In a city full of financial professionals, a growing number of Charlotteans are trying out a new financial practice known as FIRE.
FIRE stands for “financial independence, retire early” and adherents plan to retire in their 30s and 40s with millions in the bank.
How do you play with FIRE? Basically, you need to save 25 times your annual expenses so that you have the freedom to retire in your 30s and 40s.
For example, if your annual expenses are $50,000, you’d save $1.25 million, then retire.
The method isn’t just for rich people and as you’d imagine; it advocates frugal living, low-cost index fund investing and maximizing tax efficient financial vehicles like 401ks and Roth IRAs.
Wait, this sounds like a Silicon Valley thing. Are people in Charlotte really practicing FIRE? Answer: Yes.
One 29-year-old Charlotte couple will have the ability to retire at age 42 with $1.5 million in the bank.
Here’s how they’re doing it.
The couple saves about 50% of their income each year. They started practicing FIRE right when they graduated college, even though their salaries were just $28,000 and $30,000, respectively. The idea came to them after reading a financial blog called Mr. Money Mustache.
“You don’t have to be rich to save aggressively for retirement and even retire early,” she told me. “Anyone can do it, but you have to live below your means.”
In 2018, the couple will have a household income of $128,000. She works in marketing and her husband is a utilities worker.
This year, she’ll save $22,750 in her 401k and $5,500 in her Roth IRA. Her husband will save $26,200 in his 401k/state retirement fund and $5,500 in his Roth IRA. The couple also contributes to health savings accounts and puts additional savings into online brokerages where they only buy index funds.
The young couple owns a 1,800-square-foot home in a suburb just outside of Charlotte and their monthly mortgage payment is $740. “We saved up 20% for a down payment to avoid PMI,” she explained to me. “We bought less house than we qualified for because we wanted to keep our costs down.”
Another 30-year-old banking professional learned about FIRE about 9 months ago and immediately implemented the practices into his life.
He makes $225,000 a year and is now saving about 33% of his income. According to his projections, he’ll have the ability to retire in 10 years.
“It completely changed my life,” he told me. “The big thing is breaking free from the chains of lifestyle inflation and having intentionality with your money.”
He totally retooled his finances starting at the beginning of 2018. He’s now maxing out his 401k and Roth IRA. In addition to those vehicles, he opened a brokerage account, and so far in 2018, he’s already invested $20,000 in after-tax dollars in broad-based index funds.
“I come from a family of workaholics who put their family on the back burner,” he shared with me. “I’ve always known I could buy freedom of choice but I never put all the pieces together.”