The message of the FIRE movement is amazing: Stop trading time for money and make money work for you!
Yesss! Who doesn’t want to reach financial independence and be able to do the things they love? I do for sure!
Tomer and I followed the advice of the FIRE community. We increased our savings % significantly and invested the savings from our cushy corporate jobs into buying real estate. Here are our 15 favorite frugal living tips that allowed us to double our monthly savings.
This move allowed us to quit our jobs and travel the world for 1.5 years without having to work and without using our savings.
While the concept sounds great in theory, there is one pitfall though. Can you guess it?
Although the rental income was sufficient to sustain our budget travel lifestyle, it wouldn’t allow us to live a comfortable life back at home where living expenses were higher.
If you’re like us, you don’t want to work a job you hate for years to be able to buy enough assets that will sustain you for the rest of your life.
So, we decided to take a different approach than the FIRE movement.
Here are 3 things we do differently than the FIRE community. If you want to learn how to reach financial independence and retire early faster while doing the things you love, read on.
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1. Focus on cashflow (vs net worth)
The key metric the FIRE movement is focusing on is your net worth.
The ideas is to invest your money and build an investment portfolio by acquiring assets, for example real estate and stocks.
Your net worth is the delta of what you own (assets like rental properties) minus what you owe (your liabilities like mortgages).
What’s your number?
You might have heard this question before amongst the FIRE community.
“Your number” is the net worth that once acquired, will be able to sustain you financially for the rest of your life, without working. You can view it as a retirement fund so-to-say, only that retirement already starts in your 30’s or 40’s.
What we do differently: Instead of putting our key focus on working towards “our number”, we concentrate on growing cashflow.
While net worth and cashflow are related, they are fundamentally different.
Cashflow measures the difference between your income and your expenses. Our goal is to generate sufficient passive income on a monthly basis to be able to cover all our expenses.
So while a high cashflow will contribute positively to your net worth, a high net worth does not necessarily contribute to your cashflow.
Essentially, cashflow is not only taking into account how much you make, but also what you are doing with your money. This is a key difference.
If you’re earning passive income from rental properties, don’t miss our 7 Tips to Maximize your Rental Income.
2. Earn your income from doing things you love (vs work a job that pays well but you hate)
In the FIRE movement, financial independence is achieved through aggressive saving. While an average person is saving about 10% of their net income, the FIRE community suggests saving and investing 50-75% of your income.
Savings are achieved from capital gains and from earned income = your job.
However, there is one mistake many people make.
Eager to save and invest as much as possible of their income, they continue working their well-paying but soul-sucking jobs that they’re trying to escape from eventually!
Do you see the irony in that?
We came across a statistic that says that 85% of all American workers feel depressed in their work. 85% – that’s huge!
This is a reason why more and more people are turning towards the FIRE movement to build enough financial security to be able to retire early and finally use their time to do the things they love.
However, why are we spending so much time preparing for the moment when we can financially do whatever we want to instead of starting to do it already?
If you’re wondering what side hustle to start, we encourage you to evaluate your unique superpowers (yes, you have those!). Read here how you can turn your skills and interests into money!
What we do differently: Instead of relying on income from jobs we want to escape from, we build additional income streams from doing work we love.
What we recommend to do is starting a profitable side hustle.
How do you know if something is bound to be profitable?
Validate your idea with your ideal target audience to be sure it has business potential. A side hustle is an excellent way to build an additional income stream while doing things you enjoy at the same time. It is also great for tipping your toes into entrepreneurship and growing a business with less pressure.
While you’re growing your side hustle, consider also changing your primary job to something you enjoy more. Turning your employment into self-employment as a freelancer is a good way to create more flexibility, for example.
If you think that a side hustle means trading your time for money, and that’s against all principles of the FIRE movement, then read on.
The side hustles we’re talking about are special!
3. Invest both your money and time for an ROI (vs focusing solely on money investments)
As discussed earlier, the FIRE movement is focusing on investing money to make money work for you. The money you use for investments is earned by saving as much as possible from working a job.
To sum up, our two suggestions so far were these:
- Focus on cashflow and generate monthly passive income.
- Earn your income from doing things you enjoy by starting a side hustle.
Now we add the final point to the formula.
What we do differently: We automate our side hustle as much as possible to generate passive income!
Ass promised, our side hustles are special: They don’t earn money in direct exchange of your hours.
Instead of trading time for money, design your side hustle in such a way that it will be an investment of your time. Your goal is to build a passive income side hustle, so you generate a cashflow even when you are not actively working.
This way, you create a positive ROI for both money and time. Consequently, you’re using both resources in an optimal way!
How do you automate your side hustle, you’re asking?
- Instead of trading your services for money, you build assets (products, platforms, and systems)
- You automate your operations by selling via affiliates or setting up an Evergreen launch funnel
- You shift your focus from serving customers 1:1 to 1:many
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