Financial Independence

Fire Movement

Fire Movement: What Is F.I.R.E?

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What is F.I.R.E? Financial Independence Retire Early (F.I.R.E) is a movement (Fire Movement) that is dedicated to saving and investing over time to achieve financial independence such that you can retire. The goal of the Fire Movement is financial independence, but also the ability to retire far earlier than typical. What is F.I.R.E? It is not a millennial fad. It is not only for those having a high income and no children. Financial Independence Retire Early is for everyone who wants to achieve financial independence.

Fire Movement – F.I.R.E Is Not A Millennial Fad

While F.I.R.E itself is generally new to the lexicon, the concept is not. For hundreds of years, many have saved, invested, and have experience financial freedom such they can do what they desire. Let us think about it, is this not a version of what you tell your kids, and for that matter, what your parents told you? Save, such that you can have more for a rainy day. In the case of F.I.R.E, that rainy day is early retirement.

The earliest version of the modern Financial Independence Retire Early approach is said to be borne out of the 1992 best-selling book “Your Money or Your Life” by Vicki Robin and Joe Dominguez. This concept has further evolved into what we see today. Today’s movement applies the tools currently available.  For example, many achieve financial independence via use of online savings accounts which have higher interest rates, the use of Roth IRAs and traditional IRAs, maxing out 401K or related accounts, investing in low cost index funds, paying down credit card debt, and developing a side hustle in the gig economy. 

Fire Movement – F.I.R.E Is For Everyone No Matter The Income Level

F.I.R.E is not just for those with high incomes. Don’t get me wrong, I do understand that some with high incomes may have an easier time saving and investing. However, that may not be a logical reality. As noted previously, higher incomes may at times result in high debt.

It is not atypical for high earners to live pay check to pay check. Simply put, those nice cars carry a nice car payment and a nice cost for insurance coverage. Those nice homes comes with a nice mortgage and nice costs of up keep (insurance, heating, cooling, landscaping, house keeping). Further, high incomes typically comes following longer educational requirements, longer educational requirements comes with high student loans.

The simple fact is, no matter if you are taking home a high income, low income or something in between, F.I.R.E is for you. No matter the income level, achieving financial independence will take discipline and sacrifice. While popular stories show the extreme (those having a six figure incomes who are able to save greater than 70% of their incomes over a number of years or those who live in their cars in the middle of nowhere such that they are able to save 90% of their income), there are also many others who make less than six figures, have children and were able to achieved financial independence.  No matter who you are, live below your means, save, invest and you can achieve financial independence.

Retire Early

The “Retire Early” portion of F.I.R.E is typically triggered once savings/investments reach approximately 30 times yearly expenses (F.I.R.E Number). The aim is to have savings/investments such that they are able to cover living expenses by withdrawing 3% to 4% of saving/investments yearly. The total savings/investments needed to achieve financial independence is dependent on your lifestyle and the lifestyle you want to have going forward. There are different categories of F.I.R.E.  For example, there are (1) Fat, (2) Lean , (3) Barista, and (4) Coast.

  • Fat F.I.R.E: Living and planing to retire with a traditional to above average lifestyle. Fat generally requires having a higher F.I.R.E number. With fat F.I.R.E, you are more prepared for most unforeseen financial bumps in retirement.
  • Lean F.I.R.E: Living and planning to retire with a more minimalist lifestyle. Lean F.I.R.E generally requires extreme minimalist living and extreme savings. Thus, a lower F.I.R.E number. With lean F.I.R.E, you may be more sensitive to unforeseen final bumps during retirement
  • Barista F.I.R.E: Those on the journey to financial independence who have quit their traditional employment but still do some part-time work to cover current expenses that would otherwise erode their savings/investments.
    • Withdrawing money from your savings/investments, but supplementing it with income
  • Coast F.I.R.E: Those who have enough in their savings/investments and are doing some part time/full-time work to pay for their living expenses.
    • Keeping employment to cover living expenses and not withdrawing from your savings/investments

Which of the above fits what you and your family are trying to achieve?

