The 6 SIMPLE Steps Needed to Achieve Financial Independence and Early Retirement

To be honest, I have a pretty bad memory.  I do have a friend who has an eidetic memory though.  That dude can remember everything: the exact date that we met, the stain on the T-shirt I wore, the words we spoke to one another.  It’s pretty damn amazing.

It’s too bad I wasn’t blessed with that gift.  I had to get by using random tricks such as mnemonics.  But whatever works right?  C’s get degrees and D’s are for Dollars.

Anyways, a mnemonic is defined as a “learning technique that aids information retention in the human memory [through the use of] elaborate encoding, retrieval cues, and imagery.”

Sort of like how you should recall the ABC’s during an emergency that requires CPR (ABC: airway, breathing, compressions).  Pretty critical stuff if you want that guy to live.  Except we won’t be saving lives today, just your wallet.

It took me the better part of an hour to come up with this mnemonic for investing, financial independence, and early retirement.  It’s simple.

Not simple as in easy.  It’s literally SIMPLE.

S-I-M-P-L-E.  Be and live ‘simple’ (simply?) to achieve your financial dreams.  Pretty catchy if I do say so myself.

So how do we achieve FIRE through SIMPLE?

Save for a rainy day.  The first thing you have to do is set aside a chunk of change to be used as an emergency fund.  This should be about 5-6 times your monthly expenses (rent, car payment, credit cards, etc).  Everyone’s situation is different so you have to figure out what your number is.  I suggest you place this money into a safe high-paying savings account paying 1% interest at Ally Bank.

Invest the rest.  It even rhymes.  Your emergency funds got your back, so you’re good to go.  Time to make the rest of your money get to work by investing in a low cost index fund, such as the ones offered at Vanguard.  This will ensure that your money grows with the stock market while limiting damage to your principal through inflation (which erodes away 2-3% of your hard earned cash each year).

Marry the right person.  There’s this old saying that ‘opposites attract.’  It probably explains why we have divorce rates of 50%.  Don’t be that guy (or gal).  What may apply to appearances and personality should not apply to money, however.  Finances and long term goals between both sides should align; this will make your life a lot easier moving forward.  One high spender that requires a life of luxury will not fare well with a frugal minded individual seeking FIRE.  So before you tie the knot, talk to them about what type of life they would like and see if you can compromise to something that works for the both of you.

Plan ahead.  Similar to an emergency fund, one should plan far ahead with regard to their finances.  If you’re looking to buy a house in 5 years then it may not be a good idea to lock  your finances in the stock market as you can’t time the market.  For example, you may invest today and see returns of 10% a year for the next 4 years only to have a market correction cut your investment in half right when you need the money.  Murphy’s law, guys.  Always plan accordingly.

Lower your expenses.  The best thing you can do for your wallet and future finances is to cut back on the unnecessary things in life.  Do you really have to buy that $4 Frappuccino from Starbucks every morning?  No.  Make that shit at home.  Do you really need the newest 55 inch 4k television?  No.  Get outside and socialize or something.  Learn to live without these material possessions as they are only good for locking you into a revolving debt-laden consumerist lifestyle.

Enjoy life a little.  The best things in life are free.  But if you must, spend money on experiences rather than material possessions.  Go travel and see the world if you can.

TL;DR:  1) Save emergency fund at Ally, 2) Invest the rest in an index at Vanguard, 3) Marry someone frugal, 4) Plan ahead, 5) Lower your expenses, 6) Enjoy life.

It’s really that easy.

Live simple.  Be free.