Why are Millennials Jumping Into F.I.R.E ?
Many millennials are jumping on the F.I.R.E bandwagon for financial freedom and an early retirement corpus. An acronym for Financial Independence, Retire Early, the F.I.R.E movement is characterized by aggressive savings on a frugal income from investments. The F.I.R.E revolution has changed the very concept of retirement today.
Millennials attribute this transformation to an overdemanding work lifestyle. They have already put themselves on a financially strict regimen and aim for an early retirement. Their vision is to work hard now and accumulate enough to immerse himself in all that life has to offer, after early retirement. Towards this end, they are prepared to lead a spartan life, only spending on necessary food, fuel, and shelter.
F.I.R.E enthusiasts invest heavily in equity instruments and the stock market. The bestselling book, "Your Money or Your Life" by Vicki Robin and Joe Domingue, accelerated the trend. Several youngsters in the country today firmly believe in F.I.R.E and have taken to social media platforms to script their success stories and encourage others.
Here are some F.I.R.E protocols that will help you savor financial peace in your golden years.
Fix Your Target Retirement Fund
Calculate and establish the amount you will need to finance your desired lifestyle after retirement. For instance, if you wish to retire in the country, you may need a more modest amount than if you want to continue living in the upmarket part of town. Consider multiple scenarios like inflation and recession and take the aid of a financial calculator tool to arrive at the number.
Cultivate the Habit of Saving
You will need to save more funds than what you would've formerly set aside for a normal retirement goal. Financial experts recommend aiming for at least 25 to 30 times your annual income, based on the lifestyle you lead.
Clear Your Loans and Invest the Left-over Money
Ease your financial burden by paying off your dues and mortgages on time. Cash in on traditional and modern investment tools. If you are a low-risk individual, opt for fixed deposits and debt-based mutual funds. If you have an appetite for high risk, opt for funds with potentially higher returns . Equity-linked mutual funds, for instance, have higher risk but much higher returns, especially in the long stakes game.
Work on Your Health Insurance
Early retirement implies bidding adieu to your workplace health insurance cover. Scout around for a comprehensive medical health plan from a national insurer. Research the market and pick a suitable plan with enough riders for yourself and the family.
The American Express offers multiple health insurance plans with covers to all of its Amex Credit Cardmembers and their families. Most of the plans provide an exclusive OPD benefit that covers spectacles and doctor consultation reimbursement.
Leverage Your Retirement Accounts
Optimize your savings through employer retirement plans and PPF. These programs offer significant tax benefits and investment growth.
Have a Backup Plan Handy
It is essential to draft a backup plan as you are putting your livelihood on the line. Be prepared for worst-case scenarios like an economic dip or an emergency to avoid pitfalls.
Enjoy and Live in the Present
Amid all the focused savings and execution, do not forget to breathe and savour the moment. As Jonathan Swift rightly quotes, “A wise person should have money in their head, but not in their heart.”
As tempting as it may sound, early retirement requires a readiness factor as you need to be disciplined and focused on your end goal. Thus, one needs to evaluate carefully before taking the plunge.
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