Critics

The general angst of F.I.R.E is Retire Early (R.E). Many who are critical of the Fire Movement focuses in on the early retirement component. What happens if you hit a financial bump following retirement? Note that many who are committed to early retirement have no intention of retiring at 35, 40 or 45 years of age to sit at home. F.I.R.E enthusiasts typically have no desire to retire and do nothing. F.I.R.E enthusiasts generally do not desire to stop contributing to society. 

To F.I.R.E enthusiasts, Retire Early generally means you can retire, if you want to. Retire Early means you can leave a terrible career and do what you want, whether that is starting your own business, volunteering, or spending more time with your family. Retire Early means doing what makes you happy, pursing your passion. As a reality check, if someone is discipline enough to save, invest and achieve early retirement, do you think that individual will sit at home and twiddle their thumbs once financial independence is achieve? The answer is a resounding no.

Further, there are countless benefits to starting the journey to financial independence or achieving financial independence. Having money in the bank lowers financial stress, allows you to take advantage of opportunities and improves confidence. The confidence to take active steps in life to better yourself and financial position. These benefits will affect all aspects of your life, including your personal relationships and your mental health. 

F.I.R.E Financial Independence and freedom
F.I.R.E means freedom

Conclusion

What is F.I.R.E? Financial Independence Retire Early (F.I.R.E) is a movement (Fire Movement) that is dedicated to saving and investing over time to achieve financial independence such that you can retire. The goal of the Fire Movement is financial independence, but also the ability to retire far earlier than typical. What is F.I.R.E? It is not a millennial fad. It is not only for those having a high income and no children. Financial Independence Retire Early is for everyone who wants to achieve financial independence.

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What Is F.I.R.E?

Think outside the box

Financial Independence: Think Differently

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Money is emotional. The environment you are in can have a significant effect on how you approach and use money. One of the many actions that will continue to keep you from achieving your financial goals is the desire to show others that you have made it. It is only human nature to have this desire. However, if this innate desire is not controlled, it will create roadblocks to achieving financial independence. Think independently.

Think outside the box and achieve financial independence
Think outside the box to achieve financial independence

Be An Independent Thinker And Achieve Your Financial Goals

It is important to remember that financial independence, includes “independence”. To achieve financial independence, you must be an independent thinker. Further, you must also be able to act independently. Following the herd will not lead to financial freedom. Running with the herd will get you to the average:

  • Working until you are 65 with an underfunded retirement;
  • Keeping up with the Jones and having thousands in credit card debt;
  • Having a 30 year mortgage that is refinanced repeatedly; and 
  • Having new vehicles every four to five years financed over a five to eight year term.

Following the herd is not a path to financial freedom. It is the path to a life of being financially dependent on your employer and being at the mercy of your creditors. Being apart of the herd is a sure-fire way to working for the rest of your life.

Financial Independence Requires Time And Consistency

To achieve financial freedom, adapt an independent mindset and take the road less traveled to achieve your financial goals. Living beneath your means, saving, and investing over time is the tried and proven way of achieving financial independence. The process is simple and straight forward. But, to achieve financial independence requires sacrifice, time and consistency. Achieving financial freedom requires discipline to live within your means without being affected by the actions of those around you. 

Are You Willing To Make The Sacrifices Required To Achieve Financial Independence?

Think about things differently and achieve financial independence
Think differently

Look around, now focus on those who are truly financial independent. Very few are. If you take a close look at those around you, it will become very clear that being rich does not equate to financial freedom. Achieving financial independence requires not only earning money, but also being able to keep a high percentage of that money. Keeping a high proportion of money earned takes making sacrifices.

By thinking differently, it will be easy to understand that:

  • It is ok to have a paid off five year old car when your neighbor has a current year luxury vehicle;
  • Living in a small home and wearing the same set of clothing in an effort to payoff debts are ok; and
  • While it may be difficult, it is ok to forgo certain events/pleasures to stay within a predefined budget. 

The above are all ok because building towards having several months of living expenses in the bank to fully fund an emergency fund and having investments, that are working while you are sleeping, are part of the journey of not being beholden to anyone financially.

