Currently I'm 38yo, out of work and my net worth is just under $1k. So I know the first step is simply to get employed for stable income- I don't have the mindset to run a business. I also don't know many people in high or low places- I like to keep to myself whatever chance I get.
But regardless, is a 10 year plan from zero to FIRE feasible? Can people still FIRE under 50 if they started their financial plan just before 40?
That's why I think your question is a bit backward. Instead of wanting to reach FIRE in 10 years, try to understand why you want it. FIRE is just a tool giving you ~40 additional hours per week. Why do you want this time? If one is unhappy with their life before FIRE, they will just have 40 more hours to be unhappy.
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si...
It's going to take a huge change in habits.
If you're determined, I would say don't listen to the haters. I've been a member of FIRE since college, downshifted and it's amazing. I never really enjoyed working (actually, hated it) so I get to spend my time on this earth doing what I want to do (read classic books right now.)
Here’s some resources:
Reddit FIRE: https://www.reddit.com/r/financialindependence/
Practical FIRE blog: https://www.mrmoneymustache.com/blog/
Poor Richard’s Retirement: https://www.amazon.com/gp/aw/d/B0725GG5LK/ref=tmm_kin_title_...
What you need to save: https://fourpillarfreedom.com/the-financial-independence-gri...
In virtually all other situations, it's a fool's errand. Instead, figure out why you want to retire early.
Imagine you're retiring tomorrow. What are you going to do with your time now? For most people, the answer is either unclear or it's something that you can do at 50-90% while doing a regular job.
So estimate what you can save over 10 years and determine if you're willing (or capable) of living on 3% of that.
How much are you willing to live off as income? If you need $40,000/yr (before taxes) you’ll require $1m in savings. $60,000 requires $1.5m. Tax-advantaged savings like a Roth IRA improve things here a bit but we can ignore it for a general ballpark idea.
Let’s say you’re frugal and only need $40,000. You’ll have to save up $1,000,000 in invested assets over a decade. Given expected 4% inflation-adjusted returns, this works out to around $85,000 in savings each year (adjusted upward 3% each year for inflation).
In order to afford those savings, after tax and $40,000 in annual expenses, I’d guesstimate you’ll likely need somewhere in the ballpark of $150,000/yr of income. Again, adjusted upward 3% every year for inflation.
By the same math, if you want to live off $80,000 a year, you’ll probably need to earn $350,000 or more annually over that decade. The number more than doubles because of the increased taxes at those kinds of incomes.
The basic math of it would be to earn X, and live off of X/5 (both after taxes). After 10 years you’ll have 40+ years of income accumulated. There’s some additional complexities with health care, but the core plan is to earn, not spend a dime, and get used to it.
That's the easy way to do it.
Work remotely for a western tech salary and save 90% of it. That person’s $500/month example is pretty extreme, but one can live well in most of Mexico, a lot of SE Asia, and a lot of South America for under $1000/month.
If you’re planning to move for a long period or potentially forever, be aware that Spanish is much easier to learn than, say, Thai, and some countries (Mexico!) are much more flexible about visa extensions and permanent residency than others.
(Doing this with kids is much, much harder because most “international schools” charge very high tuition. The math probably doesn’t work out, especially compared to moving to a low cost of living town in your existing first-world country.)
Ten year plan sounds aggressive (again, what choice do you have), and will probably require aggressive investing.
One thing I think you can do is eliminate the notion of age. Having a home asset should be a good enough goal. If you can drop a big down payment on a home or outright buy a condo after 10 years of saving, then you can reasonably expect to not have large mortgage/rent to worry about later in life. If that stops being a worry, the need for a job starts to become less of a worry. By that time, you should hit retirement and ride the social security checks until the end.
The goal should be to remove the dependency on the economy for your livelihood.
1) You cannot run a business.
2) You have practically no net worth.
3) You do not have a network of good contacts.
4) You are 38.
5) You are jobless now.
Considering all your constraints, here is a path to consider:
1) Have an open mindset. This is the MOST important tip. Do not let your past determine your future.
2) Be consistent. Have an accountability partner to make sure you are working towards your goal every single day.
2) Master one or two specialized skills which are in-demand the most, pay the most, and are likely to be there for the next ten years. Do not learn them, master them.
3) Build projects in those areas.
4) Whenever you have questions, ask. Ask the top people working in those areas. Make a note of the helpful ones.
5) Interact with, and help people who are working in those areas, whenever you get a chance. Attend every webinar, conference and meetup. Nowadays, it is easier because you are not constrained by geography.
6) Once you have achieved near-mastery, start applying for jobs in those areas. At the same time, keep building projects. Do not slack off on either one.
7) Once you get a job, make sure to save as much as you can. Do not end up with a low net worth ever again. Learn more and more at the same time.
8) Get better jobs. Your only criteria for switching jobs should be more salary.
Not stock options. Do not gamble, your life is passing you by.
Not titles, unless you have a clear plan to leverage your title into a better paying job.
