Let me guess if this is you. You once had high hopes for your corporate career but by now you’re wondering if there is more to life than working towards the next promotion, which will then make you work even more? You heard about the FIRE Financial Independence Retire Early movement and you are eager to learn how you can create freedom to follow your real calling without worrying about your finances?
Awesome! I’m glad you’re here.
I remember how excited my fiancé was when he read this first FIRE Financial Independence Retire Early book! He was so inspired by the possibility to ditch the hamster wheel and step into a life of time and financial freedom.
Yet, it seemed intimidating. We were absolute beginners and financial independence seemed simply out of reach. According to the formula, it would take us 30 years to retire.
That was not our definition of “retire early”!
We figured out a way how we could reach financial freedom faster.
Here are 4 beginner-proof steps to reaching FIRE Financial Independence Retire Early in the next 5-10 years.
That’s right!
We used these steps ourselves to retire with 28 years old and follow our dream to travel for 1.5 years in South East Asia. Now we’re building our passion business and we’re working towards increasing our passive income to cover our monthly expenses living in Europe.
If you’re ready to fast-track your path to financial independence, read on.
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1. Save aggressively & invest into buying assets
As long as you’re getting paid for your hours, you will never have 100% flexibility & freedom. To create real time freedom, you need to generate cash flow by making your money work for you.
This is where we’re still in line with the typical FIRE Financial Independence Retire Early advice.
The rule of the FIRE community is to save 50-75% of your income. Yes, it sounds like a lot but when you do a serious re-work of your budget and eliminate expenses that are not essential, saving a significant portion of your income is not as difficult as it seems.
Don’t worry, by “not essential” I don’t mean to cut all fun expenses. You can still plan to eat meals out and treat yourself once in awhile with purchases. However, it’s critical to be intentional about your spending and avoid impulse buying. Set yourself a monthly budget and stick to it.
When investing, our rule is to keep 3x your monthly expenses accessible as an emergency cushion. The rest, invest.
The rule is the riskier the investment, the higher the return. However, in the beginning, we advice to prioritize low-risk investments. Relatively safe investments are ETFs and real estate. To select the right investments for you, evaluate your capital, your risk appetite, and calculate the expected ROI.
While this point was following the traditional advice of the FIRE community, the next step is unconventional.
2. Invest your time into creating product assets
This is where we deviate from the typical “make money work for you” approach. Instead of working your regular job to maximize your savings and investment, we encourage you to also invest your time for the maximum return.
Instead of trading time in exchange for money, use your time resource to create products and business assets that generate passive income. Product assets that require only a minimal up-front money investment and generate a high profit margin are digital products. Examples are e-books and online courses or programs.
Te good news is that you can comfortably start building product assets next to your primary job. This way, you can build additional income sources in a no-risk way.
Before investing all your available time into a business idea, it’s crucial to validate the idea first with your target audience! (Here’s how to test an idea in 4 days). Remember, you want to invest your recourses (time and money) for the highest return on investment. This means, you want to make sure that your business idea is profitable.
Excellent ways to validate your business idea are to conduct market research and get real feedback from your ideal customers via face-to-face interviews and surveys.
Important! While validating your business idea and business model, it’s crucial to keep the next point in mind to set up your business in a FIRE Financial Independence Retire Early way.
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3. Automate your business
When building a business, entrepreneurs are often running into a common trap. They invest all their time and energy into their business and, eventually, spend 24/7 on their business. This is not freedom!
Even when you are initially passionate about your business, having to work in it plus adding the financial pressure that entrepreneurs face, it’s easy to burn out.
The solution to building a business you love and that gives you time freedom is to automate your business.
Create processes and partnerships that automate your operations such as admin, marketing, and sales as much as possible.
While automation will build up over time, it’s essential to take it into account early on in the process as it will influence the way you design and market your product. Ways to automate your business are to serve groups of people simultaneously instead of doing 1:1 work, to use affiliates, Evergreen funnels, and once you are profitable, hire virtual assistants to take over operational parts of your business.
Once you achieve consistent earnings in your business, make sure you are investing your business earnings smartly. Learn how in the next point.
4. Invest your earnings into more assets
A business is like a baby! You fall in love with it and the attachment grows with every day. You want to give it all you got, it becomes the most important thing, and you build up huge hopes for it.
When entrepreneurs become emotionally too attached, they make poor decisions!
One of the primary rules of personal finance is to avoid putting all eggs in one basket and diversify your investments instead. This hold also for your business.
Use a portion of your business earnings to invest back into growing your business. The rest, invest into buying or creating additional assets.
Your goal is to have a balanced and diversified portfolio or capital and business assets. If you’re business ever faces a rough period, you can rely on your capital investments. If the stock market or rental prices go down, your business is there to catch you.
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