Get Started On Your Journey To Financial Independence

As the saying goes, getting off the ground takes 80% of the energy while maintaining orbit takes 20%. To begin on the journey to financial independence takes 80% of the effort while maintaining your set route to achieve financial independence takes 20%. Get the figurative ball rolling Now!

Conclusion

Money is emotional, and the environment you are in can have a significant effect on how you approach and use money. One of the many actions that will continue to keep you from achieving your financial goals is the desire to show others that you have made it. It is only human nature to have this desire. However, if this innate desire is not controlled, it will create roadblocks to achieving financial independence. Think independently and achieve financial independence.

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Side Hustle

Get Your Side Hustle Right

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We have all seen stories after stories of people ditching their day jobs for a side hustle. In some cases, multiple side hustles. These major financial and professional moves typically occur upon the realization that the side job provides more income, time with family and all round satisfaction as compared to the main hustle. Whether you want to make your side hustle your main hustle, or you simply want to supplement your main income with income, one important principle rings true. While you may want to jump head first into your first or second side hustles, do not allow your side hustle to interfere with your main hustle.

Reliance On The Main Hustle

Picking up and doing a side job is easy. Being consistent enough to garner a reliable income stream and/or growing the side job to become your main income source is difficult. This is akin to starting your own business. Building a reputation and developing a reliable clientele requires a huge investment of time and potentially financial resources. This investment is almost always reliant on your main hustle’s income. Therefore, it is essential to keep your main job stable as income from your side job grows.

The Problem

Even if your side hustle is performed in the hours outside of your main job, at the very least, your time investment will take away from the time available to focus on your main hustle.  

  • For example: 
    • Main hustle: 9am-5pm
    • Side job: 7pm-10pm

Those extra 3 hours of working a side job per day or week will result in a tired employee. An employee who no matter how good you are, will become prone to mistakes. Further, such an employee will likely not be providing full attention to the main hustle as they will be thinking about the side hustle….potentially having one foot out the door. How would you react as an employer if you got wind of such developments. Now, as an employer, imagine if your employee’s side job is or could become a direct competitor.

Does Your Employer Have Your Best Interest

We would all like to think that our employer want the best for us as employees, and while this may be true for some, these employers are in the minority. Your employer wants what is best for you so long as what is best for you is best for them. Where what is best for you diverges from your employer, you will have trouble. This is often the case once you begin a side job.

Employer Becomes Aware Of Your Side Hustle

If your employer have the slightest belief that your side job could potentially compete or take business away from him, he will ensure that you do not survive, at least at your current position. Expect to be fired, however, before the axe falls, the warning signs will show themselves as complaints with regard to: your ability to focus on the task at hand,  you not spending enough time in the office, you not making yourself available, or you are unable to handle new responsibilities and your inability to grow.

I have seen this play out, even in fields where a side job is completely unrelated to the main hustle. In one case, a jealous co-work informed the employer of a fellow co-worker’s side job, caused a big stir and eventually got him fired. In this case, the side hustle and the main hustle were completely unrelated. However, jealousy is ever-present as we are all human beings.

Once an employer learns of your side job, it is not uncommon for you to be accused of using company’s resources for your new endeavor. This can have far reaching implications depending on your employment agreement. For example, if your side job is one that is a new idea. Note that many employment agreements have an assignment clause wherein inventions developed with the use of employer’s equipment (for example computer) and on employer’s time belongs to the Employer. 

If your side hustle and your main hustle are in the same field,  you may even face legal action with regard to mailing lists or stealing clients among other grievances. 

As such, it is imperative that you keep your side job and your main hustle separate. We would suggest not even answering an email related to your side hustle on your current employer’s computer.

Conclusion

Side hustles may provide more income, time with family and all round satisfaction as compared to your current main hustle. However, if your journey to financial independence includes a side hustle, do not allow your side hustle to interfere with your main hustle until you are ready to have your side hustle become the main hustle.

