What Is FIRE & What Are The Habits Of Financially Independent People?
January 11, 2022
FIRE stands for Financial Independence, Retire Early. That’s a dream come true for most Millennials who saw what turning work into a passion did to their parents. Those 12-14-hour workdays can mentally, physically, and socially take a toll.
Instead, the current paradigm returns work to its original meaning: something you have to do to obtain money for what you actually like.
Imagine being 50 and spending your days working out, travelling, reading, dancing – and whatever else fulfills you. Imagine spending as much time as you want with your friends and family.
Financial independent people can do that.
Read the article below to find out the habits you can adopt today that will bring you closer to that dream.
1. Do Some Side Hustle
A side hustle is something extra you’re doing along with your job to get more money. There are two types of side jobs depending on the amount of work you’re putting in them:
- Something that feels like more work. You can include anything that you wouldn’t normally do in this category but gains you more money. Basically, we’re talking about another part-time or full-time job, and it can be anything you can imagine: mowing other people’s lawns, freelancing as a web designer, tutoring, and so forth.
- Something that doesn’t feel like more work. For example, if you like taking photos with your iPhone, consider selling them on Shutterstock. Another option is dog walking; if you already have a dog or like hiking, take a couple more pups with you. And the list can go on.
2. Invest Your Money Wisely
These investments aren’t necessarily side-hustles, though they require some amount of effort – at least in the beginning. But luckily, they’ll demand much less work as your endeavours gain motion.
Financial independent people all have some passive investments. Here are some examples:
- The classic investment portfolio. Once you’ve saved some money, think bigger than a mere saving or deposit account. Starting an investment portfolio is easier today than ever because you have plenty of online resources and intuitive apps. Thus, you can choose the right mix of stocks, bonds, ETFs, or REITs, depending on your risk appetite.
Pro tip: If you don’t have enough money to start an investment portfolio, GS Credit can help you get started with the most convenient financial solutions.
- An e-book. If you have the experience that counts, you can write an e-book. You can write a children’s book, a leaflet that would help others pass their driver’s test or even a cookbook. The world is your oyster, and of course, you will have to do some work first, but you’ll soon reap the benefits.
- A website. Invest your saved money in a website that brings you advertising revenues or even sales. You can create your website based on your interests – although that sounds more like a side hustle initially. Alternatively, you can invest in one of your friend’s business ideas – for instance, a publishing house that translates B category crime novels.
Those are just a few ideas of what you could invest your money in, but the list is practically endless. However, the main idea that should stick with you is this:
If you want to become financially independent, you need to consider different investment opportunities and put your savings to work.
3. Improve Your Schedule
You may not realise this, but most people waste a lot of time each day. Of course, we’re not talking about the time spent resting, playing sports, or eating dinner with your family.
However, like most Singaporeans, you do waste about two hours per day on social media. You also lose significant periods while vacuuming by hand or doing your finances manually.
The solution is simple.
Make a “time budget”.
You should monitor and write down all the activities you’re doing within a day. Then, eliminate unnecessary actions to make room for useful ones.
- Instead of looking at cat pictures on Instagram, try following a few financial advisors to improve your knowledge in this area.
- Start using a financing app to monitor your budget instead of manually calculating your expenses and income.
- Read at least one book per week to learn new things.
- Use one hour per day to hone a skill you’ll need in your career or side hustle.
- Start exercising; you need to be energetic and healthy to find solutions for financial independence.
4. Improve Your Financial Habits
If you strive to FIRE, you need good financial habits. That means:
- You should keep a monthly budget, monitoring your income and expenses. Don’t leave anything to chance and minimise unnecessary costs as much as possible. Review all of your purchases to identify dangerous or useless spending patterns. Then, cut these patterns down from their roots.
- Make a savings account. You’ll need to put aside at least the income for six months in this savings account. In case of an emergency, like the unexpected COVID pandemic, an accident or work redundancy, you’ll need that money.
- Start investing. Save some money that you’ll use for investments each month. For example, some sources point out that REITs are very popular in Singapore, but you can also invest in other tools.
- Start learning. Use your budget for educating yourself. Many people may consider that mentorship programs or online courses are scams; however, genuinely valuable resources will enlarge your horizons and help you progress faster than you’ve ever imagined. As such, investing in your education is money well spent – and that’s the secret weapon of many people who’ve reached financial independence.
- Pay yourself first. These savings we’ve discussed above don’t have to come last after other expenses. Instead, try prioritising your savings to have more money that will work for you. That will save you from many other unnecessary expenditures in the long term.
Let’s take this example. You’re earning $3,000/ month net salary – and that doesn’t sound like much. When you usually draw the line at the end of the month, you’re left with maybe $100.
- The first step is to make a budget. Cut these expenses if you notice you’re spending too much money on gas or take-out food. You can save $500-$1,000/ month just from unnecessary costs if you’re careful.
- Use a third of that money to start your savings account. You’ll need about five years to have that emergency fund ready, but it will be worthwhile.
- Use another third of your saved money for investing. Most dependable investments in Singapore bring you 2-7% interest. If you’re allocating $300/month for your investments, you can earn $77,000 or more in twenty years.
- Use the last third for your education. That education will help you land a better paying job, start a more lucrative side hustle or make better investments. As such, education will help you double or even triple the income you’re gaining otherwise. That’s how you become financial independent faster.
Becoming financially independent allows you to enjoy your life to the fullest because you’ll have time to follow all of your passions and do what truly makes you happy.
Of course, you’ll need to work towards this goal.
The start will be particularly challenging because you’ll have to learn how to live on a budget, look for investment opportunities, and learn more things. Alternatively, if you want to decrease the amount of time and effort towards your financial independence, reach out to GS Credit.
Our personalised financial assistance will give you the right momentum on your way to reaching FIRE. Calculate how much you can borrow here.