Not "job safety" - it is never safe. You being in an in-demand area is your job safety.
9) Put your money in low risk investments. Google "best low-risk investments" - there are many sites with lists. Invest in near-zero risk investments and park your money there. Do not touch it.
If you really, really decide to invest in stock market:
Look at the general trend of stock market. Invest only when it is going up. Never bet against market. If you invest, buy only stocks or indices you plan to hold for ten years. Never sell. Make sure to have stop losses added to do that for you. When those stop losses get executed frequently, get out of the market. Do not try to do value plays. You may not live enough to see the market reversal.
Stay away from cryptocurrencies, GME, BB, .... They are not for you. If you want to join the fun, buy ONE stock or one cheap cryptocurrency. Just one. That will give you the same thrill, without the associated risk.
10) Retire at the age of 48 or 49 and make a "Thank you HN" post here.
"Near-zero risk" means near zero profits. For a ten year horizon, stock index funds are fine but generally considered "high risk". As the ten year point approaches, slowly re-balance towards low-risk assets. Totally agree on staying away from options, anything leveraged or other gambles.
> Look at the general trend of stock market. Invest only when it is going up. Never bet against market. If you invest, buy only stocks or indices you plan to hold for ten years. Never sell. Make sure to have stop losses added to do that for you. When those stop losses get executed frequently, get out of the market. Do not try to do value plays. You may not live enough to see the market reversal.
This would be trying to time the market, which is a bad idea. Don't. You don't know which way the stock market is going until after the fact. The advice above is a quick path to buying high and selling low. Instead, invest the same amount every month and just don't touch it! Time in the market is what matters.
When I wrote it, I was thinking mostly about OP and how I can help, but now when I read it again, I see that you are right - most points are generic enough to be applicable to more than OP.
That being said, in the near term some are bullish that this uptrend process isn't done yet. It'll just be too late for me to amass enough to benefit from that and retire.
There's a handy little formula that you can play around with in order to work out a suitable target and savings timeline. Although it ignores the stochastic nature of stock markets by assuming a constant return, it's a good ballpark figure, especially if you use conservative estimates for things.
X = The amount you will need to save and invest each year until retirement
T = Your target amount (Between 25 to 30 times your desired living expenses in retirement - See the Trinity Study and the 4% rule)
R = The expected rate of return after inflation
N = Number of years until you want to retire
X = T * R / ((1 + R)^N - 1)
Assuming a relatively conservative rate of return like 0.04, and a modest but liveable target of $500,000 in 10 years:
X = 500,000 * 0.04 / (1.04^10 - 1)) = $41,645
If you can keep your living expenses low, that could potentially be done on an $80,000 or $90,000 salary. Notice that your current age does not factor in this formula, only the number of years until you'd like to retire. Now obviously, if you'd started at say 28, you could retire at your current age with the same savings amount, or take the full 20 years but only have to save $16,791 each year, but overall, you'll be fine getting started right now.
You can also flip the formula around to work out how long it would take on a particular savings target:
N = log(base 1 + R) ((T * R) / X + 1)
Your calculator might only have ln, so you can just divide by ln(1 + R) in order to get the same thing:
N = ln((T * R) / X + 1) / ln(1 + R)
Like before:
N = ln((500,000 * 0.04) / 41,645 + 1) / ln(1.04) = 10 years
Play around with those numbers and you should be able to find a plan that feels attainable, even on a relatively modest income compared to some thrown around here. In all likelihood, you'll end up exceeding your savings target as you pick up a few salary increases along the way. And if you can save especially hard in the first couple of years, those early investments will put you ahead of schedule which gives you flexibility later on.
One more thing... On decade or shorter timescales, the rate of return doesn't really matter that much. That said, you'll need to invest your savings by the time you retire, so may as well get comfortable with it now - just keep it nice and boring.
Fingers crossed I've written those formulas correctly and that they are clear enough. Hope that it all helps!
C = Your current amount of savings invested or available to invest
X = (T - C * (1 + R)^N) * R / ((1 + R)^N - 1)
N = log(base 1 + R) ((T * R + X) / (C * R + X)) = ln((T * R + X) / (C * R + X)) / ln(1 + R)
Minimize social contact with friends and relatives. That’ll end up costing you money.
Save everything.
Try to aim for $30,000 in savings a year. In 10 years, you will have $300,000. You can do this.
Life will suck. You may feel like an empty shell, going through life, as you get older. And you may question what it is you’re doing, and why. But keep your eye on the prize.
Open a stock trading account. Put your money into SPY. Keep buying it. This is the S&P 500 market. Your goal is to get that 2-3% dividend. Reinvest that back into more shares of SPY.
After a while, it will start to compound.
In 5 years, learn how to write cash secured puts. This will allow you to make a little more money than just investing in SPY. There are more risks involved here, so keep your strategy conservative. Or if this is too complicated, then skip it, and just stick to investing in SPY.