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Emergency fund

Benefits Of Having An Emergency Fund

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“Emergency” and “fund” are the new buzz words of any financial advice. You have heard it and have been told many times to have an emergency fund. How much you should save is typically dependent on who you ask. Some say have at least 3 months, others say have at least 6 months while others have recommended up to a year of your monthly cost of living saved. Whatever the amount you have settled on trying to save, start saving now. On the journey to financial independence, there are many benefits of having an emergency fund.

Financial Stress

Financial stress is not only one of the leading causes of divorce, but also stress and all related pathologies. This comes as no surprise in view of recent reports. Survey after survey notes that we are not saving enough for retirement. There are monthly reports noting that most cannot afford a $500 emergency without going into debt. Additionally, the average American has over $38,000 in debt. With regard to student loans, in the US, student loans are now over $1.6 trillion.

Less Financial Stress

What would having a months cost of living in a bank account do for you emotionally and psychologically? Would this mean not living pay check to pay check? What about being able to afford that unexpected car repair, and being able to cover that often raised $500 for an unforeseen expense. The stress relief and feeling of well being, yes, these are the benefits of having an emergency fund.

Now, multiply the amount saved by 2, 3, 6, 12, or 24. The more you save, the better the feeling. The more saved in an emergency fund, the less financial stress.

An Emergency Fund Provides Confidence

With less financial stress, comes confidence. The confidence to take active steps in life to better yourself and financial position. If you are not worried about living pay check to pay check, you can focus more on your career, education and/or family. All of which builds confidence. The more you save, the less on a tight rope you live. The more you save, the less reliant you are on your job to pay for the next 1, 2, 3, 6, 12 or 24 months of expenses.

Confidence is the ability to push back when your boss mistreats you or put you in a compromising situation. Having an emergency fund puts you in a position to fight back because financially, you may not be completely reliant on that job. An emergency fund gives confidence and options.

An Emergency Fund Creates Opportunity

Having an emergency fund allows you to take advantage of opportunities. Opportunities do not come along on a predicted timecourse. Opportunities present themselves on a random untimed basis. 

Consider the previous financial downturn of 2008. To many, the recession was a devastating event for all the known reasons. However, to others who had money saved and were able to buy into the stock market at a significant discount or purchase homes at discounted prices, the recession was a massive opportunity. The financial downturn of 2008 was a realized opportunity to many who had the financial reserves to take advantage. 

While the financial downturn of 2008 is an outlier with regard to the size of the opportunity, the same principles apply for the small opportunities that present themselves daily. Those who have the financial capital and confidence to do so, will take advantage of these opportunities. Having an emergency fund will place you in a better position to take advantage of small and large opportunities alike.

Conclusion

An emergency fund is a specific group of assets, typically cash, that are readily available to help one navigate unexpected financial difficulties. These financial difficulties include but are not limited to loss of a job, illness, and/or repairs. Whatever the amount you have settled on trying to save in an emergency fund, start saving now. On your journey to financial independence, there are many benefits of having an emergency fund.

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Surprised Santa

Holiday Sales Are Here

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Holiday Season

It is that time of the year again, where we spend money for the sake of spending money. Yes, it is that period between halloween and the new year, the holiday season with the requisite holiday sales.

Some may disagree with the time span, and argue that the holiday season begins after Thanksgiving. For those individuals, Christmas carols and decorations are on display before Thanksgiving. But the time span is not the point.

Holiday Spending

During the 2018 holiday season, Americans spent over $717 billion. Americans spent over $3.5 billion online on Thanksgiving day. On Black Friday, over $6 billion online. On Cyber Monday, over $8 billion and over $18 billon on Small Business Saturday. In total, in 2018, over 174 million individuals shopped over the Thanksgiving weekend from Thanksgiving through Cyber Monday. Many of these individuals were motivated by holiday sales. However, do you really need that new phone, TV, computer or gadget? In the time of covid-19 and related variants, should you be so focus on material things?

Sales?

If you are motivated to spend based on the holiday sales, those big signs with percentages off, I have some sober news. Retailers have figured out that those big signs can lead to sales. Lots of sales. As such, instead of actually lowering the sales prices, many may instead  increase the listed price. Therefore, there is a larger gap between the sale price and the list price.

