Do you feel like you are getting old without much to show for it in terms of wealth building or retirement savings? This is a fear that increasingly more and more people are starting to feel, especially those approaching their 50s or 60s. One way to avoid feeling fear and be as financially ready as possible, is to throw as much money into investing in your 20s, 30s and 40s. In fact, if you do the heavy work starting from your early 20s through late 30s (18-20 years) , your 40s may be spent coasting and not doing any significant savings, at least not more than in the early 40s.
FIRE
The word FIRE has become one of the hottest—excuse the obvious pun—trends in the world of personal finance. It stands for and refers to the idea of being Financially Independent and Retiring Early. The concept encourages individuals to start young, save aggressively, and invest consistently, throwing as much money as possible at the problem (saving enough to secure an early retirement). The strategy hinges on the power of compounding, ensuring your money lasts for the rest of your life. The 4% rule is often cited as a guideline for FIRE enthusiasts, suggesting you can safely withdraw 4% of your investment portfolio annually without depleting your savings, thus providing a sustainable income throughout retirement.
Maximizing your Early Savings
So how do you save as much money as possible, as early as possible in your life, to enjoy an early retirement in your 40s rather than waiting until your mid-60s? After all, nothing in life is guaranteed. First, it helps to secure a good, well-paying job in your early 20s. While this is easier said than done, it is achievable if you excel at something, have graduated from a program that is in high demand—such as biomedical sciences—or have extensive experience in a specialized trade or field, such as renewable energy engineering, data science, or skilled trades like underwater welding.
Boosting your savings, Slash your expenses
Once you have secured a well-paying job, create a budget that is geared towards an aggressive saving plan, as much as 75% of your net income. I have heard of some FIRE stories where individuals went as high as 90% with their savings, though it is not clear if they were living with family or what their salary was.
And if you feel like your job, despite paying well, is not enough and you need to accelerate your savings further, consider taking on a second job or pursuing a side gig. Whether it’s freelancing, ridesharing, tutoring, or selling products online, these additional income streams can significantly boost your savings rate. Even dedicating a few extra hours a week to a part-time endeavor can make a noticeable difference in reaching your financial independence goals faster.
Any $1K saved brings you a step closer to your goal. Break down your savings goal into $1K, $5K, or $10K installments to make things easier. Once you reach those installments, invest in your next stock, security, or other investment. Some may take the easier route with scheduled bi-weekly or monthly stock purchases, while others prefer to save larger chunks and invest them all at once. The idea is to always be mindful of the need to go big, for as early and as long as possible, so that FIRE can be achieved sooner than later.
While the idea is not necessarily to retire and have nothing to do for the rest of your life, the goal is to secure enough wealth so that you are no longer obligated to work or reliant on a job to meet your needs. Financial independence offers the freedom to pursue what truly brings you joy—whether it’s spending time with loved ones, exploring passions, or dedicating your time to meaningful projects—without the pressure of earning a paycheck. It’s about creating a life where your financial security allows you the flexibility to live on your terms, with choice and peace of mind.