How the FIRE movement can help you to retire early – 4 tips for 'extreme budgeting'

THE DREAM of an early retirement seems increasingly out of reach for many people who associate the luxury with an exceptionally high paying job or lavish windfall.

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However, there are lessons to take from a movement from across the pond. The FIRE movement is based on frugality and high levels of saving.

The movement aims to help people obtain financial independence so they can retire early – hence, FIRE.

By starting early and remaining discipline, the movement shows that an early retirement is within people’s grasp.

Ben Hampton, retirement advice specialist at abrdn, has drawn five pieces of wisdom from the FIRE movement that people can employ when thinking about their own finances.

Know what you want

Simple though it may seem, it is important to have a goal to work towards that is realistic and achievable.

Happily retired

The five tips you can use to pull off an early retirement (Image: Getty)

Mr Hampton said: “Being realistic with what you want from your retirement, and what this will cost you, will help determine how much you need and therefore how long you need to work to achieve this.”

This will involve considering multiple factors from what lifestyle someone wants to where they want to live.

This will involve regularly evaluating how much one will need and having a back-up plan to allow for economic downturns.

Mr Hampton also stressed that retiring early doesn’t have to mean giving up work altogether. People can use early retirement as an opportunity “kick-start a part-time career in something they love or pursue a hobby that could earn them some extra money”, he said.


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Start early and manage outgoings

Building on the foundation of knowing what one wants and how much it’ll cost, people will need to turn to thinking about how to get there.

By starting early, people may only need to make small adjustments that will make a big difference in the long run.

Mr Hampton said: “It’s understandable that extreme budgeting isn’t for everyone but being stricter about what you spend your money on could help make an earlier retirement a reality.”

Small changes and broad awareness of everyday spending can make all the difference. Searching for the best deals and cancelling unused subscriptions are options that won’t take too long but will be felt in your wallet.

Once savings have been made, people won’t want to see inflation taking a cut out of them. Putting accumulated savings in a pension pot may be a wise option but withdrawing them before the age of 55 will incur a tax-penalty. A stocks & shares ISA may be better and is likely to reward people with higher returns over time.

Be smart with saved cash

As has been mentioned, storing savings in a pension is a tax-friendly way to keep money growing. Some employers will also match workplace pension contributions which will really boost people’s retirement funds.

Mr Hampton urged people who are lucky enough to receive a bonus to put it away in their pension straight away as a great way to boost retirement income.

Consider a side hustle

Climbing the corporate ladder isn’t for everyone and considering a side hustle can be a great option to consider for people looking to get creative about their retirement.

It doesn’t have to be a complex enterprise and small actions “from selling things you no longer need on sites like eBay, or turning a hobby into a small business you could do at the weekends and evenings” can enhance income. Every little helps is the idea here.

Making all these decisions alone is a daunting proposition and even the savviest people will benefit from taking on professional advice.

Mr Hampton said: “A financial adviser can discuss every aspect of your retirement plans with you, including when you can afford to retire, what you can afford to spend each month or year, as well as help you choose the right investment options for you to get the most out of your money.”

William Murphy

William Murphy

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