Financially Independent Retire Early (F.I.R.E.)

According to Nerd Wallet, “Financial Independence Retire Early (FIRE) is a lifestyle movement that prioritizes extreme saving and investing in order to retire earlier than traditional methods might allow.” It seems most of the research on this topic is related to investment strategies that involve the stock market in some capacity. But, that doesn’t have to be the case.

My sister and I grew up in a lower-income household where my father worked outside the home and my mother was a creative entrepreneur. Our parents knew nothing about the stock market. They barely managed to keep the wolf away from the financial doors. After they passed and I had a chance to look at their banking records before shredding, I realized just how little we had. Financial skills were not taught in my home growing up. So how did I learn F.I.R.E. to be able to retire at age 52. The internet helped, but in essence a single mom has two main ways of reaching F.I.R.E. I was a single mom for more than a decade. I worked hard and scrimped the financial edges at times. Here’s how to get the ball rolling…

PART 1: Fear and preparedness

When I became a single mom again, I realized that I needed to learn to stand on my own two feet. No one would “rescue me”. This included financially. I started thinking about my 11-year-old and wanted to make sure she would be well protected IF I lost my job, IF the economy tanked, IF I had a medical emergency. A persistent question emerged…

Do you have enough money to cover ONE month of expenses? No

So, I opened a secondary savings account and started filtering little bits of money into that account. The amount you filter into this “emergency” account will depend upon your circumstance ($1/month, $50/month, $100/month). Regardless of the amount of money you filter into the separate account, you must start thinking of it as “emergency use only”. When I reached my one month goal, I first congratulated myself, then worry set in and I began to think…

What if I get injured and need to be out of work for 3 months?

So, I took my one-month of savings and put it in a high-yield savings account. With fear nipping my heals, I began filtering into that account. Three months, three months, protect my daughter with three months.

PART 2: Budget awareness and management

You will never reach financial independence if you cannot control your spending. No, you don’t have to start accounting for every penny of your life (there are apps for that), but you do need to understand your habits and then mildly tweek those habits. You need to know and be able to recite to any friend How much are my monthly bills? Do not stick your head in the sand. Identify the exact amount you need every month, even if you are robbing Peter to pay Paul. Monthly bills include housing, utilities, medical, and other routine bills. Once you learn the exact amount of monthly bills, you can start thinking about Discretionary expenses. These are all the other things you spend money on that can be tweeked in little amounts. Discretionary expenses may include groceries, gas, subscriptions, eating out, and a multitude of vices (tobacco, alcohol, caffeine, gambling). If you track these discretionary expenses for one week or one month, you may get a general idea of the money that slides out the door. If you track the discretionary expenses for 3-6 months, you will have a marvelous idea of money you can adjust and push in a different direction. Something as small as making 1 lunch per week and not eating out can have a snowball effect toward F.I.R.E

Financial Independence will look very different for every person out there. For me, I simply wanted to be able to buy a fancy coffee whenever I had the urge. By using my fear of not having enough money saved as a motivator, then starting to tweek my budget, I was able to grow my financial resources. When I reached the financial cushion of being able to buy a coffee at will, I also realized that I had a beautiful emergency savings account. I no longer worried if the dryer stopped working. The car needs new brakes? No problem. My emergency fund had me covered. This single mom created a stable, independent life for her daughter and eventually had a 6- month cushion for emergencies.