Jakarta, CNBC Indonesia – The definition of established for each person is certainly different because each person certainly has different financial burdens and goals. However, a FIRE (Financial Independent Retire Early) practitioner has defined this into five stages.
Each individual or family of FIRE practitioners is generally quite attached to a frugal lifestyle. This is because they target to be able to allocate the majority of their income to saving and investing.
But in essence, not everyone can do this because the income they receive per month is not always “big.” When someone earns a mediocre salary, let's say it's equivalent to twice the average minimum wage, it will be very difficult for him to be able to allocate money above 50% of his income for investment.
As reported by CNBC Make It, FIRE practitioner Jessica Fick found five levels of stability that seem to be quite related to the reality of people's lives. Here's the review.
Debt free
Debt free is the first level of prosperity. It's no secret that whatever form of debt we have, we will always have passive expenses, and debt will also erode the value of our wealth.
By freeing someone from debt, you can certainly allocate more money for saving or investing.
“F You” Money
F You means “Forget You,” and what does F You mean?
“This is also a feeling (related to finances). This is (the level) where you already have a (more stable) financial condition where you yourself can decide to leave an annoying job and start a new business,” said Jessica Fick, on CNBC Make It.
How much savings should those in this phase have? Of course it varies, but Fick emphasizes again that if you don't have the courage to leave your job, then you are not yet in this phase.
Coast FI
The word FI is an abbreviation of Financial Independence or financial independence. To find out whether you are in this phase, of course you need mathematical calculations.
First, you must know how much money is needed to retire young. An easy way to find out is to multiply the amount of annual income you judge to be “enough” to survive in retirement by 25.
Let's just say, your dream fund for young retirement is IDR 10 billion. So to be able to enter the Coast FI level, you must have money which is believed to soon reach IDR 10 billion if you invest regularly in existing financial instruments.
Of course, do very realistic calculations with conservative methods. Don't be too optimistic, because every investment process will certainly contain risks.
Semi-retired
Of course, when you are at this level you can work at your own pace. You might be able to take 1-2% of your total retirement savings for snacks or fun, because your retirement fund is really close to your target.
Financial Independence
This stage is called Financial Independence or financial independence. This is a condition where you no longer have a headache if you want to spend money on whatever you like, be it shopping, holidays or other consumptive activities.
Those who are financially independent can be said to be worthy of retirement. Some of them can even use all the money they have to make more money and pay for their lives.
Approximately, what level are you at now?
[Gambas:Video CNBC]
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