You’ve probably heard a lot about FIRE (Financial Independence, Retire Early) lately. It’s a movement that’s taken off and it’s easy to see why. The idea of having the freedom to choose when you retire and how you spend your time sounds great.
But here’s the thing: it’s not just about saving every penny and cutting out luxuries. Getting to FIRE takes more than that. It’s about understanding your money, making smart decisions and having a plan that works for you.
That’s where a financial advisor, like the team at Circadian Capital, can really help. They can guide you through the practical steps of getting there and help you avoid common mistakes along the way. Ready to dive in?
Steps to Take Before Meeting a Financial Planner
Meeting a financial advisor can be a little overwhelming for some. But it doesn’t have to be! Here are a few simple things you can do before your first meeting to make sure you’re set up for success.
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Prepare Your Financial Documents
Gathering key documents is a good place to start. So that when you are ready to meet a financial advisor, you aren’t digging through old paperwork. Tax forms, bank statements, bills, investment documents, anything that gives a snapshot of where you are financially should be filed neatly.
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Set Your Financial Goals
What do you actually want? It’s important to get clear on your FIRE goals. Maybe you want to retire at 45, or clear your debts and loans before retiring or save enough to travel the world. Be specific. The more clearly you define your goals, the better your advisor can help you design a plan that works for you.
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Take a Good Look at Your Current Finances
It can be uncomfortable, but take a moment to really assess where you are financially. How much do you have saved? What debts are you carrying? What’s your income versus your expenses? The clearer the picture you have of your finances, the easier it is to move forward with confidence.
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Understand Your Risk Tolerance
This is all about how much risk you’re willing to take with your investments. Are you okay with some ups and downs, or do you prefer a steadier, safer approach? Knowing your own risk tolerance will help your financial advisor suggest the right investment strategy for you.
How to Build a Solid FIRE Plan with a Financial Advisor
Once you have your documents together and your goals in mind, a financial advisor can guide you build a FIRE plan.
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Track Your Spending and Set a Budget
The first thing you’ll need to track is your spending and set a budget for before you retire and after you retire. Use the 50/30/20 rule for managing your budget. 50% goes to essentials like bills, 30% for entertainment, subscriptions and dining out and 20% is put aside for savings and investments.
Once you have your retirement age set, depending on which FIRE path you take – LeanFIRE or FatFIRE, you can update your budget. A good financial advisor will advise you on frivolous expenses you can cut and where to invest your money (even if it’s an expense that gives you joy). It’s not about depriving yourself, it’s about prioritising what matters to you. Cutting back on little things like subscription services or dining out can free up more cash for savings and investments for the future.
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Start Building a Strong Investment Portfolio
Saving money is great, but to achieve FIRE, you need your money to grow. This is where investments come in. Start with a short-term savings goal and a long term savings goal. For short-term, creating a savings account with a high interest rate and tax benefits. ISAs are a good place to start.
For the long-term, a financial advisor can help you build a diversified investment portfolio with index funds, stocks, pensions, bonds and maybe even real estate. The idea is to have your money work for you, so you don’t have to work forever. People who invest in diversified portfolios are more likely to see better returns over the long term compared to those who rely only on savings accounts.
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Start Retirement Planning Early
It might sound obvious, but the earlier you start, the better. The key to early retirement is building up enough savings and investments to cover your future living costs. Before you retire, clearing any ongoing debt or loans should be your priority. Your car, home or children’s education fund should be paid for. Once you have that in place, you can retire comfortably.
You also want to make sure you’ve got an emergency fund – something to cover at least three to six months of expenses in case of unexpected events like medical emergencies, market fluctuations or any other unexpected events. Inflation is another thing to factor in when calculating for retirement.
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Review and Adjust Your Plan Regularly
Life happens, things change – whether it’s a new job, a new family member or a financial windfall. Your financial advisor will work with you to adjust your plan as needed. This isn’t a “set it and forget it” kind of thing. It’s important to check in regularly to make sure you’re still on track. And if you hit a rough patch, your advisor can help you adjust without throwing in the towel.
Challenges and Realities of Achieving FIRE
It’s not all smooth sailing when it comes to FIRE. There will be challenges along the way.
For one, economic uncertainty can throw you off track. The commonly used 4% withdrawal rule assumes a stable market and regular returns. However, market volatility can undermine this strategy, leading to financial pressure for early retirees relying on fixed withdrawal rates.
Achieving FIRE often means making some tough choices. It’s easy to feel burnout with the constant financial load and frugal lifestyle. It’s important to find balance so you don’t miss out on enjoying life now while saving for the future.
Conclusion: Ready to Start Your FIRE Journey?
Building a plan for financial independence and early retirement doesn’t have to be overwhelming. With the right mindset, a clear strategy and a financial advisor to guide you, FIRE can be within your reach. It’s not just about cutting back, it’s about making smarter financial choices and adjusting your lifestyle to support your future goals.
If you’re ready to start your FIRE journey and want some expert guidance along the way, Circadian Capital is here to help. Let’s create a personalised FIRE plan that fits your goals and lifestyle.