For some years one of my main objectives in life is to get to the early retirement. That point where it does not depend on a salary, my activities (paid or not) focus on research, teaching and put my grain of sand to improve our world. Where my heritage covers my needs and I can dedicate my time to everything I like and passionate, probably in some town on the coast where I can sow food and (why not?) Raise some animals. All this without even being 50 years old.
As it turns out that these plans have a name and movement, the Fire Movement (Financial Independence, withdraws Early) or financial independence and early retire : Time, energy and money. This movement challenges the traditional narrative of retirement in the elderly, proposing a simple but sensible alternative: it lives simple, invests and achieves financial freedom. But is it really viable for an average person? In this column I will explore the characteristics of the movement and its advantages for those who plan to start on this path.
Fire is a financial strategy that arises as a philosophy of life. Do you know the aikido? This Japanese martial art is based on using your opponent’s force to use it for their own benefit. Fire is the aikido From finance, use money so as not to require work for money, simple, right? This philosophy is based on aggressive savings, investments and the drastic reduction of expenses to accumulate sufficient heritage that allows you to live on returns.
How much should I save to give my fire?
There are financial “gurus” and “finfluencers” that indicate that the figure is 5, 10 or 20 million pesos. But the truth is that the figure is totally our control, what do I mean? To depending on our desired rhythm of life will be the amount that we must gather. And that is where it plays in our favor, to reduce expenses, which becomes a virtuous cycle, if we get used to a simple life, our expenses will be simple. Does this mean that I must act as in the extreme stingy program? Not necessarily, but opt for sustainability and intelligent consumption. You dictate the rhythm, whether you want a life of comfort and one more attached to simplicity.
In general, we have two simple methods to calculate our savings (to simplify I will not take into account inflation or investment of savings prior to retirement):
- For amount required – if I want to receive a monthly amount of 10 thousand pesos, assuming that the interest rate to which I will be investing in conservative instruments such as CETES, promissory notes or debt investment funds is 6% (remember that it can vary through of time, so it is better to make conservative projections), would have to save an amount similar to 2 million pesos. So my goal must be to these 2 million in time and with the rhythm that I decide.
- By % saving my income – I can choose to decide to save a percentage on my recurring income, then savings:
- 10% of my income will take 9 years to join a year of expenses.
- 20% of my income will take 4 years to join a year of expenses.
- 33% of my income will take 2 years to join a year of expenses.
- 50% of my income will take 1 year to join a year of my expenses.
Thus, when I simplify my expenses it is easier to generate greater savings, or failing that requiring a lower amount. In addition, retiring does not mean stop working, but stop depending on my income to guarantee my quality of life. Surely many of ours Almost for sure several of them will remain active when we start our Fire and provide us with a money entry.
Light my fire
Adopt Fire can radically transform our financial perception, within the main advantages I observe:
Freedom to decide: by depending on passive income, you can choose how to invest your time in the future, this opens a large range of opportunities to enrich our mind, do what we are passionate about and contribute to society.
Reduction of financial stress: Once independence is reached and under a rhythm of high savings, the income we will have will help us live very peacefully. Financial stress is a reality, according to the National Survey of Financial Health 2023 (Ensafi) published by INEGI, about 70% of Mexicans experience a moderate-high level of financial stress. This situation does not usually remain as feelings of frustration, anxiety or sadness in people, but usually affect physical health, with symptoms such as headache, insomnia, stomach and blood pressure problems.
Financial Education: Carrying out your Fire requires knowledge about personal finance, which fosters healthy habits such as planning, savings, investment and constant reflection on our needs.
In conclusion, if you want to start adopting this movement my suggestion is that you start establishing a high savings percentage while you reduce your expenses, increase your income or make both. Diversify your investments, opt for a balanced portfolio that includes ETFs, actions, bonds, real estate and even cryptocurrencies, according to your risk tolerance. Keep a sustainable lifestyle, adopt a simple rhythm, but without compromising your well -being. And finally, educate your financial mind, learn about investment strategies and optimization of your resources. Regardless of whether you are a student, professional or you are considering starting to invest, you can take your finances and your career to the next level.
In addition, consider the support of a specialist, seeks a financial mentor, this can support you with higher quality decisions to the extent of your expectations. So do not miss more time, the best time to start taking care of your future is today. See you in the next installment.
*Juan Carlos Cruz Tapia (@juancarlos.trader) is the author of the book 100 questions to understand investments and teacher of the banking and commercial school.
The opinions expressed are only the responsibility of their authors and are completely independent of the position and the editorial line of Forbes Mexico.
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