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Chapter 4: The Paths to FIRE

Chapter 4: The Paths to FIRE

Financial independence and early retirement can be achieved through the many different paths of FIRE. The reason for its popularity lies in the accessibility of the system, which is so easy to adapt to with a little bit of strategic thinking.

The universality of the FIRE movement makes it a system that appeals to people of all walks of life. There is no correct way to get to FIRE, and you are free to pick and choose which aspects suit you and your lifestyle best. Take a look at our list below of money-saving ideas to help you on your journey to FIRE.

Index Fund Investing

Control the fees! On August 1st, 2018, Fidelity Investments released two broad-based index funds that both operate without any charges or fees. Meaning, more of your investment dollars are being put to work toward your investments. This is great news for anyone who is just starting out with investing, and a worthwhile reminder to anyone who has already been in the game for some time to keep an eye on their investment fees. Make sure to always understand your fees and shop around for low-cost providers.

Invest without an advisor. In a day and age where high-quality investment tools are available at one’s fingertips, it is getting nothing but easier to manage our own investments. If you have been gifted with a fairly rational predisposition (emotional investing is a no-no!), and basic mathematical ability, you could very well be perfectly in line to invest without an advisor.

Real Estate Investing

Fix & flip. Done right, and especially if done with cash, house flipping can be an extremely lucrative endeavor. Finding a property that can be easily renovated and sold for a profit is any DIY-savvy investor’s dream come true. By paying for the flip in cash instead of borrowing the money for it you can easily skyrocket your profit. Cash will save you on interest fees to start, but it will also give you the power to wait out a stale market instead of being forced into selling at a low price in order to offset the cost of any loan that you took out to get the ball rolling.

Buy and hold rentals. In a buy-and-hold investment, you have the distinct advantage of being in a situation where your tenant is paying down your mortgage for you, building equity in your property.

Affordable Housing

Weigh your pros and cons for size, location and price of your home. Don’t make yourself house poor by buying a property that overextends your budget.

Consider renting versus owning. There are plenty of advantages to renting over owning your own home. The initial cost to rent is 5 to 10 times less than buying a home. Renting also costs less overall, as you are not responsible for the maintenance costs of the property and often you can take the money that you’ve saved from these costs as well as the down payment that you would have put toward a mortgage and invest it instead.

House hack your way to home ownership. House hacking occurs when you own a multi-family rental property and have your tenants pay down your mortgage while you live in the adjoining unit.

Travel Hacking

Use points and miles to travel the world for significant savings. You can strategically use loyalty programs and points cards to rack up travel miles. Plenty of credit card companies offer travel reward programs and they lead to huge savings on your next trip. Plan your purchases so that you are getting the maximum benefit out of these cards, but be sure to pay off the entire balance each month, or else the accrued interest will negate the benefits.

Decrease Your Grocery Bill and Discretionary Spending

Meal prep to reduce the time and expense of grocery shopping. If you go to the grocery store with a game plan and shopping list in hand you are much less likely to waste money by buying things you don’t need. On that same note, if your meals are planned in advance you are much less likely to splurge on take-out. These cheap crockpot recipes let you stretch your dollar further. 

Consider a meal delivery service. If you find yourself hooked on take-out, a meal delivery service might be the very thing to help you cut down on your meal expenses. There are plenty of affordable options on the market, providing a delicious variety of meals with fresh ingredients delivered right to your door, curbing your need to go out to eat. Most even offer promotional deals, making it even more affordable to eat in.

Check out our review of 11 different meal delivery services, and how we reduced our food budget by 50%!

Go out to eat less! Once you factor in the cost of parking and tipping on top of the already inflated food cost associated with eating out, not to mention the inevitable indulgence on a pricey cocktail or bottle of wine, eating out is an extremely expensive endeavor. Stay in and experiment with a new recipe instead!

Look at your budget to see which expenses you can cut down on. Trim the fat from your budget by negotiating a lower rate on your cable and cellphone bill. Better yet, see which services you can eliminate altogether.

Multiple Income Streams

Side hustle. Working at side hustle in the downtime from your day job can help you put extra money toward your retirement goals. In some cases, you can even turn your side hustle into your day job if it is something that you are really passionate about.

Start a business. Starting your own business brings with it freedom from the corporate world, freedom from having a boss, and also financial freedom. A lot of your regular expenses, such as your rent, phone and car payment, become tax write-offs once you own a business. Spending less money on taxes gives you more money to put toward your retirement goals.

Work overtime at your day job. Overtime pay in the United States is paid out at time and a half. So, rack up those overtime hours and put that money away!

College Hacking

Scholarships. College and university scholarships are an excellent tool to be used to pay for an undergraduate degree. They do not ever have to be repaid, differentiating them from student loans, and they are awarded based on a variety of criteria. Meaning, they aren’t only based on academic merit. Some are awarded based on financial need, for others you need to be studying within a certain field or a member of a certain organization.

529 plan. 529 plans are legally known as “qualified tuition plans”, and are state-sponsored tax-advantaged savings plans. These plans are tools used for educational savings, but like traditional IRAs and 401(k)s, they also carry with them an annual tax reduction based on your contributions.

In-state schooling. Being a resident in the state in which you choose to study can cost you nearly half as much as being an out-of-state student. Your residency status will also affect the amount of student loan funding you receive in most cases, meaning you may be forced to pay for a portion of your education out of pocket.

Living at home. You seek independence, and we know that. But the truth of the matter is that you can save thousands on room and board, meal costs, furniture expenses and moving charges by living at home while you go to school.

Attending community college first. Community college credits cost less than state college or university credits, and most of them are transferable for those seeking a bachelor’s degree. Meaning, you can earn a good portion of your bachelor degree credits at a community college at a lower rate and then transfer them to a state college to complete your degree.

Tax Optimization

Utilize savings vehicles, like a traditional IRA or 401(k) to reduce your tax liability, if eligible. You can reduce your tax bill by saving money. Any money saved toward your retirement is great, but you can save thousands off of your annual taxes by maxing out your contribution allowance.

Buy Gently Used Cars

New cars depreciate so much in a short period of time. In fact, a new car will depreciate by approximately 20% in its first year, and about 10% over each subsequent year. It is the only depreciating asset that you will ever own.

Buy gently used cars to save money. Because of their original depreciation hit, buying a used car will save you money if you pay the market value for the vehicle. You will also save yourself the money on a used vehicle purchase by not paying the dealership fees associated with a new car purchase.

Avoid Lifestyle Creep

Lifestyle creep occurs when things that once seemed like luxuries start to become necessities, as your income grows. This is sparked by things like raises and bonuses, which are often used to fund new cars, high-end houses and expensive vacations instead of being placed into savings accounts to help you reach your FIRE goal sooner. A shiny new Mercedes would be nice, but not nearly as nice as an early retirement. Remember that a little sacrifice now will result in big rewards later on!