A New Movement FIRE

Maybe you are aware of a lifestyle called FIRE - financial independence retire early. Their goal is to retire at 40.
I recently learned about this movement and have spent some time reading what it espouses. You might find FIRE worthy to explore as it will help you review your spending and ultimately give you more money to invest.

From the blog of Mr. Money Moustache:
FIRE is simply about making smart decisions with your spending so that you waste less money. This means that you have way more money available to work with.

Living with less may test your definition of happiness.

Happiness is your goal in life, and it comes from meeting certain core Human needs. The thing is, that there are many ways to meet each of these needs – some of them free and some of them shockingly expensive.

For example, improving your physical health is one proven way to be happier. But you can accomplish this with a $2500 per month personal trainer or a $100 set of barbells from Craigslist. Same happiness, vastly different cost.

And as it turns out, there is a similar hack for every single one of life’s major expenses. You can meet all your needs at little or zero cost – it just takes a bit of skill. At this level, you would be able to save almost all of your income.

Or, you can substitute a bit more money and a bit less skill to meet those needs in an (only slightly) more efficient lifestyle, like the one I try to lead. This might allow you to save half or two thirds of your income.

Or, you can spray money in every direction randomly, trying to meet an unfiltered list of wants and needs, and end up with a random but very expensive life, while remaining almost broke throughout the entire thing. This is what most people do, and it leads to saving almost none of your income.

Reading the blog could bring you insight and reinforce some of your financial goals. Leading a meaningful life, caring about yourself and others tends to bring satisfaction. I believe in balance in all things.

When a client asks "do I have enough money to retire?" I respond: "please tell me when you plan to die." Not knowing when you will die, how long your good health will last, puts us all on notice to live every moment; to be present.

Be $ Smart - Learn new skills as what FIRE offers. Toss old habits that haven't worked. Find fulfilling work through your job or as a volunteer. Follow the three S's - spend, share, save. Retirement will come, eventually.

The Tortoise and the Hare - $ Version

So many folks postpone saving for retirement "until I get on my feet". That day can be very illusive! Below is an example of how starting early gives you a head start towards a winning goal. ($5000 a year breaks down to $416.66 per month or $96.15 per week.)

Angie, age 30, decides to begin saving for retirement this year. She invests $5,000 a year and earns a constant 6% return. After ten years, she stops making contributions but lets the money remain in the investment, earning 6% annually, for her retirement at age 65. Dave, also age 30, does not begin to save for retirement until ten years later when he is 40 years old. From age 40 until age 65, he contributes $5,000 annually, earning a constant 6 percent return.

By the time Angie and Dave reach age 65, Angie will have invested a total of $50,000, while Dave will have invested $125,000. Intuitively, one might assume that Dave will have accumulated more. However, in 35 years, Angie will have a total of almost $225,000; Dave will have accumulated just less than $195,000.

Accumulated Amounts
Angie—$5,000 annual contributions for 10 years;
$50,000 total contributions
Year 1 $5,300
Year 5 29,877
Year 10 69,858
Year 11 Contributions cease
Year 15 93,486
Year 20 125,005
Year 25 167,419
Year 30 $224,045

Dave—$5,000 annual contribution beginning in year 11 for 25 years;
$125,000 total contributions
Year 1 $0
Year 5 0
Year 10 0
Year 11 Contributions begin
Year 15 29,877
Year 20 69,858
Year 25 123,363
Year 30 $194,964

The numbers in this chart assume all contributions are made at once at the beginning of each year; 6 percent interest is calculated and applied at the end of each year. Source: WebCE

The secret is compound growth over time. Dave put aside $75,000 more than Angie but had fewer years of the money building on itself - compound growth.

Be $ smart, start saving early!