“Time is the fire in which we burn” Gene Roddenberry
My most hated and beloved question! Everyone on the path to FI or even those just thinking about it always have this one question “How long till I get there?” I personally can often drive myself mad trying to shorten the time to FIRE or bring myself to the point of despair when it seems like our spending is moving us further away.
The traditional FIRE route uses two factors to determine the speed in reach you reach it:
- Your annual expenses
This refers to the the amount of money you need to live on annually. Most people on the path to FIRE have a budget and/or financial plan.
This one is basically the least amount of money you need to live on annually means you will reach FIRE quicker. If you only need £1,000 a year to live on then you don’t need to save as much money as someone who needs £10,000 a year to live on.
This one ultimately boils down to how you see your future. If you want to live in a mansion and drive the best cars then you are going to need much more annually then someone who lives out of there car (odd contrasting example I know!)
The way to reduce this one is to set up a budget and work towards sticking to it.
2. Your annual savings rate.
Ah this one is not my friend! Mr Fire and I are not in a position to start saving yet and if you remember that last months savings rate was a shocking -34%!
As to how you calculate your savings rate, this one is a mythical creature! Mr Fire and I calculate ours by dividing our money left over at the end of the month by our income but there are many ways. I will hand you over to the wonderful Firestarter’s post all about debunking the myths since he sums it up perfectly!
The answer to when you can reach FIRE is simply how quickly you can save up the amount of money you need. There are other ways too though such as investing to create a passive income stream that you will receive like an income each year. The 4% rule is used in this strategy which I will be learning about next!
How do you calculate your savings rate? How do you plan to reach FIRE?