This post is inspired by Paula Pant and Joshua Sheats who discuss this concept in detail on Paula's excellent podcast - Afford Anything. Josh is a host of a popular podcast - Radical Personal Finance. I highly recommend that you take a look at both of these guys. The following are the stages of financial independence:
So you probably wonder what is that FIRE thing and why on earth would I want to be part of this.
FIRE stands for Financial Independence Retire Early. Well OK, so now you know what it stands for, but why should you care? You should care because maybe you don't want to spend most of your waking hours at work for the rest of your life or maybe you'd like to travel more or maybe you'd just love to be able to decide when you want to work and when you'd rather not.
Once you achieve FI or financial independence it simply means that you can support your normal spending needs from your investments, so you can make a choice of what you want to do without financial pressure to do it. Hell, you could work for free volunteering your time at the local charity you care about if you wanted. Financial independence can come from many sources. You could draw money from an Investment portfolio, getting money from rental properties you own or from a business you created.
And I know what your thinking "he is already talking about Investments and I don't understand that mambo jumbo". What if I told you that you could open an investment account and be an investor within fifteen minutes. I might just get your attention there.
What if I told you that historically one of America's most popular index fund called S&P 500 returned on average 10% yearly since its inception?* You might say, well fine so what? Well due to something called the compound interest or as Albert Einstein called it - the eighth wonder of the world, you could rake up more than you think.
Hi, I decided to start writing about our journey to financial independence. Why?
Simply because I want to show people that if we can do it than there’s no real reason why they couldn’t. We are no experts on gaining wealth, but we are trying to make logical decisions about our finances and limit amount of crap we buy. I look around me and see friends and work colleagues buying stuff on credit and I simply don’t understand. In these days of uncertainty why would you want to borrow money to buy stuff you don’t really need. I can’t remember where I read or heard this, but it went something along the lines of “we buy crap, get in debt and work like donkeys to impress people we despise”. Big homes, cars, watches, expensive gadgets, fancy dinners, overprices groceries in posh supermarkets where only people with branded clothes are allowed and the list goes on and on. We don’t really need any of that! We simply got lost in separation of wants and needs. They are not the same thing and what we sometimes want is not what we necessarily need. We have completely lost the idea of enough and however much we can afford on credit sometimes becomes new enough.
So, how has this all started in my head? I became aware of the Financial Independence Retire Early or FIRE movement at the beginning of 2019. Since then I was obsessed with the idea of being able to make 9-5 work optional. Not that I don’t want to work or that I don't like my current job, but I would love to work on my own terms. I watched lots of video blogs, read books and listened to days worth of podcasts. I learned about passive investing, the 4% withdrawal rate rule and other stuff I had no idea about.
My wife also quickly got on board. All she needed to know was that the plan is to be semi-retired in ten years and fully retired in twenty. Once again, not that we don’t want to work, but only want to work when we want to and do what we want to do. I know it sounds too good to be true. . . .
Well we are going to try and make it work.
I am not going to go into this too deep, but we are by no standards wealthy. We only recently reached a status of average earnings after years of education and struggle. We are very motivated. That probably comes from the fact that we both immigrated to UK without much. I come from troubled family and my wife's family was lower middle class. We now understand that it is not what we make, but what we spend, the gap is all that matters. We were never big spenders, but I had a few bad habits I had to shed to ensure that we can make it work. If you’re interested in specifics of our plan visit us more often for a read as there’ll be a lot more. If we fail you can read and hopefully soon watch how we failed, but if we succeed then maybe you can learn something from it.
My name is Witold, but I call myself a frugal alien on this blog. Why? Because I feel like one when talking to people about personal finance. I write about financial independence and ideas surrounding it whilst embarking on that journey with my wife.
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