That big sale may not be as big as you think.

Holiday Spending And Your Financial Future

Now that your euphoria of large savings have been normalized, have you considered how spending in the holiday season will impact your financial bottom line. Of the 174 million Americans who spent over $717 billion during the 2018 holiday season, how many are financially independent? How many are on track to retire early or living pay check to pay check? How many could have contributed to their savings, 401K, IRA or personal investment account? What about paying down debts  from the previous year’s holiday spending?

Extravagant spending during the holiday season occurs yearly. Let us assume that the retirement age is about 65, and conservatively, careers begin after college at age 22. Based on this estimate, about 43 years of spending occurs during your working years. How could saving during the holiday season have impacted the average American’s bank accounts? How many could have retired early or at least struggle less financial?

Stay On Your Journey To Financial Independence

While the holiday season is branded as the season for spending, take stock of your financial situation and how your holiday spending will impact your journey to financial independence. 

Collect moments not things

Conclusion

Your family is important and we are certain that they would rather you be in a better financial situation than purchasing gifts that will put your financial future in jeopardy. If you are planning on making small or large purchases this holiday season, keep in mind your financial goals. Stay on your journey to financial independence.

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Holiday season

Holiday Season Tips For Saving

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Each year, Americans spend an inconceivable amount of money during the holiday season. As we approach the holiday season, be conscious of your spending. Financially, do not undo your hard work and the sacrifices of the year. Do not veer off your path to financial independence. Be intentional in your spending.

Holiday Spending

The holiday season is the one time of the year where culturally, it is acceptable to spend what we do not have. In some cases, we are spending on people we do not like, and people we do not like to be around. 

Studies have shown that it is not uncommon for a large percentage of people to not only overspend during the holiday season, but to spend to such an extreme that they are not able to pay off their sending in the month following the holiday season. In many cases, payment of the debt generated in the holiday season is carried over for a year or more.

Worst yet, much of the accumulated debt is on credit cards. According to wallet hub, the average credit card interest rate is 19.21% for new offers and 15.10% for existing credit cards. 

Holiday season
Happy Holidays!!

Holiday Saving Tips:

Have a plan

Treat your holiday shopping like every other spending occasion. Evaluate where you are financially, know how much you are willing to spend, make a budget and stick to it. 

Where Are You Financially

As the end of the year approaches, evaluate where you are. Do you have a savings or an investment goal? Did you plan to pay down debt? Are you planing to make a big purchase in the next year? These are all factors that should impact your spending. If you have goals, and you are on track, keep moving forward toward your goals. If you are off track, get back on track. Do not allow the holiday season to impede your progress.

Budget How Much You Are Willing To Spend

Once you have evaluated your financial position, determine how much you are willing to spend. Do not underestimate your possible budget, be realistic. Are you traveling for thanksgiving? Are you traveling for the winter break? Do your family members expect gifts? Have you set expectations? Are you hosting? Are you hosting a party? Budget accordingly.

It is not uncommon for us to not include the cost of travel in our budgets for the holidays, however, the vast majority of us travel during the holiday season. This is an important consideration especially with the increasing cost of air travel. Consider the cost differential of traveling to Time Square for new years eve vs watching the ball drop at home.

Whether for thanksgiving or later in December or for new years, consider the cost of travel, cost of gifts and any related recreation activities. Further, set expectations based on what you can afford.

Stick To It

Once you have reviewed your financials and made a budget, stick to it. Make travel arrangements early, take advantage of sales, set expectations and spend within your means.

Conclusion

As the holiday season approaches, continue on your journey to financial independence. Evaluate where you are financially, know how much you are willing to spend, make a budget and stick to it. 

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First Generation Immigrant: Guide To Financial Independence

First Generation Immigrant: Guide To Financial Independence

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Journey to Financial Independence

Financial independence is predicated on the simple formula of money in vs. money out. If you have more money in (salary, passive income, gifts, investments etc.) than money out (bills), you have discretionary income. With discretionary income, you may save, invest or spend. When you invest and save, you are moving forward on your journey to financial independence. Spending most or all of your discretionary income hinders your march toward financial independence. In the first generation money guide to financial independence, whether you have expenses in home country or new country, move forward on your financial journey by ensuring that your financials are secured.

