The FIRE Movement and The 7 Pillars of FIRE
The FIRE movement is a movement that has started to gain traction over recent years. FIRE stands for Financial Independence Retire Early. It is a lifestyle that aims to give individuals control over their financial options by maximizing the basic tenants of financial literacy. Being a financial literacy enthusiast, it has been extended fascinating lately to discover what this movement is and how active its community is.
Originally, financial literacy to me was learning how to deal with your money. I teach financial education as a passion and helping people to understand the fundamentals of money management helps me feel like I'm making a contribution to my society. But this community takes it to another extreme. Now I'm seeing how basically earning a 'master's degree' in money management through FIRE ideals can actually afford you opportunities that would not have been thought possible until the traditional retirement ages of 60-70. It affords individuals the opportunities to live life on their terms and help others to do the same.
There are many podcasts that you can check out in order to discover more about the FIRE community including Inspire to Fire, Yo Quiero Dinero, and The Mad Fientist just to name a few.
One particular FIRE Podcast I've been listening lately to is Inspire to Fire with host Chris. He doesn't seem to have revealed his last name on the Internet for personal reasons. On his show, he invites guests who have achieved financial independence to let the audience know about their stories and how they were successful in their pursuit. The first episode I listened to starred Janesse Torres Rodriguez, the creator of Yo Quiero Dinero. Her episode was especially inspiring as it featured a person of color who achieved freedom on their own terms. The second episode I listened to was The Millionaire Educator (real name Gerry Born). While I liked the Yo Quiero Dinero episode, the Millionaire Educator episode absolutely floored me. Why? Because he became a multimillionaire on a teacher's salary.
As I write this, I'm still in shock. This is the quintessential case of resourcefulness. I highly recommend you check out that episode. I'll link the episode at the end of this article. In his episode, Gerry focused on a concept he created called The Seven Pillars of FIRE. While individually, the Seven Pillars of Fire were all financial concepts that I've heard before in other places, collectively I appreciate how they incorporate fundamental principles of money management in pursuit of a worthwhile life.
Tomorrow, I will be doing an Instagram live with my friend Joshua Jackson on the pillars at 6 pm Central. With that being said, in an effort to better study these principles and prepare for Instagram Live tomorrow, it makes sense for me to review these concepts. I hope you learn something along the way. These are really good refreshers for the tenants of financial literacy.
Pillar 1: Debt Avoidance.
To be financially stable or independent, you cannot have bad debt in your portfolio. This includes debt like credit cards or any high-interest loans. The interest that you pay while you are paying minimum payments or regular payments on these loans, inhibits you from directing your income and spending potential to wealth-building assets. You have to get rid of this debt as quickly as possible. I cannot stress this enough.
In order to eradicate bad debt and stay away from it, look into such strategies as the Avalanche method or the Debt snowball. These strategies will help you get rid of credit card debt as quickly as possible so you can start doing fun things and building wealth. Please stay away from credit repair agencies and balance transfers. You need to pay off your debts. It's that simple.
Not all debt is particularly bad. It's okay to have a mortgage or sometimes student loans as long as you have a plan to make it work for you and to leverage it for your financial success in the near future. Besides that, having and maintaining credit card debt will literally kill your financial future.
Pillar 2: Savings
It's really what it comes down to. The more you can save the more you can use that money for things that actually matter like emergencies or investments or building wealth. The more you save, the more you can grow. It's recommended to save at least 10% of your income but according to the FIRE movement. The goal is to save and invest up to at least 50 or 60% of your income. Either way, we all know the old adage: a penny saved is a penny earned.
While true, you are going to need a lot of pennies to get what you're trying to go. Start small and keep going.
Pillar 3: Frugal Living
The concepts of this pillar are simple: Do not spend more than you make. While the concept is simple the actual application of that can become difficult to implement. In order to live a frugal lifestyle, you have to be appreciative of where you are while being able to grow past your current state.
Frugal living is a mentality. Comparison in a negative sense will have you trying to keep up with other people and going out to restaurants and traveling when you should be really focusing on living a comfortable lifestyle now and into the frugal. The key to frugal living is an internal sense of happiness which is substantiated by gratitude. Be truly grateful for you what you have so you're not trying to fill the word with other things that you don't. I can talk more about this at length but like I said, gratitude will help keep you grounded so you're not trying to live above your means.
Pillar 4: Prudent Investments
I've written articles at length about investing and how simple it should be. Prudent is another word for wise. For me, wise usually means simple and potent.
One of my favorite quotes is:
I wouldn't give anything for the simplicity on this side of complexity but I will give my life for the simplicity on the far side of complexity - Oliver Windell Holmes
Keep your investing simple. Invest in index funds that track the entire market and keep plugging into the machine. It'll pay off handsomely in a long run.
Pillar 5: Income Maximization
This is a fun one. The concept in question here is how you uncover the acre of diamonds where you are planted. The answer is how you add the most value. There's a quote that goes, "Don't start to be a man of success but rather be a man of value." You will get compensated for the quality of problems that you help people solve. When it comes to income maximization, the question you must continually ask yourself is what can I do better? Simple. Just keep getting better at what you do. Work on your craft daily and then you will start to see income streams form from the amount of value you're adding to people's lives.
If you're not the best at what you do in your current line of work, you have work to do or you can change your occupation. Either way, find something that you're passionate about and pour your heart and soul into it. The marketplace will reward you for making their lives better.
Pillar 6: Tax Minimization
Not my specialty. I'll be the first to admit it. My range of knowledge usually focuses on finding the most tax-efficient vehicles like Roth IRAs or 401Ks or traditional IRAs. I do recommend seeing a tax professional for this section especially when it comes to retirement distributions. You can drastically reduce the amount of taxes that you have to pay by learning how to report your income appropriately.
What I will focus on is doing some of the groundwork now and take an advantage of the most popular tax-efficient vehicles. If you're eligible for a Roth IRA, use it and invest in it. Take advantage of the match if you have a 401k. And make sure that you do your research on the best tax-efficient vehicle for you as you continue on your financial independence journey.
Pillar 7: Wealth Multipliers
I haven't heard about this concept but I found it interesting. The belief behind this concept is to pursue activities that can make you feel like you are wealthier than you actually are without actually having the wealth.
One thing that The Millionaire Educator spoke about was travel hacking. If you can use your credit cards efficiently incorrectly, this is how people take amazing trips at a fraction of the cost. Dear research on travel hacking in other ways that you can save on doing the activities you love. Don't go broke trying to live your best life.
These were the Seven Pillars of FIRE Gerry Born has used in order to retire a millionaire on a teacher's salary. It is absolutely insane to see what you can do once you are able to have the right mindset. Research some of these pillars and apply them to your life to see what you can do to make sure that you have the light that you want. Also, continue to become inspired by other people's journeys as they choose to take life by the reins and live it on their terms while helping other people to live theirs. Peace and blessings, people.