FIRE: Financial Independence and Early Retirement
Everyone keeps saying it’s super easy and anyone can do it. I would have to disagree with that statement. There are a few key characteristics of the people that I’ve noticed when I’ve read their blogs:
- They read A LOT – These people are constantly reading blogs, doing their research, and looking at investment strategies to figure out where to park their money and ensure capital income.
- They are OBSESSED with their budgets – This is the hardest part for people. It’s the tracking of every penny that comes in and goes out. These are the people that need every receipt for every purchase even if it’s for $1, because they are entering into a spreadsheet to make sure they are on track with their budget. They are reviewing all their online accounts at least once a week and crunching those numbers in excel on a regular basis. Excel is their best friend.
- They are MINIMALISTIC – None of these bloggers have a 2,000+ sq feet house. They all live in modest sized homes/apartments in any location. The key here is modest-sized. We’re talking about 300 sq feet to no more than 1,000 sq feet. This also means that you can’t fit very much stuff in there, so less they spend on material items and the more they save. They also watch what they buy and will only buy when needed and on sale.
- They TRAVEL – If you really analyze their budgets and where they splurge, it’s on traveling. Traveling might be a large part of their spending, BUT they don’t buy anything. They splurge on the activities and live in cheap accommodations. This goes hand-in-hand with the minimalism.
- They meet their GOALS and realize setbacks – Saving over 50% of your income is difficult. These people have altered their lifestyles because they have set a goal for themselves and are constantly repeating items #1-4 above to ensure they reach it. If there is a month their investments took a dip or they accidentally spent too much, then they realize that very quickly, evaluate the issue, and fix it for next month (not waiting a few years later to admit their issues).
I believe the key to retiring early is to know what comes in (income) and what goes out (expense). It takes a lot of discipline to consistently record the expenses, because life gets busy and it’s tedious to sit there and enter numbers into a spreadsheet. It gets even more frustrating when you’re not good a spreadsheets.
Recommendation: Dedicate a full Saturday or Sunday to learning some basic excel functions (i.e. sum and average functions) and build a basic spreadsheet to enter data into. At the minimum try to add up your expenses once a week. Even if you missed a few transactions, it’s better than nothing. Overtime, you’ll have a pretty good idea of your overall expenses and you’ll start to commit to this on a more regular basis providing you with a more accurate picture. Eventually, you’ll figure out what can you cut and save more!