Challenges

For first generation immigrants, the journey to financial independence can be daunting. When a family immigrates to another country, they typically do not have the family or community support they had in their home country. This exposes first generation immigrants to a number of new financial challenges. These financial challenges include financially supporting family members both in new country and home country.

Lack Of Community Support

For most first generation immigrants, with regard to childcare, there is no grandparents, sisters or brothers to help. Natives also encounter this issue, however, to a lesser extent. Natives have family in country, whereas immigrants may not. On the financial front, for immigrants there is no or very little inherited land, business or assets in new country. Immigrants, especially those who are the first to enter a new country, have to build wealth from scratch. 

Immigrant Money: Remittance

A more challenging issue is remittance. Many first generation immigrants have or feel obligated to send money back home to support family members. It could be to support studies or general home life. Remittance represents a large transfer of funds each year. For example, according to The World Bank, in 2017, individuals sent over $689 billion to their home country. 

Immigrant Money: Hyper Savers

To financially support multiple households (new country and home country), immigrants tend to be hyper savers. As such, although in the aggregate, immigrants may have a lower amount of money in (salary) than most natives, many immigrants are hyper savers and have a higher savings rate than natives. This does not mean that immigrants have more saved. As noted above, immigrant salaries tend to be lower than natives and immigrants may have more financial responsibilities as compared to natives. This hyper saving tendency may result at least in part on circumstances and necessity. However, because of financial constrains, in most cases, hyper saving does not lead to financial independence for many immigrants.

The Journey To Financial Independence

To move forward on the journey to financial independence, one must save and invest. While we are not advocating that one should not support family in home country, cutting back on the amount sent must be considered. It is important to ensure that your financial situation is secure before aiding others, yes, including family. Think back to the safety instructions given before a plane takes off.  In an emergency, put on your oxygen mask before your child’s.

If your financial situation is not secure at home, your family’s (home country and new country) financial situation will also not be secure. 

Consider the following: 

  • (1) you save very little while supporting your family in home country and loose your job. In this situation, not only will you be in a bad situation, but so will your family in home country. 
  • (2) you cut back on the amount of support you provide to family in home country and save a small sum in your emergency fund. If you loose your job, both you and your family in home country have a bit more runway to deal with issues that appear. This is the same principle that should be applied if you have adult children. First, address your financial situation and where there is addition or left over funds, aid your adult child.

Conclusion

In the first generation immigrant money guide to financial independence, whether you have expenses in home country or new country, move forward on your financial journey by ensuring that your financials are secured.

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Video Summary

Financial Independence

Your Financial Independence

Money Maroon

Welcome to JoToFI.com. May our insight and opinions on the financial world aid your journey to financial independence. Break free from the 9-5 and journey to a life well live. Ask yourself this simple question, do you want to retire when you are in your 60s or are you willing to put in the work to retire early? By retiring early, we are not talking about siting at home and doing nothing as the world passes you by. Intsead, we are talking about taking your life back and living as you choose because you can financially afford to do so.

Start Living Your Life Today

According to Wikipedia, financial independence is the status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others. In other words, financial independence is the freedom to live without the need to earn an income. Because you do not need to earn an income does not mean that you will not. If you look around the internet or here at JoToFI.com, you will find many examples of people who have retired and are earning more than they did while working a stereotypical job. Are you ready to take the next step?

Financial Independence Can Be A Reality

While financial freedom may seem impossible, it is not. Financial independence can be achieved by modifying your attitude toward money and implementing your financial plan consistently over time. Save, invest, pay down debt, live below your means and repeat. The journey may be long, and the pace of financial growth will begin slow, however, the destination is worth it.

All journeys begin with a first step. Take your first step to financial freedom today and reap the rewards tomorrow. The journey to financial independence begins now.

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