FIRE, standing for being financially independent and retiring early, is becoming more popular.
Followers of FIRE aim to save much of their income in investment accounts, working towards their FIRE target – the amount they need to regularly withdraw to replace their usual work income.
Jessica Fick and her husband, Corey, who lead The Fioneers, a financial independence platform, remind us that this strategy doesn’t work for everyone. “Not all have big salaries or can manage with $30,000 a year,” Jessica notes.
The Ficks, both aged 36, have outlined five levels of financial freedom. Currently, they’re at the third stage, “Coast FI,” where they’ve
saved enough for retirement in their 50s and now use their income for day-to-day expenses.
Here’s a breakdown of the five stages of financial freedom:
- Freedom from Debt
The first step towards financial independence is getting rid of debt. The Ficks believe that some debts, like mortgages, can be part of a wise financial plan.
However, paying off high-interest debts, such as credit card dues, is essential to free up more money for retirement savings.
“Freeing yourself from debt reduces your monthly costs,” says Corey. “Without debt, you can either save more or cut back on working hours.”
- ‘F You’ Money
This level of financial wealth isn’t just about reaching a certain amount of money, say the Ficks.
“It’s really about feeling secure,” Jessica mentions. “It’s having enough funds to leave a tough situation or take a new opportunity, like quitting a stressful job or starting your own venture.”
The amount needed varies depending on personal factors like having a family or job flexibility. While it can include investments, it’s important that you’re willing to use this money when needed.
Jessica adds, “But it’s not truly ‘F You’ money if you’re afraid to spend it.”
