Score a Two-Fer Toward Financial Independence - Deepstash

Score a Two-Fer Toward Financial Independence

Lifestyle inflation is an insidious killer of your financial wellbeing and eventual financial independence.

What it is: allowing your expenses to grow along with increases in your income.

How preventing it helps:

  • Using increases in income to plump up your savings lets you take advantage of compounded returns over time.
  • Second, keeping your expenses lower reduces the size of the nest egg needed to fund your retirement. 

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MORE IDEAS FROM How to Reach Early Financial Independence

  1. When you score a raise or bonus, invest at least half of it for the future - this is the most painless way of increasing your savings rate.
  2. Whenever you pay off a loan or credit card, increase your savings by the same amount you no longer need to send to your creditor. This is another relatively painless way to save more.
  3. Every few months, review your spending and trim 3% off each discretionary category (e.g., eating out, shows, etc.).

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RELATED IDEA

What early retirement means

Early retirement is not defined as when you stop working forever, but as having the freedom and flexibility that saving up enough money can give you if you want to leave a job.

The idea that when you retire, you are done working is an old school idea. Working is actually good for you. People that altogether quit working start losing their mental faculties and may die sooner.

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Savings and investments should be part of a monthly budget even when young or just starting a career.

You cannot save enough if you are waiting until your late 30's before thinking about savings and investments.  Then credit cards and loans will drag the savings with added responsibilities like marriage, children, care of parents, etc.

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Financial Independence, Retire Early (FIRE)

FIRE is a financial movement of extreme savings and investment that allows proponents to retire far earlier than traditional budgets and retirement plans would allow.

  • By dedicating up to 70% of income to savings, followers of the FIRE movement may eventually be able to quit their jobs and live solely off small withdrawals from their portfolios decades before the conventional retirement age of 65.
  • To cover their living expenses after retiring at a young age, FIRE devotees make small withdrawals from their savings, typically around 3% to 4% yearly.

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