What is FIRE Strategy For Early Retirement: Explained

FIRE or 'Financial Independence, Retire Early' movement has gained traction in recent times. The movement encourages people to save more, invest more, and spend less, so that retirement age can be cut back from traditional 60-65 years. This model has become particularly popular among the millennials, gaining traction via online platforms such as blogs, podcasts, etc. The objective is to accumulate enough assets until the passive income from these assets generate enough active income. While there is a key threshold to achieving financial independence, there are different variations to FIRE. Traditional FIREThis is the stringent approach where individuals aim to save 50 percent of their income.Lean FIREIndividuals have to reduce their expenses drastically by living in cheaper areas, and minimizing miscellaneous spending. The investments are also low, and savings are high.Fat FIREThe idea is to live a life of luxury after retirement, contrary to traditional principles of saving. While savings are paramount pre-retirement, the retirement corpus remains higher than usual.Coast FIREThis strategy focuses on living a basic lifestyle after retirement after building an investment portfolio which should grow via compound interest. In the second step investing can be slowed or stopped. The individual coasts towards retirement by maintaining a lower paying job.Barista FIREIt is for poeple who want to partially retire before they actually retire. It implies switching to a less demanding or even a part time job. The individual prioritises early retirement with a small saving, but the individual will take up part time work like working as a barista.The advantages of FIRE include financial independence, reduced stress, and more free time, while the disadvantages include lifestyle sacrifices when young, market fluctuations especially inflation, unforeseen expenses like medical emergencies, among others. FIRE has been criticized by some people as well, given that large investments require large sums of money to begin with.

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What is FIRE Strategy For Early Retirement: Explained

The movement encourages people to save more, invest more, and spend less

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