In our lives, we all aspire to achieve financial independence, a day when we'll have more than enough money. It's the day we'll no longer need to fret about future expenses or find ourselves trapped in the relentless rat race.Imagine a future where you no longer work solely for money, but instead, you work for your passions, for the sheer joy of it. This is the ultimate goal of financial independence, a life unburdened by financial worries.In this article, we'll explore the path to financial independence, what it truly means, and how you can embark on your journey toward a future where your passion becomes your purpose.
Although achieving Financial Independence, Retire Early (FIRE) is a remarkable goal, there are persistent myths that continue to cloud the minds of investors who may not have delved deep into this subject. For those who are new to the concept, it's essential to understand that financial freedom in the context of FIRE is defined by having a substantial savings nest egg. By the age of 60, the target is to have 30 times your yearly expenses, while by age 50, you should aim for 35-40 times, and for those more ambitious, 45-50 times of your yearly expenses by age 40. These milestones are key components of the FIRE journey, allowing individuals to embrace early retirement and financial autonomy."
At the age of 50, with annual expenses at 20 lacs, the key to achieving financial freedom isn't merely reaching a specific number: it's about creating a substantial multiple of your expenses. This multiplier, typically ranging from 30 to 50, depends on your age and investment capabilities. For instance, someone needing 50,000 per month may require 2-3 crore today, while an individual desiring 3 lacs per month to FIRE at 40 might need 16-18 crore now. As life progresses, expenses change, and so does your FIRE corpus goalpost, highlighting the dynamic nature of financial freedom planning.
Contrary to common misconceptions, life isn't entirely carefree after achieving FIRE. While it provides comfort and reduces financial worries, constant consideration of your investment portfolio's performance and its sustainability is necessary, particularly without a substantial margin of safety. Even if your calculations indicate you need 10 crore for a lifetime and you FIRE with 10-12 crore, it's a close call. Factors like uncertain future inflation, varying portfolio returns, and unexpected life events will occupy your thoughts. Expect a life much like before, with reduced financial concerns. This isn't the case for those with ample financial freedom.
The FIRE concept has garnered considerable attention in today's media landscape. Social media, YouTube, Telegram channels, and podcasts are bustling with conversations about achieving financial freedom. Many individuals have already achieved or are on the path to FIRE. Yet, this widespread discussion can inadvertently create a sense of pressure for millions who feel left behind.Drawing from our interactions with over 1000+ families in India and among NRIs over the past decade and a half, our observations reveal that only a handful, around 5-6 individuals, managed to attain FIRE before their early 40s while working regular jobs and building their wealth from the ground up. Several more will reach this milestone in their 50s, but the majority, representing the broader population, will retire in the traditional 58-60 age bracket. Some may not retire adequately and could face financial challenges.While discussions about achieving FIRE are prevalent, the reality is that only a small minority in India attains financial freedom early in life. In a group of 1000, where 2 discuss FIRE, it is imperative to recognize that the vast majority are not as close to achieving it.
The idea of Financial Independence Retire Early can foster misconceptions about immediate retirement. Leading a life entirely void of activity is unrealistic, as humans are naturally driven to stay active and pursue their passions. Many in the FIRE community continue working, but it's not the same grind as before.One reader's experiment involved a 2-month break to simulate retirement, revealing the challenges of daily expenses and idleness. This prompted a swift return to work.Expecting never to work again post-FIRE is often wishful thinking. It tends to arise from the stress of a current job, often at the expense of life's enjoyment. Instead, aim for a flexible, low-stress job or pursue activities you're passionate about.Engage in open discussions with your spouse about your FIRE plans, as they may not be ready for you to be home all day. Striking a balance between relaxation and meaningful engagement is key.
Many individuals believe that reducing expenses and depriving themselves in the early years will help them progress towards FIRE. The idea is that what you save will contribute to your wealth. However, this isn't entirely accurate. Most people who achieve FIRE at a young age prioritize increasing their INCOME rather than cutting EXPENSES. Slashing expenses has its limits, and depriving yourself isn't a sustainable path to financial freedom. Consider those who earn 4lakhs a month but lead a modest lifestyle on 1 lakh, saving 3 lakhs a month with discipline over the years. These are the individuals who typically attain FIRE early, not those with lower incomes struggling to further reduce their expenses. Avoid going down that route! When you spend money, you participate in country’s growth. Excessive cost-cutting can drain the enjoyment from your life, resulting in some extra savings that may eventually be spent impulsively. It won't lead to financial independence.
"Super charge Your Earnings; The Power of Smart and Strategic Efforts." "Choose your expenses; be a wise spender." "Invest more; be a smart investor."
info@saventh.com
