Highlights
- FIRE is the acronym for Financial Independence Retire Early.
- Know your FIRE number.
- Budgeting is the foundation of FIRE.
May PERAan' is SBS Filipino's new podcast series which features financial experts seeking to answer the most common questions about money and finances.
Financial expert Jerry O'Brien explains what the FIRE movement is and why having a proper budget can help you retire early.
Listen to the podcast
LISTEN TO
May paraan ba upang ika'y makapag-retiro pagdating mo ng edad 40?
SBS Filipino
31/08/202112:06
What is the FIRE movement?
"FIRE or Financial Independence Retire Early it has gained popularity recently - maybe around 10 years ago. Basically, this is saving a significant portion of your income and investing it in different asset classes. That will ultimately give you a steady income source in a few years after your establish that asset base."
The money you've invested and earned will then be what will sustain you should you retire early or cut back on your working hours.
What is your FIRE number?
This is the income you want to achieve from your investment.
Jerry explains that different people will have different FIRE numbers.
"For example, you want to have a FIRE number of 33,000 a year earned from her investments after tax. Her FIRE number is just supplementary income.
"The ideal number for investment yield is 7%. Yield is what you get from the investment that you made; so 33,000 AUD divided by 7% will give us an asset base of 472,000 AUD. So that asset base is what she needs to put into her investment - either in stocks, property or business."
Jerry says that 7% is certainly achievable in Australia, especially if you invest your money in stocks.
"In this case, 3,900 monthly is what you need to save and invest; or roughly, around 55% of your income to achieve FIRE in 10 years."
Budgeting and saving
"I know budgeting is a boring or cliché topic to talk about for some, but it's important. It's the foundation of FIRE. Ultimately, what you want is to trace what income comes in and where it goes," Jerry shares.
With the necessary things you need to spend us such as tuition fees, you might not be able to save and invest 55% of your income and this might mean retiring later than your goal.
"Ultimately, it's not how big your income is. It's about how much you save," he emphasises.
ALSO READ / LISTEN TO
Disclaimer: This article is for general information only. For specific financial advice, you should consider seeking independent legal, financial, taxation or other advice to check how the information here relates to your unique circumstances.
