Bring the F.I.R.E. this 4th of July—A Guide to Financial Independence

Are your ears burning? That’s because F.I.R.E (financial independence, retire early) is sweeping the country as more women decide to live a life they love on their own terms.I know, it sounds impractical. Aren’t we supposed to work until we’re ancient? But I’m here to share the skinny on how you can cut years off your 9-to-5 and go get that tan on the beach in the Bahamas instead (again, this is not fake, keep reading).

What does it mean to be on F.I.R.E.?

You achieve F.I.R.E. when your wealth, including savings and/or investments, can provide enough cash flow to make working an option and not a necessity (what a dream, right?).There are two ways to become a financially independent boss babe: the four percent rule and passive income streams.Skim off the top.

According to this rule, you can annually withdraw at least four percent of your investment portfolio to live off of without touching the balance (a.k.a. how much you put in). By leaving the balance, you’re creating a recurring income stream off the money you earn from the investment.So how much do you need to invest? That depends on how much you need to cover your lifestyle for a year. If you’re currently living off of $50,000, you would take that amount and divide it by 0.04.

In case you don’t have your calculator app open, that comes to $1,250,000. Casual, right? Who doesn’t have a cool million to spare?

Get passive (aggressive).

Option two is to create passive income streams. It takes an initial investment, but then little to no ongoing effort.Real estate is a great example of this. Once you buy a house, you can rent it out immediately. Consider what you’ll pay for the mortgage, property taxes, maintenance, etc., and check if the price you’d need to charge to cover all of your expenses and still return a profit matches the current market. If so, it’s time to start living that Airbnb host life.

If real estate isn’t your thing (or you find all that math downright scary), start smaller. Want something super easy? Create a printable to download off Etsy for a one-time fee.

This sounds overwhelming… 

You’re right, it does. How are you supposed to save enough money to purchase real estate, let alone grow an investment portfolio of over a million dollars? Girl, I hear you.Just like Drake, you gotta start from the bottom.

First, give yourself a financial quiz. Are all your bills on time? What about debt, savings for a rainy day, and that shoe sale that comes once a year?

If you get an A, great job! If it’s looking more like a C or lower, get yourself situated before jumping into the F.I.R.E.

Once you’re doing well financially, estimate how much money you need to stay there. Add up your monthly spending, then multiply it by 12. That’s the amount you need to be generating from investments or passive income streams to cover your living expenses for a year.

You don’t have to follow just one of the two F.I.R.E. routes, either. In fact, many people do a hybrid and become financially independent sooner than later.

Are you feeling the burn yet?

If not, maybe check out how you can get F.R.E.E. or Financially Resilient and Empowered Early.

We’re changing the narrative around money but change can’t happen with a one-sided conversation. Send us an email and let us know what you think. And remember the nav.it money app offers you free tools for checking in and managing your money moves.

You can download it at Google Play and the Apple Store.