Financial Independence, Retire Early means Financial Freedom, Early Retirement or often abbreviated as FIRE, is a movement for those who prioritize saving and investment to prepare themselves to achieve financial freedom, plus being able to retire early from work to enjoy their old age without being burdened and burdening themselves and others. This movement actually emerged in 1992 when a book entitled “Your Money or Your Life” written by Vicki Robin and Joe Dominguez, discussed the concept of financial independence and early retirement. The word “FIRE” which means “API” is just an abbreviation of the jargon created by the community of those who agree with the movement.
To achieve independence or financial freedom, so that finally you can retire early, in the sense that you are no longer busy and confused about making money, of course this requires struggle while you are young and productive, and maybe not everyone can make it happen, depending on what and who the person is. how was his work when he was young and productive. Those who have an above average income, if we talk in Indonesia above the UMR or UMP, of course the path will be much easier to achieve this, if indeed the arrangements or financial management are carried out strictly and well.
For example, let's take an example, a worker with a salary of Rp. 10 million per month, starts working at the age of 25, taking into account all monthly living expenses, with a residual salary of for example Rp. 3 million per month, and routinely saves and invests this Rp. 3 million for 20 years, then at least at the age of 45 or for 20 years of saving and investing, he has managed to collect as much as IDR 720 million, maybe this is higher if the return on investment is high. Whether this Rp. 720 million is enough for him to retire early at the age of 45, this will really depend on the perspective and lifestyle of that person in the future, but we are talking about the concept.
But of course this cannot be forced on those with low incomes, for example like a construction worker with a salary of IDR 100,000 per day, can he set aside money to save for old age? very hard to do. I'm alone with a salary of Rp. 5 million, sometimes it runs out even minus. Let's say I can save Rp. 500 thousand per month, for 20 years, I collect Rp. 120 million, can this make me financially independent and retire early, I think with that kind of money it will be very difficult, so there will be people who cannot do things it in his life.
But we have to look at the context that the idea of this movement wants to convey, that people are required to be more productive, to produce more, to seek additional income in order to make this happen. This will certainly encourage people to plan and achieve these goals before they get old. By dedicating part of their lives to saving and investing, followers of the early retirement financial independence movement, of course, will really hope to be able to quit their jobs, not work all their lives just to make money, but can enjoy the results of work that has been done years before, and this many encourage millennials to live extremely frugally, hoping to retire early by having lots of money in hand.
When they finally decide to stop working, and they have a lot of money in hand, in order to survive, consumption or expenses will also continue to be suppressed, maybe they will also only use a little of the money they have, given that there is no more financial income. This of course also requires a hard struggle, getting used to living very frugally, while monitoring every expense that is made, while continuing to invest to increase existing money, because basically inflation will definitely erode their purchasing power, year after year and will increase.
For this reason, there are several types of this FIRE class, including:
Fat FIRE, namely those who save and invest more than the average savings and investment of existing workers, but do not reduce their quality of life. This group generally has a very high income, for example there is a friend of mine whose salary is currently the head of a branch of an insurance company, take home pay Rp. 25 million, in a month can set aside around Rp. 15 million, meaning for only 10 years of work , already has old age savings of IDR 1.8 billion.
Lean FIRE, namely those who try very hard to save and invest with existing income, even very extreme, saving here and there, maybe sacrificing a little quality of life. This group generally has a slightly higher income than the average worker
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FIRE which stands for Financial Independence Retire Early literally means financial freedom and early retirement. So, from language alone, it can be concluded that this is a term that describes the condition of a worker who has achieved financial independence and then decides to retire early prematurely.
FIRE itself is a movement initiated by Vicki Robin and Joe Dominguez. This movement calls on the millennial generation to encourage them to allocate a large portion of their income for savings and investment. Do various ways so that a number of 30 times the annual expenditure is reached. Only then, retire from work, and live using those savings and investments. Sounds interesting and easy right? Yes, but hard to put into practice.
No kidding, in the FIRE movement, we are advised to allocate 70% of our income for savings and investment. Only after that, 30% of income is used to meet all living needs including an emergency fund. It literally takes one's life below the threshold, and is an extreme way of managing income.
Actually, how many proportions of income are used for savings and investments depends on the retirement target as well. The longer the target retirement time, we can reduce the amount of income allocation for savings and investment. But of course in the FIRE movement, the sooner the better, that's why it is recommended that 70% of income be allocated for savings and investment. In addition, we are also encouraged to actively seek additional income to accumulate more of our savings and investments.
By living hard like that, the target of 30 times the annual expenditure can indeed be achieved. Not to mention if our investment grows, of course investment growth will also shorten the achievement of targets. However, the FIRE concept is not just a concept of managing income, but how to be able to retire early as soon as possible. This is the difference between FIRE and other personal finance concepts.
