“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

What Is Financial Independence Retire Early aka FIRE?

What Is Financial Independence Retire Early aka FIRE?

You may have noticed a new term starting to creep into the mainstream financial media, that term is FIRE, and you might be wondering, “What the heck is FIRE? And how is it related to personal finances?”.

FIRE is an acronym that stands for Financial Independence/Retire Early. The basic idea is that if you pursue FIRE you can eventually stop working for money. You can be financially independent. You can do anything, retire early, keep working, volunteer, basically you can have more freedom.

The idea is that with enough savings/investments you’ll eventually reach the point where you can live off your investment income indefinitely. Once you reach this point you’re considered financially independent, you no longer NEED to work for an income, and can retire to a life of leisure (although you may choose to continue to work, change roles/professions, start a business, or volunteer).

While the concept of early retirement sounds amazing, it does take quite a bit of focus and determination to get there. To reach FIRE it requires a high savings rate, very high.

The typical financial advice given to the public is to save and investment approximately 20% of your net income (part of the simple 50/30/20 budget).

But to reach financial independence retire early you need to save more, much more. To reach FIRE you need to have a savings rate somewhere in the 30%-70%+ range. The higher your savings rate the faster you can stop working for money.

Because it’s easier to reach financial independence/retire early with a high savings rate, the path to FIRE is made easier with an above average income. With an above average income, basic expenses are easily covered, and it becomes more about managing lifestyle inflation. People who pursue FIRE try to limit their lifestyle inflation to maintain a high savings rate.

FIRE is also possible with a below average income, but requires a lot of creativity to reduce basic expenses. This may include house hacking, avoiding car ownership, and more extreme lifestyles. To reach financial independence/retire early with a low-income you need to live an alternative lifestyle.

Reaching FIRE is one of those extreme personal finance goals, it’s a goal that isn’t for everyone.

Even though the end goal sounds appealing, it requires a lot of hard work and dedication along the way. Reaching financial independence retire early means living way below your means for the rest of your life. It’s a lifestyle more than it is an end goal. It’s a lifestyle with a lot of freedom, but it’s also a lifestyle that requires a lot of control.

If you’re able to control your spending, and save a large % of your income, then reaching financial independence might only be a few years away.

To find out how far away you are from financial independence you can make a copy of our FIRE calculator and quickly calculate how many years it will take to reach FIRE in your situation. It will help you estimate how many years from FIRE you are based on your net-income, current expenses, and existing savings.

We’ve used our FIRE calculator to create four examples of how to reach FIRE.

read more
How To Maximize Your Canada Child Benefit (CCB) And Gain $1,000 to $10,000+

How To Maximize Your Canada Child Benefit (CCB) And Gain $1,000 to $10,000+

If you currently have children, or if you’re planning to have children soon, or if you know someone with children, then this blog post could help you increase the Canada Child Benefit (CCB) by $1,000’s or even $10,000’s.

The Canada Child Benefit is a generous government benefit. It’s available to families with children aged 17 and under. This benefit is based on taxable income and can be maximized with some careful planning.

By using just two common accounts, the TFSA and the RRSP, we can maximize the Canada Child Benefit (CCB) and also minimize income tax.

The net result is $1,000’s or $10,000’s in additional Canada Child Benefit (CCB) and potentially $100,000+ in additional net worth over the course of a financial plan.

In this blog post we’re going to go through a specific example of how one family can boost their Canada Child Benefit by over $55,000, and when combined with income tax reductions, improve their overall net worth by $300,000+

read more
Break Bad Spending Habits: Do A ‘No Spend’ Month

Break Bad Spending Habits: Do A ‘No Spend’ Month

Habits. They’re both good and bad.

Habits are tough to change because for the most part they occur subconsciously. You’re not really in control. You may not even realize it’s a habit. You think you’re making a decision but really it’s just a habit driving your actions.

When you have a habit, good or bad, you’ve been wired through repetition and rewards to make the same actions over and over. Truthfully you have very little control.

Habits form when a behaviour is repeated often enough to become automatic. There are typically three phases to creating a habit, the cue, the routine, and the reward.

For example, a regular exercise routine is an extremely beneficial habit. Regular exercise can greatly improve your overall health and wellbeing. Getting 75 minutes of exercise each week can extend your lifespan by as much as 4.5 years! (Not to mention you feel so much better!)

Unfortunately, habits can work against you too. Bad habits can form just as easily as good habits.

Bad habits usually form during stressful times, during big life changes, and when you’re bored.

Bad spending habits are particularly easy to form because there is an immediate reward for spending money. Bad spending habits are also easily formed because there are spending cues all over the place in the form of advertisements.

Bad spending habits can be very detrimental to your financial health. Even a few bad spending habits can cost you $50-$100 per week. Over the course of your lifetime those habits can cost you hundreds of thousands of dollars (See the difference just $10/day makes!)

If you think you may have some bad spending habits I’ve got a challenge for you!

Try doing a “no spend” challenge this month. For the next 30 days you should spend no money at all. NOTHING!

Doing a “no spend” month is a great way to reset your spending habits (and save a bunch of money!)

read more

Owen Winkelmolen

Advice-only financial planner, CFP, and founder of PlanEasy.ca

Work With Owen

“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

What Is Financial Independence Retire Early aka FIRE?

