Americans tend to overspend. As a consequence, many have to work extra hours or waste their hard-earned money servicing credit cards. A new school of thought, known as the FIRE movement, aims to help folks skip debt entirely and retire early using common sense and basic math.
What Is the FIRE Movement?
The “Financial Independence, Retire Early,” or FIRE, movement revolves around maximizing savings to quit the rat race at a young age. The literature, popularized in blogs and podcasts, offers simple formulae to illustrate how this can be accomplished. For example, if one saves 25% of his or her income, each year of work equals an additional four months of retirement. By saving 50%, each year spent behind a desk means an even year of leisure.
These numbers suppose a withdrawal rate of 4% annually. That may not sound like much, but anyone frugal enough to save half of his or her income should be able to live off of the interest generated by his or her investments, at least until Social Security kicks in.
As for those investments, followers favor a long-term buy-and-hold approach that minimizes broker commissions. Most prefer index funds, not solely for their low expense ratios but also for their superior performance. Additionally, some acquire real estate, particularly rental properties.
Interested in Owning Real Estate?
It is no wonder why a FIRE disciple might be interested in owning real estate. Being a landlord is not easy, but the potential for long-term appreciation makes for a more profitable side project than affiliate marketing, blogging, or a part-time job. That is because while these activities are popular with FIRE followers, they merely provide income. On the other hand, real estate offers a chance at revenue and equity growth.
However, despite the benefits of real estate ownership, some individuals do opt to steer clear. One of the reasons is because agent commissions and costly closing attorneys can contradict everything that the movement represents.
Fortunately, Propy has managed to streamline the purchase process with electronic document management, smart contracts, and blockchain registry tools. These advances make transactions less expensive and more transparent. In time, the FIRE movement could well embrace Propy as an excellent way to buy.