Being Extremely Frugal.... FIRE Community
My last post I talked about discovering FIRE = Financial Independence retire early. As I dug deeper into it I started to realize some of the sacrifices some of the FIRE members makes is beyond what I could ever do.
Rent cheap by doing room sharing or pay no rent by living with parents.
Have no family or dependents to worry about.
Pay back all debt to not be burden financially and avoid adding any debt what so ever.
The 4% rule.
A good portion of FIRE members follow or have something similar to the 4% rule. The rule is estimate your yearly spending and divide that by 0.04 which will give you the amount required to save at minimum to live financially independent. For example if I spend $80,000 a year then 80,000 / 0.04 is 2,000,000. That means at minimum I would need to save $2,000,000 to retire.
Of course I need to cut my expenditure to make it feasible in saving enough for retirement. In the next few days I will focus on what expenditures I could possibly cut and which ones are a necessity.
Thanks for reading.
The 4% rule, is that assuming that you'd just be living off the money and not invested in something that gives you an annual return ? $2m seems like an awful lot of money.
With $2m invested in something with only a 5% return, that's $100k a year, probably a lot more than most people need.
I started off in the other direction, worked out how much I would be comfortable living on and then calculated the sum I would need to pay enough interest to cover that. It's not really that much either, and that's with a conservative 3% interest per annum.
True. I spent all day thinking about it and will likely do the reverse and figure out how much I really for spending each year and work toward a total. Thanks.
I could see this working if you started young, but if you are established like most of us with a family it would be difficult. If you started at 21, had no kids, spent little money, then the total needed to be saved would be pretty small to be come financially independent. It would take a ton of discipline to get there.
Not only do I have kids I have some outstanding bills. So truthfully this is an uphill climb for me. Yet I can still take what positive steps I can get. Thanks.
I think the philosophy has value, I just think one has to be an early adopter of the system. It is almost a conditioning system by which you become accustomed to a lesser lifestyle so it takes less to retire. I am all for it, I am a little far down the road. Got a mountain of student load debt to pay back. Heck I am at the age where it is more likely that my parents move in with me than the other way around.
Indeed what you say is true but a lot of times that is what we all have to face. Reality. Wish there was a easy button to reset but no that is life. Regarding parents staying it is true, nursing home can be expensive and parents may feel convenient if they were close to their children. Bottom line this is happening whether you are a believer in FIRE or not. Sometimes it has to be so just in order to survive.
There is no doubt this is a great lesson for those about to enter the market. However for those of us with family and kids. We may not be able to do all but we can live the the awareness to invest or save for retirement.
I have done that for years asking myself how many silver bars or gold I could get from not buying a certain bag. I find I am good in doing that for myself but still working on doing that when shopping for the kids. I have got to the point where I do not impulse buy for myself.
The temptations with spending is always upon us. Very difficult indeed to stop but have to always think the bigger picture and longer time frame.
I decided what to buy before going to the shops and stick to it.
I agree. Some of those points are beyond me! I try to be as frugal as possible, but there's always something I could trim. But living with my parents is a big ol' no go! We'd drive eachother crazy! lol
you are not the only one <--
this looks like a great plan but a lot of sacrifice goes into play here