Why the ‘retire early’ theme is about hard work

You want to follow your passion. You are tired of your regular job that starts at nine in the morning but has no end. This column had, in the past, touched upon the topic of ‘Financial Independence, Retire Early’ or FIRE. Giving up a routine life and following your passion is easier said than done. The problem with that is your ordinary life pays for your bills. Your life driven by passion is unlikely to be equally remunerative. To retire early and follow your passion, you need to change your life. Scott Rieckens, an American author who wrote a book, “Playing with FIRE (Financial Independence Retire Early),’ argues you have to save money at a high and accelerated rate. That requires you to make drastic changes to your current lifestyle. You need to ask yourself questions about giving up things.

The key to success in saving more is the effort to control the urge to spend. When we start work, our general tendency is to spend. There is little effort to save or invest as we either lack knowledge or have the will to think about rainy days. You can do that if you are sure of your future income. However, if you are in a job that pays you well now, you need to work towards saving and investing more today. That way, you can plan your early exit from the routine nature of your job. Some people start early but never finish their work on time. Many of you work multiple shifts to earn a living. While some of you may enjoy your work now, many people are passionate about other things than their regular work.

The pandemic

The Covid-19 pandemic has turned into a game-changer for work-life. Many people who thought working from home was not possible at their jobs have figured it out. Companies that thought working from home was a waste of resources had benefited from cost savings by shifting operations to that mode. While the world adjusts to a new normal at the workplace, many of you realised that you could offer your skills to many more companies than just one.

There is a surge in self-employed or freelance workers. People have quit their routine jobs and started taking up assignments based on their comfort during the day. The ‘great resignation’ phenomenon hit technology services companies with a higher than average attrition rate. More people have quit than joined IT services companies after the lockdown. Those in the IT services industry who have spent a couple of decades working in a regular job may be able to generate a steady income through savings. They can choose to follow their passion and ensure that they balance their lives better than before. That applies to everyone who wishes to do so. Retiring earlier than 60 does not mean giving up work. You will continue to work at your own pace. However, you do need the support of your savings.

What you can do

If you are at a stage where you have saved well for the past decade, you may want to look at the value of your liquid assets. What monthly income can you generate by putting these savings to work? Assuming you invest your savings into a monthly income plan, you could develop a regular income. Typically, these funds give you an 8-10% return annually. For savings of `1 crore, you can generate up to `85,000 per month.

You then need to look at your expenses and see if that covers your monthly expenses. If you own more than one home, you may want to sell the second one and add to that kitty to boost your monthly income. As we argued in the past, your age between 25 and 50 is the time when you save and invest the most. If you wish to hang up your boots early from a day job and do something you are passionate about, you need to work towards creating a savings pool that would allow you to have a regular income.  

You need to change your lifestyle
Scott Rieckens, an American author who wrote a book, “Playing with FIRE (Financial Independence Retire Early),’ argues you have to save money at a high and accelerated rate. That requires you to make drastic changes to your lifestyle. 

(The author is editor-in chief at www.moneyminute.in)