There may be little, hidden financial moves you’re making that are destroying your chance to grow wealth. If you can find out what they are, and then change your behavior, you can turn things around. Your chances of reaching financial independence will increase exponentially. See if you’re making these 4 mistakes that are destroying your chance at FIRE (Financial Independence, Retire Early).
The following post is by MPFJ staff writer, Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.
If you’ve been reading personal finance blogs for any length of time, you might know what FIRE is. FIRE stands for Financial Independence, Retire Early.
People everywhere are jumping on the FIRE train. They’re hoping to open up their options for work and life.
They figure if they can save enough cash to be financially independent, they can live their life as they please.
Can Anyone Achieve FIRE?
You might think it’s impossible for you to become financially independent. Becoming a millionaire isn’t that difficult once you know what you need to do.
“Normal” people become millionaires every day. And they’re doing it on a variety of incomes too. Ronald Read, a janitor from Vermont, died at age 92 with 8 million dollars in the bank.
If Read can do it, so can you. If you’re having trouble envisioning reaching financial independence, it could be that you’re sabotaging your finances.
There may be little, hidden financial moves you’re making that are destroying your chance to grow wealth. If you can find out what they are, and then change your behavior, you can turn things around.
Your chances of reaching financial independence will increase exponentially.
See if you’re making these 4 mistakes that are destroying your chance at FIRE.
Mistake #1: You’re Not Budgeting
I know – the dreaded “B” word. It sounds simple and unimportant, but it’s vital for reaching FIRE. I used to hate, hate, hate the idea of a budget. To me, it sounded like a prison sentence – one where I couldn’t have any fun with my money.
After I forced myself to start using one, I found out that budgets provide freedom. And lots of it. How? By helping you learn what is important to you.
Before I started budgeting, I was wasting hundreds of dollars per month on drive-thru runs. I was a busy mom of four little ones and didn’t think I had time to cook.
Once I got sick and tired of being broke I started to budget. I realized that I didn’t like spending $300 a month on fast food. I had other things I wanted to do with my money.
Things that were much more important to me. I started to pack snacks and light on-the-go meals before we left the house. And I saved hundreds of dollars a month by doing so – money I now use to reach my financial goals.
Do yourself a solid and start living on a budget. You’ll be glad you did.
P.S. Part of a successful budget is a spreadsheet for spend tracking. Your budget is useless if you’re not sticking to it. When you track your spending, you can tell if you’re sticking to your budget.
I use a simple Excel spreadsheet to track my budget. You might find a system like Personal Capital easier. They’ll track your spending for you – for free.
Mistake#2: You’re Living La Vida YOLO
Are you living the YOLO (You Only Live Once) life? The one where you take every opportunity to play and spend?
If that’s your attitude about life and money, your chances of achieving FIRE are minimal. Frugality is key to financial independence.
YES, you can budget some money in for fun stuff. But remember your FIRE dreams as you’re determining your monthly budgeted amount.
Don’t throw away your chances at FIRE so you can waste all of your money now. Instead, make a list or picture board of your FIRE dream.
Post it where you can see it every day. Then make spending choices accordingly.
Frugality doesn’t have to be boring. I’ve learned firsthand that a frugal life can be a fun one.
Exchange restaurant meals for potlucks at home. Do movie nights at home with friends instead of going out. Plan cheap vacations like hiking and camping trips.
If you’re committed to spending all of your extra cash on whims, there won’t be any left over to grow wealth with.
Mistake #3: You’re Not Automating Saving and Investing
I’m telling you right now, until you start automating saving and investing, you won’t grow your wealth. Treat your FIRE funds as a bill. Pay them every month – before you pay anything else.
Here are some steps you can take as you work to automate saving and investing:
- Max out your 401k contributions
- Save a set percentage of your income in a basic, high-yield savings account
- Automate non-retirement investing. Educate yourself on what to invest in, and take that education seriously. Turn off the TV and read expert books on successful investing.
You absolutely have to make saving and investing a top priority if you want to reach FIRE. I know that can be scary, especially if you’re new to investing.
But all FIRE achievers will tell you it’s necessary and it works – provided you educate yourself on doing it right.
Mistake #4: You Refuse to Learn Patience
When it comes to FIRE, patience is crucial. It takes years to pay off debt and get to the point of financial independence.
And it’s easy to let your life and your desires get in the way of that. Practice patience on a daily basis. Wait to eat until far past when you’re hungry. Control your response if the kids tick you off.
Work at being patient, then you’ll find it easier to wait as you pay off debt and build wealth.
Conclusions
Achieving FIRE is possible, but it does take work. You may need to retrain your mindset entirely. But, won’t the end result be worth it?
