usually But most of the employees in the corporate sector are not happy with their jobs. If the office environment is not good, then it is quite challenging to remain in the job till the age of 60. Want to leave the job, but are unable to because they are dependent on it for their livelihood. But there will be some people around you who talk about early retirement. You too can retire early. At present, FIRE strategy for early retirement is becoming quite popular. By following this strategy you can retire even at the age of 40. Let us know how this strategy works?
What is fire strategy?
The FIRE strategy is one way to achieve early retirement. It has 3 main principles. First- Start saving 50 to 70% of your income. Second- Reduce your expenses and show financial discipline. Third- Invest your savings at the right place. That means save more, spend less and invest your money wisely.
How much money is needed for early retirement?
You need to know how much money you should have to retire early. You need to know what your monthly or annual expenses will be after retirement. Now how to know this? There is a thumb rule for this. This is the 4% rule. Suppose you retire with an amount of Rs 5 crore, then according to the 4% rule, you can use 4% of the Rs 5 crore every year. It will cost Rs 20 lakh. You can also reverse it. 4% upside comes to 25x. That means your retirement corpus should be 25 times the amount that you will withdraw in the first year. Suppose you need Rs 15 lakh as expenses in the first year of retirement, then 25 times that amount comes to Rs 3.75 crore. That means you should have this much money at the time of retirement.
put your money in the right place
To achieve early retirement, you will have to invest as much as possible. Invest your money in a place where you get good returns in the long term. The sooner you start investing, the bigger the fund you will be able to create. In developed countries like America, people use low-cost index funds or exchange traded funds. In India too, index funds and ETFs are becoming bigger. You can get higher returns than the benchmark here.
These tips will be useful
Earn more and increase savings: You have to save 50 to 70% of your salary every month. However, in this era of inflation, it may not be possible to save half of the income. But savings should be as close to this level as possible. It is best that we think about increasing our income. For this you can also do part time job. You can change your job for a better salary. Also upgrade your skills. Look for other income sources along with job. You can earn passive income from dividends from shares, interest from FD, blog income, monetization of YouTube channel, property rent etc.
Reduce expenses like this: Drive an old car instead of a new one. Use public transportation. You can rent a house instead of buying it. Make your own food. Reduce restaurant expenses. Avoid credit card loans. In this way you can save more money by reducing your expenses.
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