How to FIRE?

      In my last few posts i have tried to answer some of the key questions around FIRE

1. What is FIRE?

2. Why FIRE?

3. Types of 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

1. Time as a Lever - Save over the longer duration, to build a corpus

2. Skills / Job as a lever - Upgrade yourself to a higher paying job or take on multiple jobs or side hustle to increase your income

3. Cost reduction as a lever- reduce your expenses

Steps

1. 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.

2. Start Budgeting

   • 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.

3. 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.

4. Upgrade yourself

   • Keep learning

   • Invest in yourself, read the investing greats, imbibe their philosophy and then create your own

5. 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.

6. 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.

References

Title image - Ludovic Bertron - Flickr