Published on 07-11-2019
Even though the idea of financial independence has been around for quite some time, in the past few years, it’s becoming more mainstream as members of the community have opened up and shared their progress on a variety of platforms like blog, videos, and podcasts.
They come from various backgrounds and circumstances - those fresh out of college, career changers, families, and more all looking for a pivot - the ability to have enough saved and invested to explore their options, whether it is with their jobs, schedule, or lives.
There’s a documentary on the movement - Playing with FIRE that is enjoying a traveling summer release across the country, bring more awareness to the financial independence movement.
You might wonder, ‘Is financial independence something we can do?’
It may very well be, but first, we need to look at some key components and numbers to really get an idea if it’s the right path for you.
First off, what exactly is FIRE?
FIRE is financial independence, retire early. The idea is that you specifically invest enough (or generate enough passive income) so that you don’t have to work a job again.
The truth is many financially independent families and those on the path do still work, but it’s more on their terms.
Whether it’s part-time, freelance projects or giving more with volunteering, they find financial independence is less about avoiding the office and more about pursuing something they’re excited about and is meaningful to them on some level.
If you two are thinking about joining the FIRE movement, there are a few key numbers you two should discuss:
You can pull both your essential expenses and savings rate by looking over your accounts either by downloading the transactions or by using an app that pulls and organizes all that data for you.
After you’ve reviewed both, you have a clear idea if financial independence is the path for you.
You may see that you’re in a pretty good spot income-wise, but you need to optimize your expenses.
Or you see that you have a fairly frugal lifestyle, but to grow that gap, you need to focus on growing your income, either by switching jobs, negotiating with your current employer, or taking on a side gig.
Your savings rate is absolutely crucial to how quickly you can financial independence.
Right now the average savings rate for Americans is just above 6% which is below what the 10-15% rate financial planners typically recommend for that traditional retirement schedule.
It’s not uncommon for FI families to look at the 30-50% range. Going that high means they cut their path from the 40-50 year range to about half (17-28 years).
You’re going to have to get pretty aggressive for a shorter timeframe. The good news is that there are several ways you can get there.
Here are five ways I’ve seen FI minded families approach things.
However, you decide to pursue financial independence, make sure you have regular check-ins to track your progress and adjust your plans as necessary.
These money dates as I call them, are a wonderful way to review your numbers in a relaxed setting and puts your finances into perspective.
Money is not the goal, it’s really about your time and making sure you can devote more of it towards the people and projects you truly care about.
These dates allow you to make sure your money is moving in that direction.
If you’re looking to save more and have your money work for you, check the different savings and investing options at Coastal. Depending on your goals (financial independence or otherwise), you can find an account that fits you.
You can also sit down with a CFS* financial advisor to help you craft a path towards financial independence that works with your circumstances and time table!
Elle Martinez is the creator of Couple Money, a personal finance podcast and site focused on helping couples get on the same page, dump their debt faster, start building wealth together.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Coastal Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.