the worry or time constraint of having to earn a wage. 

For many, the opportunity to redirect their energy into new forms of employment is incredibly satisfying, and has led to the creation of many successful businesses. Businesses which in turn, produce more income and which can eventually be put on autopilot.

Financial Independence Recreation Enjoyment

Who doesn’t like holidays? Well being financially independent means you can go on holiday… forever! After getting FIRE’d, many individuals, couples and families have taken extended vacations, travelling very cheaply by taking advantage of Travel Hacks (such as credit card sign up bonus frequent flyer miles) and leveraging ‘Geographic Arbitrage’ to stretch their dollars further. 

Geographic Arbitrage means taking your investment income from a strong economy into a weaker economy so that you can get more value; for example many Americans and Australians choose to retire in South East Asia, where the cost of living is very low and they can have a higher standard of living.

But financial Independence doesn’t mean you have to pack up and go; many of those who reach FIRE choose to spend their time in their community, with their friends and family, playing sport, volunteering with local organisations and exploring new ways to have fun.

Financial Independence Retire Eventually

Quitting your job is not for everyone. But the numbers don’t lie, and when your passive income exceeds your cost of living expenses, you don’t need to work anymore. Its a huge jump, and not something everyone is ready to go for straight away. If this sounds like you, financial independence will give you the option to retire eventually, when you are ready. 

As a side bonus, the longer you work when you are already Financially Independent, the larger your portfolio will grow. This gives you a greater cushion, reducing your risk and giving you more passive income. This can be a very insidious goal, raising the question “when is enough, enough” and lead to analysis paralysis, delay and hesitation.

So how do I do it?

Check out our articles on Financial independence, and follow through our simple process for creating wealth

  1. Educate yourself – Review your knowledge, values and goals
  2. Make a budget – Track your expenses and needs
  3. Reduce your expenses – Be frugal (but still have fun!)
  4. Create a savings buffer – Save an emergency buffer, and some capital
  5. Boost your income – Make more from your job, and start a side hustle
  6. Invest your savings – Invest your capital to get rich slowly
  7. Manage your portfolio – Once per month “Kindle your FIRE”
Ready…Set… GET FIRE!

Your Get FIRE’d number

Your Get FIRE’d number is simply the amount of investments you will need to produce an income that covers your cost of living. We will cover more on this later, but as a sneak peak this is found by multiplying your annual living expenses by 25. This is based on the internationally recognised ‘4% rule’, which gives a 95% chance (statistically over a 30 year period) that your portfolio will survive all economic downturns and continue to provide your passive retirement income, adjusted for inflation. 

Having a large cash buffer (such as 2 years living expenses) is an important part of this. Extra sources of income such as active income from part time, contract work and side hustle’s, or passive income from alternative investments, projects and other businesses can be really helpful in managing your cash flow and keeping a healthy buffer. This ensures you keep your main investments topped up over the long term, and maintain a good financial independence margin.

In Australia, we have a unique two-stage retirement system thanks to Superannuation. Superannuation is our tax sheltered retirement investment accounts. You only pay 15% on money that goes into super, and its earnings are only taxed at 15% within the fund. It sounds great, but the catch is you can’t access it until you reach ‘preservation age’ which ranges from 55 to 60 depending on how old you are, and what type of job your employed to do.

So Aussie FIRE starters should consider tucking some extra cash into their Super, if they haven’t already. The Tax benefits and time it has to grow and compound means that by the time you reach preservation age, you should have a tidy investment ready to fund the rest of your retirement. You can make a yearly concessional contribution of up to $15,000 into your super without incurring any tax penalties.

Thats not to say you should neglect your Get FIRE’d! portfolio, as you still need to live off something between when you retire early, and when you can access your super. The trick is to find the balance that gives you the best possible chance of success and earliest retirement.

Become a FIREstarter today so one day you can Get FIRE’d!