If you don't know how to save money, don't talk about "FIRE financial freedom"

The two keys to "FIRE financial freedom" are "saving money" and "money begets money". If you are really determined to move towards "FIRE financial freedom", please start with "saving half of your income"!

1. The basic version of FIRE saving money: half of the income is saved

There are various ways of saving money in the market. The two girls have FIRE experience. There is no shortcut to saving money. For the FIRE family who is just starting out, it is simple and rude to save half of their salary directly, and it is also the most effective .

[Situation 1: Fixed salary, half of the income is saved]

Assuming that your monthly salary is NT$40,000, you save 20,000 yuan a month, and the remaining 20,000 yuan is used for expenses (including daily, fixed and enjoyment expenses). On this basis, your "FIRE retirement account" needs The figure is 6 million yuan (annual expenditure of 240,000 yuan X 25). If you start working continuously at age 25 and save $20,000 a month, 25 years from now, when you're 50, you'll be saving your target $6 million in your FIRE retirement account.

You may be asking, is it possible to not have to wait 25 years to reach the FIRE retirement account goal? Or after 25 years, can the "FIRE retirement account" amount be a little more? This is also what the two girls want to discuss with you from their own experiences.

2. FIRE save money advanced version: control expenses, save more income

If you want to save money faster, one is to increase your salary income, and the other is to increase the deposit ratio.

[Situation 2: Salary growth, half of the income is saved]

Assuming that you start working from the age of 25 and your salary has grown, according to the principle of "saving half of your income", the expected situation is as follows:

• Five years before work: monthly salary of NT$40,000, half of the monthly deposit is 20,000 yuan
• The second five years: the monthly salary is NT$50,000, and half of the monthly savings is NT$25,000
• The third five years: the monthly salary is NT$60,000, and half of the monthly savings is 30,000 yuan
• Fourth five years: monthly salary of NT$70,000, half of monthly savings is NT$35,000

When you work until age 45, your FIRE retirement account will be $6.6 million (= 24 X 5 + 30 X 5 + 36 X 5 + 42 X 5).

[Situation 3: Salary growth, spending control, more income savings]

Assuming that you start working at the age of 25, in the first five years, according to the principle of "saving half of your income" and "accounting for half of your expenses", and in the next few years, according to the principle of "controlling your expenses" and "saving more income" , the expected situation is as follows:

• Five years before work: monthly salary of NT$40,000, half of the monthly savings is 20,000 yuan (income 40,000 yuan - expenditure 20,000 yuan)
• The second five years: monthly salary of NT$50,000, monthly savings of 30,000 yuan (income 50,000 yuan - expenditure 20,000 yuan)
• The third five years: monthly salary of NT$60,000, monthly savings of 40,000 yuan (income 60,000 yuan - expenditure 20,000 yuan)
• Fourth five years: monthly salary of NT$70,000, monthly savings of NT$50,000 (income 70,000 – expenditure 20,000)

So, when you work until age 45, your FIRE retirement account will be $8.4 million (= 24 X 5 + 36 X 5 + 48 X 5 + 60 X 5).

Now, let's look at the above three hypotheses:

• [Situation 1] Fixed salary and half of the income: At the age of 50, the "FIRE retirement account" will be deposited to NT$6 million
• [Situation 2] Salary increases, half of the income is saved: At the age of 45, the "FIRE retirement account" will be saved to NT$6.6 million
• [Situation 3] Salary growth, control expenses, and save more income: At the age of 45, the "FIRE retirement account" will be saved to NT$8.4 million

Saving money well is an essential action that must be continuously accumulated in the process of "FIRE financial freedom". You can choose the method that suits you according to your own situation, whether it is "saving half of your income" or "saving more of your income", as long as Start saving money, save the first "saved money", you will have the opportunity to "money begets money" in the future, and you will be one step closer to your ideal "FIRE financial freedom".

At this time, you may want to ask: "I am a moonlight family, what should I do if I can't save money", "I also want to save more money, but what should I do if my salary doesn't grow?". If your problem is the Moonlight Clan, I suggest you start by checking your own spending (refer to the previous article). If your problem is salary growth, which is related to personal career development, we will discuss more in a follow-up article.

Focus on:

Saving money well is a must for FIRE financial freedom:

1. The basic version of FIRE saving money: half of the income is saved

2. FIRE save money advanced version: control expenses, save more income