Have you heard about the FI/RE movement? If you’re one of my Twitter followers then I’m sure you have, but if you’re part of my other social networks, this may be a foreign concept to you. Today I’m going to go over the FI/RE movement and how I became part of it without even knowing it!
Defining FI/RE
There is a movement that has been “formally” going around now for a little over 10 years, but the concepts of the movement have been around for decades. It is the FI/RE movement which stands for Financial Independence / Retire Early. It is becoming more and more popular with millennials, and there is a documentary being filmed right now that will further detail the movement.
The entire concept of the movement is to become debt free and have enough passive income and savings for you to “retire” earlier than most. There are several misconceptions about the retirement part of this equation which I will go further into detail in this article.
Financial Independence
What is Financial Independence? This is my main goal right now as I work to save and invest as much as I can while destroying my last debt which is my home mortgage. Financial Independence is about having enough money saved and invested to no longer need to rely on a job as a source of income. It’s about working because you want to, not because you need to.
One of my biggest fears is not being able to provide for my family. If I become so sick that I can no longer work, the income stream for my family stops. My wife would need to get back into the work force, and starting out, it’s questionable if she would be able to find work that could replace the income stream I have spent 14 years building up. More than likely we would need to sell our house and greatly reduce our expenses and lifestyle.
The devastation that could be caused by an interruption in my income stream is something that I am looking to mitigate as soon as possible. When I pay off my mortgage in the near future, we will have very low living expenses which would allow for many other options if something were to happen to me.
I am currently building up my passive income with investments and I am toying with the idea of purchasing rental properties in the future – with cash of course. If I could do it all over again, I would have saved up and bought my current home with cash, but what’s done is done. Hopefully, you’re in a position where you can learn from my mistakes and do it the right way! 🙂
Financial Independence is achieved by decreasing spending on wasteful items and increasing your income to rapidly invest in things that will create passive income.
Passive Income Streams
Passive income is about not having to rely on formal/traditional work to survive. Passive income can take the form of stock market investments, rental properties, a book you have written, or any other form of income that comes in from things you have invested your money and time in. When your passive income streams equal your living expenses – you have achieved Financial Independence!
Retire Early
So what does it mean to retire early? The option or act of retiring early does not mean retirement in the traditional sense. The Retire Early part of FI/RE focuses on being able to quit your job (if you want to) to pursue other hobbies or interests of yours. Many people who achieved FI/RE, spend 40 hours or more each week at part-time jobs they love and/or volunteer opportunities. It’s about living the life you always dreamed of – which can also be the 9-5 job you have, if that is what makes you happy!
I personally will reach the FI/RE status in about 6 years, but I have yet to decide what I will do. My passive income will be able to supplement my current take-home money in about 6 years, but I may continue on in my current career for longer due to the health benefits and other employer-sponsored benefits. The exciting aspect of this is I will have the option to leave if I wanted to pursue something else without the need to replace my income.
The Benefits Of Joining The FI/RE Movement
While the FI/RE Movement may sound like a hippy millennial movement, it’s really about taking control of your finances and getting rid of your debt. This is not a new strategy or concept – it’s something that your grandparents probably subscribed to. It’s about living below your means and saving up for a rainy day. My grandparents saved through annuities, which has worked for them – but I am choosing a different investment path.
Either way, the concepts are the same. Spend less than you make, save for emergencies, and invest for the future.
Critics Of The FI/RE Movement
The main argument against the FI/RE movement is the “frugal” mindset many people subscribe to. The argument I commonly hear is people want to live their life to the fullest while they are young. They want to spend their money on things that make them happy – like cars, trucks, boats, trips, food, because they won’t be able to enjoy them in the same fashion when they are elderly.
The problem with this mindset is the majority of the time they are not spending their own money on these things they love. They have loans on their vehicles, they have credit card debt, and they spend more than they make. Their lifestyle is not sustainable and they will be working into their late 70s. The frugal mindset is not about cutting every enjoyable thing out of your life. It’s about finding what you truly value in life and budgeting for it.
It’s about spending responsibly and spending your money intentionally.
Yes, at times you will need to delay your desire for immediate satisfaction by not buying that large HD TV you don’t have the cash for. However, it’s not about cutting the idea of that TV from your life. It’s about saving up and paying for it with your own cash – not the banks. The necessity for immediate gratification is causing so many issues in America.
Most of those toys you enjoy – you could still have some of them if you saved up! Be honest, much of what you have bought sits in the garage or in closets and you rarely use it. This movement is about strongly considering purchases so you don’t waste your time at a job you may hate, for something you’re not going to care about in a year.
Telling Your Money Where To Go
As you have heard in several of my previous posts – I do not have a lot of fancy extras. I don’t have new vehicles, cable, boats, big TVs and many other things people consider important in our culture.
I do spend money though, actually quite a bit.
I spend my money on vacations with my family. We go on several vacations each year – more vacations than most people because I defer extra money into a vacation savings account rather than buying toys. For you, toys may be more important than vacations – it’s about prioritizing what is important in your life and telling your money where to go.
It’s also about investing. I invest about 25% of my income (pretax) and live off of the rest while I pay down my mortgage. The less I eat at restaurants, the more goes towards the mortgage. It’s about making intentional choices about what is important to achieve my goals! This is why I am able to do what I do, and how I will be able to reach FI/RE by the age of 41.
My Hope And Passion For You
This is why I have created this blog. I have such an excitement inside of me knowing how close my goals are, and how I am protecting my family. I didn’t know what I was creating when I started this blog, but I take a huge amount of pride knowing many of you read my words and are working on freeing yourself from the chains of debt. I want nothing more than for you to experience the financial freedom that comes with living and spending intentionally.
I have absolutely no doubt you can destroy your debts and get out of the hole you are in. It all starts when you stop digging – I hope that day is today! I don’t care how old you are, it’s never too late to start. I read stories daily of people who reached FI/RE in their early 30’s and I’m envious of them. Granted they didn’t make the stupid money mistakes I did when I was younger, but there will always be someone who is better than you financially.
The goal is for you to be in a better position tomorrow than where you are today! For more information, check out some of my related articles: The Debt Payoff Playbook and Simple Steps To Start Your Debt Free Life!
You can do this my friends and I will be here with you through your journey. Please do not hesitate to reach out for advice or if you need me to cheer you along! Leave a comment if anything here resonated with you or if you have something to add that I missed.
In addition, please add your email to the bottom subscription so we can keep in contact if you miss some of these posts. Finally, you’re awesome – if you put your mind to it I have no doubt you will find that financial peace you are looking for. You work too hard to be this broke!
-Ryan
