Once you’ve mastered your budget, paid off any high debts and built up your emergency fund its time to look at the most exciting part of the plan…the freedom fund!
So what is a freedom fund??
A freedom fund is your pool of savings and investments that will be used for your path to semi FIRE or full FIRE, if that’s what you decide to do. Its the pot of money that you will be able to draw out an income each year to cover some or all of your expenses. Its your escape from the 9 to 5 rat race. Its your route to a different lifestyle and better work life balance.
In the next few posts we will cover all the things you need to know to start your own freedom fund including the 4% rule, some investing basics, compound interest and working out how much you need in your freedom fund. So keep on reading and start your journey to freedom today!
I know this title is going to be a hard one to sell. But hear me out…
Most people wince or roll their eyes at the thought of budgeting. They see it as depriving themselves in some way. Not being able to buy the things they enjoy or have any fun.
But I like to think of having a budget as the opposite of that. Its all about making sure you allocate spending to the important things in life (such as financial freedom) and reducing the amount to the things not adding any value (do you really need another pair of jeans, shoes, handbag….insert as applicable).
So where to start?
A good place to start is with a budget planner or spreadsheet that you can fill in with all your monthly expenses. There are lots of free budgeting spreadsheets on the internet, here is a good one – Budget Planner: how to manage your money – MoneySavingExpert you can save the excel version to your computer or print it out. If feeling adventurous you can create one yourself, you get bonus points for that!
Then look over your bank statements from the past few months and see where your income has been going. You don’t need to beat yourself up on this. But “What isn’t measured isn’t managed” (a famous person once said) so you need to know where things stand at the moment without judging yourself, so you can manage it going forward.
Next step is to think about whether the spending in each area is adding value to your life or not. If the answer is no then this is probably an area you could cut back on or eliminate altogether. Some expenses probably can’t be changed very easily such as rent or mortgage. But other areas such as TV packages, subscriptions, eating out or clothes shopping usually can.
By reducing the expenses that aren’t adding value to your life you can pay more into the exciting expenses that align with your values like your financial freedom. You will then literally be buying more free time. Now hopefully you’ll agree that does sound like fun!
Whatever you decide to call it, it has the same purpose. A pot of money that is patiently waiting in an easy access account so that any unexpected life events that might occur (e.g. boiler breakdown, car repairs, job loss) wont throw your financial dreams off track. Its a security blanket for you and your finances. Just knowing its there can be life changing if you’ve never had one before. You can close your eyes every night with a smug smile knowing that you will be able to handle any of life’s financial curveballs.
The amount of emergency fund to save depends on how much is going to allow you to sleep soundly at night. This will be different for everyone but somewhere between 3 to 6 months of your living expenses is probably enough. If you currently have zero emergency fund then even one months living expenses will be a game changer. Just keep building it up.
Once you have an emergency fund in place you can pat yourself on the back and start to look at other options for the rest of the money you have been paying yourself first. We will come on to this in the following posts.
I like to think of semi-retire FIRE as a more chilled out version of the traditional FIRE (financial independence retire early) movement.
Before I came across the FIRE movement, I often used to think the idea of working 5 days a week and getting just 2 days off to do what I chose to do, for the next 30 to 40 years just didn’t seem like a well balanced life to me.
So when I came across the idea of FIRE in my mid thirties it immediately piqued my interest.
I read all the classic FIRE blogs like Mr Money Moustache and JL Collins The simple path to wealth. But after doing the calculations to work out when I would hit financial independence, on my average salary and potential savings rate, I wasn’t going to reach FIRE much before age 60, and not that many years before my official retirement age. The trade off wasn’t worth that. I didn’t want to put my life on hold until a magical date 25 years in the future when I could finally get my freedom and financial independence.
But rather than give up on the idea as nonsense or only for other people, I decided to embark on my own version of it.
Introducing Semi-Retire FIRE
I’m writing this from the perspective of someone aiming for semi-retirement rather than a traditional early retirement date. After running the numbers and realising full FIRE wasn’t realistic for me, I focused on building enough flexibility to never need full-time work again.
I still use the same principles and techniques of FIRE but to reach a stage where I have enough passive income from investments to never have to work full time again. I could subsidise my lifestyle and current income to work just 2 or 3 days a week, or work part time on a lifestyle business or freelance basis. Still giving me flexibility and more time to do what I wanted to do. And crucially would hit that number far sooner than 25 years!
And that’s how it all started.
If you want to find out more about how I did this I will be posting regularly on this site but here are some of my most popular posts to get you started –
Semi-Retire FIRE 