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4 FIRE Movement Tips You Can Get Behind

These four FIRE movement inspired tips can help you reach your financial goals: track your spending, calculate your savings rate, automate your savings, and consciously spend.

Articles by Bobby Glotfelty
By Bobby Glotfelty Investment Advisor Representative, Betterment Published May. 05, 2020
Published May. 05, 2020
3 min read

The FIRE (Financial Independence Retire Early) movement is a financial and lifestyle movement of individuals who generally take extreme measures of frugality, saving and investing with the goal to become financially independent and retire early.

Although many of the strategies used in the FIRE community may seem extreme, there are lots of tips you can implement to help get yourself closer to financial independence and retiring early.

Below are my top four FIRE movement tips that you could start using today.

Start saving

1. Track your spending.

Tracking your spending is one of the first steps you should take on your journey to FIRE. This exercise can help you learn more about where your money is going and provides clarity around spending issues you may have.

Tracking your spending for at least 30 days is recommended—however, the longer, the better.

There are many ways to track your spending: you can use a journal, a spreadsheet, or even apps.

Learning about where your money is going can hopefully provide you with the jumpstart you need to begin eliminating unnecessary expenses.

2. Calculate your savings rate.

Calculating your savings rate is important because it can give you an idea of how much money you’ll need in retirement. At the very least, you’ll know how much you can live off of now, which may be an indicator of how much money you’ll need in retirement.

A simple way to calculate your savings rate is calculating how much you saved (or plan to save) in a year divided by the amount you’ve earned in that year.

For example, if you were able to save and contribute $6,000 into a Traditional IRA and you make $50,000/year, your savings rate would be $6,000/$50,000, which is a 12% savings rate.

A great article that goes into the savings rate is Mr. Money Mustache’s The Shockingly Simple Math Behind Early Retirement. Also, here is a helpful savings rate calculator from the blog Millennial Money.

3. Automate your savings.

There are three main benefits to automating your savings:

  1. It’s a one-time set up process.
  2. It allows you to pay yourself first.
  3. It can protect you from unnecessary spending.

Automating your savings can help you avoid lifestyle creep and can keep you on track to reach your retirement goals.

For example, when you automatically contribute to your company’s 401k plan, that’s automated savings.

You can also set up automatic deposits from your checking account into other savings vehicles and investing accounts, like Betterment Cash Reserve, taxable accounts, or IRAs.

If you want to learn more about how to automate your savings, check out our recommended three most effective deposit settings.

4. Conscious Spending

The path to an early retirement is made up of two main components: your savings rate and conscious spending.

Conscious spending is figuring out what you value and then laying out a foundation for what you want to spend your money on.

Ramit Sethi does an amazing job describing this process through his idea of Money Dials: Why you spend the way you do. In short, figuring out what you value allows you to spend money on the things you care about, and stop spending money on the things that don’t add value to your life.

While some might say that the FIRE movement is extreme in its savings strategies, don’t let that discourage you from adopting healthy habits that can help you reach your financial goals.

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