The FIRE (financial independence, retire early) movement is a programme of extreme savings and investments that allows people to retire far earlier than a traditional pension plan allows for.
This is according to JustMoney.co.za.
The FIRE movement is said to be popular among Gen-Z as well as young professionals and can be seen being referenced to on social media platforms like Instagram, TikTok, and YouTube.
At its core, the FIRE movement is to achieve financial independence by getting people to save and invest generally 50% to 70% of their income, which will allow them to stop working earlier than the traditional retirement age of 60 or 65.
According to JustMoney.co.za, once people have built up a substantial financial cushion, they can pursue new passions and career paths without the pressure of having to earn a salary.
Sarah Nicholson, operations manager of JustMoney.co.za said that many young people are attracted to FIRE’s promise of freedom and flexibility.
An in-depth youth insights study by Flux Trends and Student Village found that among respondents, Gen-Z members plan to retire, on average, at 52 years, while 27% want to retire at age 45 or younger.
However, these retirement goals are not achievable for most people in the country.
“Youth unemployment is extremely high. Those fortunate enough to have a job often subsist from month to month. There’s very little money left in their budgets for saving, let alone building up a substantial investment fund,” Nicholson said.
“Following the FIRE method is easier if you have a good education, a substantial salary, and no dependants.”
The FIRE movement offers valuable lessons that you can use to design a better financial future for yourself and your family.
Here are some FIRE movement tips to help you take control of your finances:
Boost your financial literacy
Improve your financial literacy by learning more about money matters so you can make informed decisions about how to spend, save, and invest.
You can read books, follow financial blogs, listen to podcasts, and engage with the FIRE community on social media to keep learning and stay motivated.
Create a detailed budget
Monitor your income and expenses carefully. Having an understanding of where your money goes is the first step that a can help you identify where you can trim costs.
Save and invest aggressively
You should save and invest a considerable portion of your income. Setting up automatic transfers into a savings account can ensure consistency.
Build an emergency fund
Ensure you have robust savings that can cover three to six months of expenses. This safety net will stop you from dipping into your investment portfolio when you are in a financial crisis.
Live below your means
Adopt a frugal lifestyle by making small lifestyle changes like buying second-hand items, rarely eating out, doing your own home repairs and car maintenance or sharing accommodation.
Maximise your income streams
Look for ways to earn extra income through side hustles, freelancing, or skills training to get a higher-paying job.
Invest wisely
Focus on low-cost, diversified investment options. You should consider a balanced portfolio that aligns with your risk tolerance and long-term goals.
Minimise your debt
Be cautious about taking on debt, and pay off high-interest loans as quickly as possible.
Take care of your assets
Assess your risks and research appropriate insurance that suits your needs.
Track and adjust
Review your financial plan regularly so it can take into account changes in your lifestyle like marriage, divorce or buying a new car. According to Nicholson, it is important that you stay flexible and that you can adapt.
Plan for healthcare
Healthcare costs can be significant, especially if you retire early and lose employer-sponsored medical aid. Select a medical aid package and gap cover that suit your needs and budget.
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