What Is Financial Independence Retire Early aka FIRE?

You may have noticed a new term starting to creep into the mainstream financial media, that term is FIRE, and you might be wondering, “What the heck is FIRE? And how is it related to personal finances?”.

FIRE is an acronym that stands for Financial Independence/Retire Early. The basic idea is that if you pursue FIRE you can eventually stop working for money. You can be financially independent. You can do anything, retire early, keep working, volunteer, basically you can have more freedom.

The idea is that with enough savings/investments you’ll eventually reach the point where you can live off your investment income indefinitely. Once you reach this point you’re considered financially independent, you no longer NEED to work for an income, and can retire to a life of leisure (although you may choose to continue to work, change roles/professions, start a business, or volunteer).

While the concept of early retirement sounds amazing, it does take quite a bit of focus and determination to get there. To reach FIRE it requires a high savings rate, very high.

The typical financial advice given to the public is to save and investment approximately 20% of your net income (part of the simple 50/30/20 budget).

But to reach financial independence retire early you need to save more, much more. To reach FIRE you need to have a savings rate somewhere in the 30%-70%+ range. The higher your savings rate the faster you can stop working for money.

Because it’s easier to reach financial independence/retire early with a high savings rate, the path to FIRE is made easier with an above average income. With an above average income, basic expenses are easily covered, and it becomes more about managing lifestyle inflation. People who pursue FIRE try to limit their lifestyle inflation to maintain a high savings rate.

FIRE is also possible with a below average income, but requires a lot of creativity to reduce basic expenses. This may include house hacking, avoiding car ownership, and more extreme lifestyles. To reach financial independence/retire early with a low-income you need to live an alternative lifestyle.

Reaching FIRE is one of those extreme personal finance goals, it’s a goal that isn’t for everyone.

Even though the end goal sounds appealing, it requires a lot of hard work and dedication along the way. Reaching financial independence retire early means living way below your means for the rest of your life. It’s a lifestyle more than it is an end goal. It’s a lifestyle with a lot of freedom, but it’s also a lifestyle that requires a lot of control.

If you’re able to control your spending, and save a large % of your income, then reaching financial independence might only be a few years away.

To find out how far away you are from financial independence you can make a copy of our FIRE calculator and quickly calculate how many years it will take to reach FIRE in your situation. It will help you estimate how many years from FIRE you are based on your net-income, current expenses, and existing savings.

We’ve used our FIRE calculator to create four examples of how to reach FIRE.

read more
How To Maximize Your Canada Child Benefit (CCB) And Gain $1,000 to $10,000+

How To Maximize Your Canada Child Benefit (CCB) And Gain $1,000 to $10,000+

If you currently have children, or if you’re planning to have children soon, or if you know someone with children, then this blog post could help you increase the Canada Child Benefit (CCB) by $1,000’s or even $10,000’s.

The Canada Child Benefit is a generous government benefit. It’s available to families with children aged 17 and under. This benefit is based on taxable income and can be maximized with some careful planning.

By using just two common accounts, the TFSA and the RRSP, we can maximize the Canada Child Benefit (CCB) and also minimize income tax.

The net result is $1,000’s or $10,000’s in additional Canada Child Benefit (CCB) and potentially $100,000+ in additional net worth over the course of a financial plan.

In this blog post we’re going to go through a specific example of how one family can boost their Canada Child Benefit by over $55,000, and when combined with income tax reductions, improve their overall net worth by $300,000+

read more
Break Bad Spending Habits: Do A ‘No Spend’ Month

Break Bad Spending Habits: Do A ‘No Spend’ Month

Habits. They’re both good and bad.

Habits are tough to change because for the most part they occur subconsciously. You’re not really in control. You may not even realize it’s a habit. You think you’re making a decision but really it’s just a habit driving your actions.

When you have a habit, good or bad, you’ve been wired through repetition and rewards to make the same actions over and over. Truthfully you have very little control.

Habits form when a behaviour is repeated often enough to become automatic. There are typically three phases to creating a habit, the cue, the routine, and the reward.

For example, a regular exercise routine is an extremely beneficial habit. Regular exercise can greatly improve your overall health and wellbeing. Getting 75 minutes of exercise each week can extend your lifespan by as much as 4.5 years! (Not to mention you feel so much better!)

Unfortunately, habits can work against you too. Bad habits can form just as easily as good habits.

Bad habits usually form during stressful times, during big life changes, and when you’re bored.

Bad spending habits are particularly easy to form because there is an immediate reward for spending money. Bad spending habits are also easily formed because there are spending cues all over the place in the form of advertisements.

Bad spending habits can be very detrimental to your financial health. Even a few bad spending habits can cost you $50-$100 per week. Over the course of your lifetime those habits can cost you hundreds of thousands of dollars (See the difference just $10/day makes!)

If you think you may have some bad spending habits I’ve got a challenge for you!

Try doing a “no spend” challenge this month. For the next 30 days you should spend no money at all. NOTHING!

Doing a “no spend” month is a great way to reset your spending habits (and save a bunch of money!)

read more

 

Join over 250,000 people reading PlanEasy.ca each year. New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

 

 

Join over 250,000 people reading PlanEasy.ca each year. New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

 

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