The FIRE movement is burning red-hot.
With a number of Americans becoming uninterested in the thought of working until their 60s or 70s, many are turning to a new way of life.
I’m an amateur personal finance geek.
Your tools have helped me become a smarter investor.
Personal Capital Dashboard User, February 2021
If you’ve never heard of the FIRE movement, it stands for “financial independence, retire early.” The goal is to be “work optional” as soon as possible, typically under the age of 40. Adoptees of the movement focus on saving a large chunk of their salary, using tax-advantaged retirement accounts and increasing their earnings in order to retire before the average person. With the FIRE movement gaining momentum, many folks wonder if it’s possible for them.
Exploring if retiring early is right for you? Here are some ways Personal Capital can help.
1. Track Your Net Worth
Your net worth number is a hallmark of your financial health.
Keeping track of your assets and liabilities (all in one place) is a great way to measure your progress towards financial independence. Having a visual manifestation of your financial hard work not only allows you to adjust and evolve, but also motivates you to continue towards your goal.
According to a recent study by Dominican University in California, you’re 42% more likely to achieve a goal by writing it down and making it visual. Seeing my net worth in Personal Capital was one of the biggest reasons I hit my $100,000 goal — my big first step towards financial independence. I could check in every week (or let’s be honest, every day!) on my progress to encourage myself. Seeing all of my accounts in one place streamlined the time I was spending on my finances.
2. Plan Your Early Retirement Date
If you’re interested in the “RE” of the FIRE movement (aka “retiring early”), then planning is crucial. Early retirement takes massive logistical planning — making sure you’re invested in the right retirement accounts, learning about early withdrawal limits and figuring taxes is a full-time job.
A Personal Capital financial advisor can help you determine when you’ll reach your goal, and create a comprehensive plan to help you confidently achieve your goal. They can also help you estimate how cutting your spending and increasing your saving could get you there faster. Having someone dependable in your corner makes all the difference.
3. Set Good Financial Habits
Like any goal, building good habits is the key to reaching financial independence. Financial self-care — like optimizing your accounts, checking balances and increasing your savings — is the best way to ensure you’re building a strong financial foundation. Building these habits early in the process helps put you on the right track for paying off any debt, saving regularly and growing your investments. Using resources like Personal Capital means you’re setting yourself up for success.
4. Minimize Fees
On the road to FIRE, every dollar counts, especially when you consider compound interest. The fees associated with your chosen investments, like mutual funds, could be costing you. Personal Capital’s Fee Analyzer tool helps you scope out the expense ratio for popular funds — including the ones you’re already invested in through your 401k — to make sure you’re not losing money. It also gives you information about the taxes associated with your investments so you can make the right choice for your strategy.
If you decide to pursue financial independence — or if you’re just trying to build a strong financial foundation — Personal Capital can help you every step of the way.
Personal Capital compensates Tori Dunlap (“Author”) for providing the content contained in this blog post. Additionally, in a separate referral arrangement between Author and Personal Capital Corporation (“PCC”), Author is paid $70 and $150 for each person who uses Author’s webpage (www.HerFirst100k.com) to register with Personal Capital and links at least $100,000 in investable assets to Personal Capital’s Free Financial Dashboard. As a result of these arrangements, Author may financially benefit from referring potential clients to Personal Capital and/or be incentivized to present blog content that is favorable to PCC. No fees or other amounts will be charged to investors by Author or Personal Capital as a result of the Referral Arrangement. Investors that are referred to PCC and subsequently subscribe for investment advisory services provided by PCC’s affiliated adviser, Personal Capital Advisors Corporation (“PCAC”) will not pay increased management fees or other similar compensation to Author, PCC or PCAC as a result of this arrangement. Additional information about PCAC is contained in Form ADV Part 2A available here.