Reaching financial independence is best looked at as a game, a puzzle. There are all these little pieces everywhere, and your job is to get them into the right place. Only then the picture will be completed, and you can rest assured that your odds for a safe and free life have reached a comfortable point without worries.
This puzzle may look different for everyone, but if summarized into a few short key points, it would probably look something like this:
- Job & career
- Family & friends
Each of these points can have several sub-points and sub-topics which require consideration, but overall I would say that this is probably what most of our lives are about. The order of the points is not chosen by accident. This is, in my opinion, where a higher amount of focus should be distributed, when you start planning your own path to FIRE.
Health always comes first. No matter what you want to do, or what you like to do, or what you plan to continue doing – if your health drops so will all your plans.
A successful career or at least a stable job comes right after that because as we know, you need money to generate more money. Good or bad, our world is designed around money and without it, nothing gets done. So, in the beginning, you simply need to do your part and join the rat race. Without inheritance, a serious portion of luck in a lottery or casino, or any other completely uncommon circumstances, there is simply no other way. It is worth noting though, that pushing your career straight up quickly is a powerful method to escape the rate race significantly earlier. Simple logic: The more money you will have to save and invest, the sooner you can call it quits.
Controlling your expenses is on par with a career as the most powerful tool to reach FIRE. It doesn’t matter how high your salary gets, if you waste all that money on things that don’t matter, then you will have nothing to invest. In fact, it is probably one of the most difficult things to learn for the majority of people. You read all the articles about credit card debt? Education loans? Mortgage payments? How much money people spend on eating out, transportation, travel, parties, etc.? That’s right. You need to have control over your spendings, otherwise, all your efforts will be for nothing. Personally, I recommend to embrace and learn about a minimalistic quality lifestyle. More on this another time.
Balance is important, and things are not fun if we have no one to share them with. The goal for any FIRE aspirant is to have more freedom – and more time. But this freedom and this time are best spent by sharing with someone. Family and friends are an important pillar stone to keep your sanity, staying down to earth and to start appreciating all the benefits that life has to offer. It’s easy to neglect those ties when you focus on your career and try to keep your spendings at bay, but make sure to never let them tear apart.
Being prepared for emergencies is a very basic risk-control measure. All your hard earned money and all your savings can be eradicated in a glimpse when a sudden accident or incident will require you to pull out cash from your accounts. Basic insurance and a reasonable emergency fund will ensure that you can sleep well at night.
Savings & investments are a diversified topic. As my readers know, I favor the stock market. However, there are tons of other options for how money can be saved and invested. No matter how and where you start, just make sure you do it regularly. Make sure you get regular interest or dividends paid out. And make sure to re-invest those, to let the 8th world wonder of compound interest do its magic.
Home is on my last spot, for a simple reason. Home is a flexible concept for me. We all have our dreams, plans, and goals, and choosing a home can play a crucial role in your life. Repeatedly. What do I mean by that? Well, in the beginning, it might make a lot of sense to chose your home for a place where you can maximize your savings. Low tax, plenty of affordable shopping options and neighbors who don’t care about what type of car you drive really have a strong influence on your daily expenses, your lifestyle, and ultimately on how quickly you will be able to grow your nest-egg. Later, you might think more about a comfortable lifestyle, move to a tropical paradise or get back closer with your family. For a FIRE aspirant, buying a home is seldom a good investment and rather a loose and flexible concept.
Putting these pieces together and understanding what you want, how you want it and where to put your focus is the first step to understand who you are, what you want and how a realistic plan to get there might look like. Why not start thinking about it today?