I’m on track to retire at 42 thanks to the FIRE method – here’s how you can too

JACOB Aldridge might only be 40 years old, but he’s already planning to quit work and start his retirement.

He is one of a growing army of people in the so-called FIRE movement , who are saving hard at a young age so they can start retire ahead of schedule . Jacob Aldridge plans to retire decades ahead of schedule FIRE stands for Financially Independent, Retire Early – it’s a movement which started in America in the early 90s, but has become popular elsewhere in the world.

Jacob, who currently lives in Australia and works as a business consultant, said: “I first heard about FIRE in my early 30s – I found a blog about financial independence and it opened my eyes to what was possible.

“I was immediately excited by the thought of only working by choice – or possibly never working again – decades earlier than I had originally planned.

“Now, if everything goes perfectly, I’ll be in a position to retire the day before my 42nd birthday.” read more on saving

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The idea behind FIRE is that you save and invest a higher proportion of your earnings at a young age so you can gain financial independence and be in a position to retire early.

Research by money transfer site Remitly found that online searches for “FIRE method” have soared by 46% this year alone.

It’s an understandable ambition given that people are working longer than ever – the current State Pension age in the UK is 66 and will only go up.

And more people in their 60s and 70s are having to work longer than they expected just to pay the bills . Most read in Money

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For many people, the FIRE aspiration will sadly be unattainable – but that’s not to say you shouldn’t save for retirement if you can afford to.

Be sure to do your homework and check how much you’ll need to set aside – and make sure you can afford it, you shouldn’t leave yourself struggling now.

Here are Jacob’s top tips for any FIRE wannabes: Do your maths

Work out what you expect to spend in retirement to give you an idea of how much you’ll need to save. Don’t forget to factor in a budget for unexpected expenses like a broken boiler or car repairs too.Many FIRE savers work by the “4% rule” – this is where you divide your annual expenses by 4% to get your “retirement number”, which is the amount you need to set aside to last you.So, if your annual outgoings – mortgage , bills, groceries, holidays and everything else – were £15,000, your retirement number would be £375,000, and you could expect this to last you around 25 years (although it’s important to factor in inflation).Jacob is a high earner, and as he’s self-employed his income changes from month-to-month, but he aims to save around £2,000 a month.Some savers also have assets such as a business or buy-to-let property that can provide an income even after they have retired.Other FIRE savers shift to part-time or freelance work rather than retiring completely. Start investing Savings rates are at rock-bottom so it’s hard to grow your money if you keep it in the bank.Soaring inflation also means the “real” value of your cash is being eroded away as the same amount won’t stretch as far as it used to.For FIRE savers, that means you’ll need to invest.Jacob said: “Start small. Set up a stocks and share ISA and once you have made the first step, it gets easier.”He used forums to get advice, but you can also seek help from a professional financial planner.It’s important to keep in mind that with investing, there are no guarantees – and the value of your money could go down rather than up.Experts recommend drip-feeding small amounts rather than investing a lump sum, and being sure to leave your money alone for the long-term.Apps like Nutmeg and Moneyfarm […]

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