Anyone seeking financial freedom to retire early or FIRE knows that many options exist to save and invest money. Today I’m excited to share with you 16 ways to help you reach FIRE faster!
The question is, what’s the best way to go about it? The problem is that there’s no one-size-fits-all answer, as the best method depends on each person’s unique circumstances.
That said, there are still some critical steps that can help anyone on the path to FIRE.
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Table of Contents
1. Decide how early you want to retire
At what age do you want to be financially independent? Are you talking about retiring at 40 or maybe 60? The answer to this question will play a big role in determining how much you need to save and invest.
This is the first question you must ask yourself, as it will shape the rest of your FIRE journey.
There are different ways to calculate how much you will need for retirement. You can check out the other articles I’ve written describing the 4% rule and the 25x rule when considering retirement.
Related Content: Coast FIRE: The Easiest Way to Join the FIRE Movement
2. Take into account your cash flow and how much you owe
FIRE isn’t just about saving money – it’s also about ensuring your cash flow is positive. That means you need to consider how much you earn, how much you spend, and how much debt you have.
For example, if you’re earning a high salary but have a lot of debt, it will take longer to reach financial independence. The problem with debt is that it can be like a weight around your neck, dragging you down and preventing you from making progress.
In our other article, How We Save 56% of Our Income [Family of 3], we share why it’s essential to keep healthy cash flows when buying real estate.
3. Consider your investment options
Once you have a handle on your cash flow and debt situation, it’s time to start thinking about investing. Investing allows your money to work for you and grow over time.
There are many different options, so it’s important to research and find the right ones.
If you’re young, don’t be afraid to take some calculated risks. My wife and I purchased our first real estate property in our early 20s while still attending college. We learned many valuable lessons and were able to later turn it into an investment property that brought in passive income.
You might want to focus on more stable investments if you’re older. Adjust your investment strategy to your age and willingness to take on risk.
4. Automate your finances
One of the best things you can do to reach FIRE faster is to automate your finances. Set up automatic transfers from your paycheck into your savings and investment accounts.
This will help you make headway on your goals without even thinking about it. Automation is key to achieving financial independence because it takes the emotion out of decision-making.
You also want to ensure that you automatically invest your money in the right places. You can do this by using a service like Betterment or Wealthfront.
5. Live below your means
One of the most important things to remember to make the path to FIRE faster is that you must live way below your means. This doesn’t mean that you have to live like a monk – but it does mean that you need to be mindful of your spending.
Seriously consider your every purchase and ask yourself if it’s something that you need. A lot of people find that they can save a ton of money just by making small changes to their spending habits.
If you don’t need it, don’t buy it. Of course, that’s easier said than done if you have kids or other financial responsibilities, but it’s still something to keep in mind.
Related content: 15 Frugal Living Tips to Save a Ton of Money
6. Keep your expenses low
How is this different than living below your means?
Well, living below your means is more of a general principle. Keeping your expenses low is specifically about finding ways to reduce the amount of money you spend each month.
There are many ways to do this, but one of the most popular is downsizing your home. Moving into a smaller house or apartment can save you a ton of money monthly on rent or mortgage payments, utilities, and more.
7. Make extra money
Of course, saving money isn’t the only way to reach FIRE faster. You can also make extra money to help you reach your goals faster.
There are many different ways to do this, but one popular option is to start a side hustle. This could be anything from driving for Uber to starting a blog to selling products on Etsy.
The key is finding something you’re passionate about and can do in your spare time. Making a few extra hundred dollars each month can significantly affect how long you reach FIRE.
An excellent way to increase your PASSIVE income is by renting out extra space! With NEIGHBOR, you can easily rent out extra space, such as your garage, self-storage unit, rooms, etc.
8. Go back to school and further your education
No matter where you are in life, there’s always room for further education. Returning to school or picking up a new skill can help you get a better job and make more money.
This doesn’t mean that you need to get a Ph.D. – but taking some classes or getting a certification in something can really pay off.
The goal is to make yourself more marketable and increase your earnings potential. If you can do that, you’ll be well on your way to reaching FIRE faster.
You need to make yourself irresistible to potential employers. Plus, your current job might pay you more if you have more education.
9. Get rid of your debt
To retire early, you must get rid of your debt. We’re talking every last penny – credit cards, student loans, mortgages, car payments, everything.
The reason for this is twofold. First, debt is a massive weight around your neck. It’s emotionally and psychologically draining.
Second, debt costs you money. The interest payments on your debt could go toward your retirement.
