FIRE stands for “Financial Independence, Retire Early”. It’s a trend that promotes people to live modestly so they can save more money for early retirement or part-time employment. You can become work-independent sooner if your savings rate is better and you save a larger percentage of your income.
Your FIRE number, to put it simply, is the sum of money you must have invested in order to be able to live off the returns and stop working.
How to Get Your FIRE Number
This straightforward formula is provided by The Trinity Study, the origin of the well-known 4% rule, to determine your FIRE number:
FIRE number = Annual Expenses x 25.
Assuming your annual spending is Ghc48,000, then your FIRE number would be Ghc48,000 x 25 if your monthly living expenses were Ghc4,000.
Using the FIRE number method and a list of your current monthly spending, determine your anticipated yearly retirement expenses. Analyze the current costs your family incurs for housing, food, personal care, medical care, transportation, and community services.
You may retire at any age if you have the money to do so, so keep that in mind. Make a plan to establish various passive income sources that can support a work-free lifestyle based on your FIRE number. If it seems too much, think about making a FIRE number range. Make sure your objective reflects your lifestyle preferences and core values. In the end, figuring out your FIRE number is an excellent approach to begin retirement planning, even if you don’t retire young.
Red Crown Investment Training equips you with the right knowledge to achieve financial independence. To get more information, call 059 816 2212 or WhatsApp 024 465 6555.