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Saving enough money to retire comfortably later in life can seem like a daunting, out-of-reach goal.
But some are challenging themselves to get there faster than usual.
The FIRE movement — which stands for Financial Independence, Retire Early — is built on the idea that being super efficient with your money can help you achieve financial freedom sooner.
during the meeting CNBC Financial Advisor Summittwo experts share the steps they’re taking to become richer than they ever imagined.
“The FIRE movement is based on the principle that the higher your savings rate, the higher the percentage of your income you save as a percentage of your income, and the sooner you will achieve financial independence,” says the author of Financial Freedom. Author Grant Sabatier says. , who had $1.25 million saved by age 30.
Alex Trias, a former lawyer living in Portugal, is retiring at 42 thanks to long hours and aggressive savings, as well as the economy of inheritance and small real estate investments increase.
Both Sabatier and Trias offer advice on how others can follow in their financial footsteps and retire early if they want to join the movement or simply improve their financial prospects.
1. Increase the savings rate
Sabatier noted that the average savings rate in the US today hovers around 2% to 5%.
That rate ensures that most Americans will never be able to retire, he said. For those who are able to retire in their 60s or 70s, they may end up with a lot less money than they thought.
But by saving around 50 percent of their income, the average person can achieve financial independence in 10 years or less, Sabatier said.
Between 2010 and 2015, Sabatier saved 82% of his income into a stock market index fund and allowed it to compound.
“Now I have a lot more money than I ever imagined, and I can save and invest more than I need,” Sabatier said.
2. Lower cost of living
To achieve a high savings rate, you need to lower your cost of living.
Sabatier did this by moving from a $1,700-a-month apartment to an $800-a-month apartment. He also chose to buy an $800 used car instead of a new one.
“In my 20s, I basically lived like a college student,” Sabatier said.
Trias took the concept a step further and moved to Portugal, where he was able to reduce the costs he faced living in Washington, DC.
His annual property taxes dropped from about $11,000 to about $184.
What’s more, Trias says his health insurance costs are now 10% to 15% of what you’d pay for an unsubsidized plan in the US.
Prescription drug costs have also dropped dramatically, with a drug that costs about $600 a month in the US now accounting for just $60 of his budget, he said.
3. Increase revenue
Of course, it’s easier to save more when your income is higher.
Sabatier said he realized he needed at least $23,000 a year to make ends meet. But once his annual income surpassed $250,000, savings started to add up quickly, he said.
To reach that level of income, Sabatier added various side hustles, including helping out with a friend’s moving company, building a website and running Google ad campaigns. He also started writing online and building an online business.
“It’s never been easier in history to start a side hustle because the barriers to entry are so low,” Sabatier said. “There are so many different ways you can make money online in ways that didn’t even exist 10 years ago.”
There are worse problems than waking up at 45 with $1 million in the bank.
Grant Sabatier
Author of Financial Freedom
In contrast, Trias makes managing his portfolio and working for himself a top priority in achieving his financial goals.
Both acknowledge that the FIRE lifestyle comes with sacrifices and risks.
So it’s important to check in with yourself every year to assess whether the trade-offs you’re making are worth it.
Not everyone sticks to a FIRE strategy until retirement. Some people do this for five or 10 years and then enjoy the freedom of having more money in the bank than they thought possible, Sabatier said.
“There are worse problems than waking up at 45 and having $1 million in the bank,” Sabatier said.