The concept of FIRE, an acronym for financial independence and early retirement, is increasingly captivating.
Followers of this philosophy strive to save a substantial part of their earnings in investment accounts.
By saving vigorously, they work towards reaching their FIRE number — the amount necessary in their accounts to perpetually withdraw and substitute their regular job income.
However, Jessica Fick and her husband, Corey, leaders of The Fioneers, a platform offering content and services focused on financial independence, note that this strategy is not feasible for everyone.
“Many don’t earn hefty salaries like software engineers or manage on $30,000 annually,” Jessica observes.
The Ficks, both 36, have delineated five levels of financial independence. Presently, they are at the third stage, “Coast FI,” having saved enough for eventual retirement (projected in their 50s) and currently using their income for lifestyle expenses.
Here’s an insight into the five stages of financial freedom:
Debt Freedom
Achieving debt freedom is the initial step towards financial independence. The Ficks view debt pragmatically; for instance, they consider a mortgage part of a sound financial strategy.
Yet, for those with high-interest debts like credit card balances, eliminating debt is crucial for freeing up budget space for enhanced retirement savings.
“Debt freedom lowers your expenses,” Corey explains. “By clearing debt, you can save more or reduce work hours.”
‘F You’ Money
Accumulating this level of wealth isn’t solely about hitting a specific financial milestone, according to the Ficks.
“It’s about a sense of security,” Jessica says. “It’s having enough to exit a negative situation or seize an opportunity, like quitting a harmful job or launching a business.”
This amount varies based on factors like having children or the ease of switching jobs. It can include investments, but the key is readiness to use these funds.
“But it’s not really ‘F You’ money if you’re hesitant to use it,” adds Jessica.
