Are you also tired of the daily 9-to-6 job and are troubled by every order of the boss. Do you also want to retire at an early age and live a free life, If yes, then the FIRE model can be a magical formula for you. This is the best way to get financial independence and early retirement.
What is this FIRE model
The name of this miraculous formula is FIRE. Its full name is – Financial Independence, Retire Early, i.e., Financial Independence and Early Retirement. This is such a powerful financial plan in which you earn and save so much money in your youth that you do not need to work for the rest of your life. The most special thing about this model is that your retirement age is decided by no one else but yourself. Your goal can be to retire at the age of 45, 50, or 55 years. Once you decide on your retirement goal, called the ‘FIRE number’, the whole game is to achieve it.
30X Rule of Success
Now the question arises, how much money is needed to fulfill this dream? According to financial experts, you have to save at least 25 to 30 times your annual expenses. This is also called the ’30X rule’.
For example, if your annual expenditure is ₹5 lakh, then your target will be 30 times ₹5 lakh, i.e., ₹1.5 crore. The day you have this much money in the form of investment, you are ready to retire early.
Savings and Investment
If the goal is big, then you have to work harder. According to the FIRE model, you have to save 70 to 75% of your income and run all your expenses in the remaining 25-30%. This may sound difficult, but it is not impossible. For this, you will have to rein in unnecessary expenses.
Just saving money will not work. You will have to invest that money in a place where it grows rapidly. For this, you can invest in SIP in mutual funds, the stock market, or any other good scheme. The purpose is that your money also works for you and helps you reach your goal.
Increasing income is also very important
If you feel that you will not be able to save so much with just your salary, then do not worry. Increasing your income is also very important for this model. You can start a side business, do freelancing, or find a job that pays more. The more you earn, the sooner you will be able to achieve your goal.
Does the FIRE model work in India
Absolutely, this model works perfectly in India too. For this, you will just need a lot of discipline and smart financial planning. Here, it is very important to make a plan keeping in mind the inflation rate. If you cannot save 70%, start with a smaller target. Try saving 30% first and gradually increase it. Also, focus on ways to increase your income.
Benefits and Risks of the FIRE Model
Once you achieve your FIRE number, there is no compulsion to do a job. Your investments will keep bringing in so much money that all your expenses will be easily met. After this, you can do everything you have always dreamed of.
However, there are some risks in this too. The biggest risk is market fluctuations and sudden inflation. Apart from this, any major medical emergency can also affect your plan, so it is very important to have good health insurance.