Nov 9, 2018 2:00:46 PM

FIRE: Financially Independent, Retire Early

Topics: Mortgages, NZ Mortgage Adviser, Retirement, Early Retirement, Debt-free, Mortgage-free 0

The latest buzzword to hit the finance streets: FIRE. It stands for “financially independent, retire early” and is a philosophy inspired by a wave of millennials who are no longer content to amass wealth by traditional means or wait to retire at age 65. In simple terms, FIRE means living frugally while saving most of your income. Sound crazy? Perhaps not.

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Finance and philosophy
At first glance, the principles of FIRE may sound a little delusional, even quite extreme and they’re by no means for everyone! But for many, FIRE is a way of life that lets you cut your expenses, maximise your savings, and ultimately reach financial independence at an early age.

Extreme frugality
When it comes to saving, FIRE adherents practice extreme frugality, striving to save more than 50 per cent of their income while following the FIRE principle of “simplifying and redesigning lifestyle to reduce spending”.

What that means is finding opportunities to cut back on spending and earn more income in order to reap the rewards later on. For example, to cut down on commuting costs, you could take advantage of living in a bike-able city and ride to work, which has an added health benefit. Or learn to cook healthy meals so you’re not tempted to eat out or buy take away meals.

Fire up savings
As well as saving a large portion of their income, FIRE adherents look for extreme ways to aggressively grow their savings and take advantage of bonuses in the form of points or even cash.

For example, signing up for a credit card and hitting the minimum spend in order to claim the bonuses like air miles or cash. Or pre-paying large expenses like insurance to earn a pre-payment discount. Investing money in property is another way to grow savings – rental properties or holiday homes that pay for themselves.

Take a closer look
It’s not uncommon for FIRE adherents to retire in their 30s or early 40s, at a time when most people are pouring more and more resources and time into their careers. Of course, living a FIRE kind of lifestyle isn’t for everybody and being an extreme saver isn’t always possible.

But, if FIRE sounds like something you’re interested in pursuing, here are some things you can begin doing right now:

1. Figure out an extreme savings rate that works for your lifestyle and begin a strict saving regime.
2. Use a simple low-cost investment strategy to quickly grow your savings.
3. Pay off your mortgage early and get rid of all your debt.
4. Decide where you can make sacrifices… do you really need a car or could you bike to work instead?

If you’d like to talk to someone about growing your savings and cutting back on your debt, get in touch with one of our mortgage advisers.

For more tips on buying or selling property, securing the best home loan rates, and insurance and savings advice, follow Mortgage Express on Facebook or Twitter


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