TL;DR - Key Takeaways

• How to retire early using the FIRE (Financial Independence, Retire Early) strategy.
• The various types of FIRE - lean, normal, and fat, with ways to calculate each.
• Crucial tips to increase your income, savings, and proper investment strategies.

Understanding the FIRE Movement

The FIRE (Financial Independence, Retire Early) movement originated in the U.S around three decades ago, thanks to Vicky Robin and Joe Dominguez whose best-selling book, 'Your Money or Your Life' popularised the concept. In essence, FIRE is about accumulating enough wealth that, when properly invested, generates an income that covers your yearly expenses.

Types of FIRE

Different ways individuals can leverage FIRE strategy to retire early:

Lean FIRE

This is calculated as twenty times your annual expenses. For instance, if you spend INR 50,000 per month (INR 6 lakhs annually), your lean FIRE would amount to INR 1.2 crores. Assuming that you could achieve lean FIRE at the age of 40, the math dictates that you'll need to invest approximately INR 42,000 monthly to reach INR 2.3 crores by 40 — assuming post-tax returns of around 11% over a 13-year period.

Normal FIRE

Your normal FIRE number is simply twenty-five times your annual expenses. There's a research-based reason why the figure stands at 25. A study by Trinity College concluded that if you saved 25 times your annual expenses and withdrew only 4% annually, this corpus would last you for about 30 to 40 years.

Fat FIRE

As the name suggests, the fat FIRE number is considerably larger, totaling around fifty times your annual expenses. Once you achieve this amount, you can afford to spend more than usual and still have a substantial amount left over for your heirs.

Achieving your FIRE Number

Here are three strategies to help individuals meet their FIRE goals:

1. Increase Your Income

Finding ways to improve your earnings could help you achieve FIRE faster. This could involve negotiating a salary raise, seeking a better-paying job, or starting a side business for extra income.

2. Increase Your Savings

You could consider following the '50 30 20' rule — 50% to expenses, 30% to savings, and 20% to debt repayments — or design a custom budget according to your income and expenses.

3. Optimal Investing

Depending upon the state of the market, you may prefer investing in stocks. However, putting all your eggs in one basket — this case, the equity market — isn't advisable due to potential drawdowns. Therefore, it's better to diversify your investments across various asset classes.

Diversifying Your Investments

To maximize your returns and minimize risk, your investments should be strategically divided - around 60% should go into domestic equity, 10% in US equity, 15% in debt, 5% in gold, 5% in crypto, and the remaining 5% in real estate. Of the total invested in the domestic stock market, it's advisable to split your funds between large-cap, mid-cap, and small-cap companies.

The Master Financial Planner Tool

Financial planning isn't just for retirement — it's a lifelong habit. With the 'Master Financial Planner Tool', you can manage your financial goals effectively. Moreover, being a member of the 'One Percent Finance Club' gives you access to financial tools, resources, and a thriving community, all of which play a significant role in helping you on your journey to financial independence.