How to FIRE?
In my last few posts i have tried to answer some of the key questions around FIRE
Now comes the next logical question - how to FIRE? This is probably simplest to answer but most difficult to implement.
Those of you in IT / Project management areas would have seen this triple constraint triangle
Similarly to create a retirement corpus, you have some levers that can be used.
So what levers can you use to get the Corpus
Time as a Lever - Save over the longer duration, to build a corpus
Skills / Job as a lever - Upgrade yourself to a higher paying job or take on multiple jobs or side hustle to increase your income
Cost reduction as a lever- reduce your expenses
Start tracking Finances
If you currently don’t track finances then there is no way you can prepare for FIRE. Step one would be to start tracking your finances.
There are several tools available both online via web and apps on your smart phone. I use Spendee on my iPhone to track income and expenses.
Make sure you enter every single transaction and most importantly create multiple wallets so that your significant other can do the same.
Once you have a handle on your income and expenses, start budgeting by different categories. There are tons of tools available online - YNAB is one of the popular ones, a good old spreadsheet works too.
Pay yourself first
This is a concept you see in many financial blogs - the first expense as soon as your salary hits your account invest it
Better still automate this process by setting up a recurring transfer out of your regular savings / checking / salary account to a separate investment account on the salary day every month.
Invest in yourself, read the investing greats, imbibe their philosophy and then create your own
Understand your risk profile and tolerance
Everyone has different levels of tolerance to risk, go online and find out what yours is.
Based on the risk assessment, work with a financial advisor to develop your financial plan.
Avoid the financial news
Once you have a plan defined and set in motion, ignore the financial news.
Check the portfolio only once a quarter to re-balance.
If you can follow these steps, you are well on your way to FIRE.
Title image - Ludovic Bertron - Flickr