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.
For the argument sake and very simple math, we will assume that you can get an unlikely 10% return (not adjusting for inflation for simplicity). Let's compare what you would have in ten years if you saved £100 per month on an ordinary bank account with no interest paid. Simple 100 x 12 x 10 = £12000. Yeahhhhh that's great, but hold on to your seat. If you invested the same amount with the assumed 10% return due to compound interest you would have £20405.13*. That's just a very simple example of what can be achieved when working with compound interest. We use Vanguard for our investments, please take time to read about them as they are just great. You can open an account in minutes, but please read up on options before going there and investing.
Below you will find the compound interest calculator, which fascinates me and also a link to a very useful Investopedia page where you can look up all sorts of stats and more.
I am not a financial planner and I don't get paid by Vanguard. I am just a simple guy sharing my take on personal finance. Any sponsored links will be marked as so.
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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