The more money you spend on interest, the longer it will take you to reach FIRE. So, if you’re serious about retiring early, you need to get rid of your debt and begin living a debt-free life.
You can always try out the debt snowball method. We used this debt payoff strategy to repay 56,000 in student loans quickly.
10. Put as much money as you can in your retirement accounts
Of course, you want to do this after paying off your debts!
There are tax benefits to doing this, which we’ll discuss briefly. But the most important thing is that you’re putting your money towards your future.
The more money you can put into your retirement accounts, the better. This will ensure you have enough money to live comfortably when you retire.
The best retirement accounts are 401(k)s and IRAs. If you can, you should max out your contributions to both of these every year.
By maxing out your 401(k), you’re putting $18,000 away each year. And if you have a company match, that’s even more money you’re getting for free.
With an IRA, you can contribute $5,500 each year. And if you’re over 50, you can contribute an extra $1,000.
If you can swing it, maxing out these accounts each year is a great way to reach FIRE faster.
11. Reduce your tax burden as much as possible
You’ll need to hire a good accountant to do this. But there are a lot of different ways to reduce your tax burden.
This could be anything from taking advantage of tax breaks, setting up a home office, and deducting your business expenses.
The goal is to keep as much of your money as possible and to have less of it go towards taxes. The less you’re paying in taxes, the more money you’ll have to save for retirement.
You don’t want to cheat on your taxes, of course. But there are legal ways to reduce your tax burden. And you should take advantage of them if you can.
If you do your taxes, ensure you take advantage of all the deductions and credits you’re entitled to.
12. Consider relocating to a cheaper area
This isn’t for everyone. But if you’re serious about retiring early, you might want to consider relocating to a cheaper area.
Moving to a cheaper area will reduce your cost of living and free up more money that you can put toward retirement. We’re talking about lower mortgage payments, cheaper groceries, and lower utility bills.
If you work remotely, this is an especially good option. You can live anywhere in the world and still work from your laptop. The only downside is that you might have to say goodbye to your current lifestyle and social circle.
13. Take good care of your health
Your health is one of your most important assets. The healthier you are, the less money you’ll have to spend on medical bills.
You’ll earn more money now if you’re healthy and can work longer hours. And you’ll have more money in retirement if you don’t need to spend it on medical bills.
If you can be healthy when you’re young, you’ll be more likely to stay healthy in retirement. So, take good care of your health now, and you’ll reap the rewards later.
You’ll also save money once you retire if you’re in good health. That’s because you won’t need to buy as much insurance.
14. Invest every cent that you don’t spend
Any money left over at the end of each month should be invested. Let’s say that you budget yourself $300 a month for entertainment.
But at the end of the month, you only spent $200 on entertainment. That extra $100 should be invested. You might think the $100 is meaningless, and you can let it sit in your checking account.
But that’s not true. That $100 can grow into a lot of money if you invest it. Toss that $100 in a rising tech stock and let it sit for a few years. You’ll probably get a better return on your investment than letting the money sit in your savings account.
One way you can increase your savings and investments is by mico-investing.
ACORNS is a popular platform that can round up money from purchases and automatically allocate those funds to diversified investments.
You can check them out today and receive a $20 bonus investment!
15. Don’t be afraid to make changes
If you’re unhappy with how things are going, don’t be afraid to make changes. That’s true in both your personal life and your financial life.
If you don’t like your job, quit and find something else. End it if you’re in a relationship that’s not working out.
If you’re not happy with your current financial situation, make changes. That could mean getting a better-paying job, finding a cheaper place to live, or investing more money.
Whatever it is, don’t be afraid to make changes. Life is too short to be unhappy. And you’re in control of your own happiness.
Although easier said than done, you can start making baby steps today toward meaningful change.
16. Don’t let your emotions get the best of you
Your emotions can lead you astray, especially when it comes to money.
Don’t make financial decisions based on your emotions. That’s a surefire way to lose money.
For example, don’t sell all of your stocks when the market is crashing. And don’t buy stocks just because everyone else is buying them.
Investing is a long-term game. You need to take a long-term view if you want to be successful.
You’ve Got This!
So, by now you should know how to retire early. It’s not easy, but it’s possible. You need to be disciplined with your money and make smart financial decisions. Try focusing on one or a few tips in this article to help you reach FIRE faster.
You begin by assessing your current financial situation and setting some goals. Then you need to create a budget and start investing your money.
You should also make sure that you’re taking good care of your health. That way, you can stay healthy and work harder. The harder you work now, the faster you’ll get to enjoy FIRE.
Please comment below with ways you’ve been able to gain control over your finances and speed up your financial freedom journey!
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
