Attain Financial Independence, Retire Early (FIRE), Live Happily

“How do you live without a job or business?” (that implies to be “With a family to feed, how do you survive without an income?“) is the question I have been often asked by many of my friends and relatives, with surprise and often with envy! It is difficult to quench their curiosity easily in a few words. So I tell them that I work from home or make money online or trade stocks from home or I retired early or something like that, whatever comes to my mind at that point of time. By the way, is financial independence and early retirement possible? Could it be made a reality or just a dream?

Of course yes, it is possible. I didn’t inherit a fortune. Still I attained financial independence, retired early (FIRE) in April 2012 at the age of 42, and am living happily now. My wife was a homemaker even before.

Seven years have elapsed since then. Thus far I find it to be an ideal choice I have made. Passive income gives me the freedom and independence to decide on how I spend my time. I get a lot of time to spend with my family as well.

Meanwhile if you are unaware, there is a whole lot of buzz going on all over the web, for and against FIRE. (Just google fire movement.) I have done it on my own quite a while ago. I didn’t know back then about such a movement. So how did I attain financial independence, retire early, and how am I doing now?

It is nothing different from what I wrote about early-retirement planning back then. But still I go here with anything new, if at all I learned in between:

Build cash flows

With no income stream, business or asset received or inherited to begin with, the formula for attaining financial independence and retiring early is nothing but working your way to build passive cash flows to meet the expenses post retirement. The earlier you start and the bigger the streams you build, the earlier you retire and the better off you are later on.

Instead of you working for money, beyond certain threshold, let the money start working for you. It could be by investing wisely whatever has been saved or by building passive streams of income from affiliate marketing, multilevel marketing etc., either online or offline, or with hobbies that pay, where you passionately invest your excess time. If it is your passionate hobby that pays you, you kill two birds in one shot.

There are a lot of avenues to invest your savings. Nonetheless the motto should be ‘less investment, more income.’ I have my income streams from passive farming, dividends, fixed deposit interest, rent, online ads etc. Beginning to live from hand to mouth and working on building multiple passive income streams, you climb up the ladder of sufficiency and excess.

Be a penny pincher

Lead a modest lifestyle to keep the wolf from the door. A penny saved is a penny earned. I always keep a tab on electricity bills, have bought only used cars, and only lead a frugal life. Furthermore, anything that could go against you, pre or post retirement, is lifestyle creep. I have always been wary of it, and it is easy to slip into.

If you are mindful of these facts, focused, and organized, you lead a happy and contentful life. Else, if you are a shopaholic and spendthrift leading a posh lifestyle, throwing out extravagant parties, going on shopping spree, you end up breaking the bank, and back to square one.

Keep compounding

Spend less than the income, invest the money thus saved, further build up the cash flow – the cycle has to go on. Compounding shouldn’t have to stop at any time, before or after retirement. It has to bring your bread and butter for years to come.

Whether you are aware or not, inflation takes care to pull you down the ladder, affecting your future income and worth. To hedge inflation, keep compounding investing in good businesses and inflation-proof assets that offer steady income. Over time, money starts making money and slowly the snowball effect starts kicking in.

Say no to debt

A smart person can go broke with either of the 3 Ls; liquor, ladies, or leverage (debt). The last one is the worst of the three. It is better to stay away from debt. I view debt as forfeiting the uncertain future income for present consumption and have always remained averse to debt.

Nevertheless I use credit card to pay the bills and expenses, clear the card bill monthly, convert the rewards points to cash, and thus get paid for using the card. It is prudent to not carry over the credit card balance. If you can’t keep tab on expenses, it is in your best interests to keep the credit card away.

Prepare for the worst

Hope for the best, but prepare for the worst. Have some money in liquid assets like fixed deposits or liquid funds as an emergency fund to meet any unforeseen contingencies. It is judicious to have a good health-insurance policy with cashless hospitalization options and to undergo preventive health checkups every year.

Have a roof over the head

If you could make your savings compound at a better rate, then owning a home is a bad idea. However, it is better to have a roof under the sun, so that you don’t have to worry about paying rent every month or worry about ever-increasing rents. Living in an own house has a lot of sentiments attached to it too.

Small family, happy family

Having more than a child is a retardant to your dream of financial independence and early retirement, warranting postponement of retirement by a few more years! You are taking up more responsibility and drain on your finances knowingly. A small family is a happy family.

Invest time wisely

After retiring early, you have ample time at your disposal. Hereafter it all boils down to how wisely you spend, or rather invest, this time. I spend most of my time reading annual reports and subjects that enthuse me, thinking, viewing interviews, listening podcasts, taking notes or writing. Utilize the ample time fruitfully either to invest in yourself or to grow your income.

Bottom Line

Even though I am living by it, I couldn’t convince my friends or close relatives about FIRE, as they lack confidence in the execution part! They are addicted to a busy lifestyle. You can take a horse to water but you cannot make it drink! Thus early retirement is a state of mindset.

Even if you have attained financial preparedness to meet future obligations, accomplishing early retirement is embracing the mindset of fulfillment. Inflation worries, greed, insecure feeling, discouraging family, friends, relatives, naysayers, lack of confidence or ballooning needs – all could come in way between you and early retirement. But if you are determined, you can. Where there is a will, there is a way.