7 ways to reach FIRE on a low income

FIRE stands for Financial Independence, Retire Early. There is a lot of discussion as to whether you can reach it on a low income. I believe it is possible since it is working for me so far. However, I am focused on the FI part because I chose a career path that I love, so I do not feel the need retire early.

  1. Become debt-free. Especially all high-interest and/or depreciating debt. This should be the primary goal of those trying to reach FIRE. For instance, if the interest on your debt is 10% and you are earning 8% returns on your portfolio you are still out 2%.
  2. Cut grocery costs. As a foodie, this is a little difficult, but where I live in Sweden the meat is expensive. So, I have become somewhat of a vegetarian out of necessity. I get my protein from other sources, especially beans. Lots and lots of beans. I also shop for frozen fruit and vegetables since it tends to be cheaper when it is frozen.
  3. Cut as many small costs as possible by getting a cheaper phone plan. When I was in the U.S., I paid $35 monthly for a go-phone plan, in Sweden I pay 199 SEK (about $20). I did ‘splurge’ on the internet data, just to ensure I could stream movies but I only paid about $25 for my portion of it. Another cost-saving move was making creating a meal plan to ensure I would have lunch for work.
  4. Save on housing costs. I am actually moving to a new place outside of the city-center that is nearly half the price of my current place. I am 100% aware this is not feasible for everyone but if you can’t do it perhaps think about house-hacking. This is where you rent a room that would cover a portion of the rent/mortgage.
  5. Save to the extreme. Well, pay yourself first and save what is leftover at the end of the pay period. I have set my account up to save what is leftover at the end of the month. I see many in the FIRE community save between 40-60% of their income. It is very simple math to figure out how long it would take you to save for 25x your annual income. At 40% savings: (1-.40)/.40= 1.5. It would take you 1.5 years to save for 1 year of retirement, so approximately 37.5 years to save for 25x. At 65%: (1-.60)/.60= .667 years or about 8 months to save for 1 year of retirement.
  6. Generate more income by taking on a side-hustle that will create passive income. The first portion of this is straight-forward. You essentially make money in your sleep. You can create a subscription service or an e-book, all you need to do is market it.
  7. Invest. This kind of ties into creating passive income but it feels it deserves its own point. Many in the FIRE community recommend mutual fund investments to save for the FI portion of FIRE. However, starting out investing does not need to be scary, especially for those on low incomes. If you’re in the U.S., there are micro-investing apps that are available to help you get started, like Acorns. On Acorns, you can set up a minimum $5.00 and the app invests it for you. Also, you can set up round-up investing where the app will round-up your card purchases to the nearest dollar amount. I have hyperlinked the referral code if you are interested.

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