My Secret to FIRE

Today I will tell you my secret to FIRE (Financial Independence Retire Early). Actually there’s not much to it, nothing fancy, no financial advisor needed, and it’s not such a secret. You save as much of your income as you can (~50% for me, for 13 years) and dollar cost average it, automatically have it put into your investments from your bank account, weekly, biweekly or monthly. Then don’t think about it, just live your life. save and invest. No need to check it, (unless you want to, and if you want to I suggest doing it when the market is up to make yourself feel good). You let the magic of compound happen, and allow your money work for you and grow while you sleep. 

A few years ago I noticed I had to pay a lot more taxes and investigated why. It turned out one of my investments that I had just set and invest, grew so much, and it wasn’t tax efficient (Vanguard Primecap core VPCCX).  I had thought this would be a great investment to put into as my mom had started it for me many years ago, and now they aren’t accepting new investors into it. Whether right or not, in my mind this meant it was a good investment to be in. With some mutual funds, such as this one, significant yearly capital gains release can result in additional taxes, something to be aware of before investing a significant amount of money in a taxable account. Being busy with my clinical work and writing papers, I probably hadn’t checked my accounts in a while and found out I had way more money than I knew I had, well on my way to financial independence. 

In summary, my strategy for creating wealth:

1. Live within your means

2. Automate saving and investing (set and forget)

3. Enjoy your life (while your money works for you)

How about you? How have you been able to grow your wealth? 

Comments

Post a Comment

Popular posts from this blog

Book review: I will teach you to be rich

Just started this book by Ramit Sethi and I like its entertaining style so far. Honestly I find it much more entertaining than the white coat investor and I like his sense of humor and he also has the immigrant mentality background. And it’s purpose meshes with my blog, we both want our writing to help people to feel more comfortable about money. Also I like that he emphasizes that there isn’t one right way to get there for everyone. Do you want to save and invest 20% and get there in 30 years or 50% and FIRE (what I did). And we all get to choose how we want to be rich. Does being rich mean to you that you no longer need to work for money, but for your own personal satisfaction if at all? Does being rich mean living in a certain area? Or buying what you want? Or traveling where you want? Or not having to worry about money? Chapter 1: would you rather be sexy or rich (lol)  Why is managing money so hard? One thing is the information overload, all of the things on the news, what peo...
Read more

How much do you need to retire?

It depends on how much you need to live on! So the first step would be to see how much you have spent in the past year, or longer, to get an idea. The 4% rule, states that you can live off of 4% of your invested assets and that you will not run out of money. For example, if you have $1 million invested, each year you can pull out $40,000 without having to touch the principle, on average. Certainly if it’s a down year it’s recommended to not take out as much as 4%, and you can take out a little bit more in good years. Personally, as I am more conservative and risk-averse, so I would not want to pull out more than 3%, especially since I have had to retire early due to my health, and I’m also concerned about inflation and I must admit a little fearful in general. The more typical physician might live on about 100 K a year, (aka FATFIRE) so you would need about $3 to $4 million if you were living off of only invested assets for that. It’s good to take into account any additional income you...
Read more