10 min read I Date: 27 August 2024
Are your financial plans on FIRE?
As we celebrate Malaysia’s journey to independence, let’s also embark on a personal journey towards financial independence. Just as our nation achieved freedom, you too can achieve financial freedom with the right knowledge and tools. Discover how the FIRE (Financial Independence, Retire Early) movement can help you live a life of choice and abundance.
What is the FIRE movement?
The FIRE movement is all about achieving financial independence and retiring early by making smart financial decisions, investing wisely and living modestly. By focusing on financial freedom, you can unlock the true potential of your future, free from financial stress and constraints.
How to design your FIRE approach?
Calculate Your Retirement Savings with Rule of 25
The Rule of 25 is rooted in the 4% rule from the Trinity Study in the 1990s. (Source: Forbes, 21 Jan 2021)
It’s a simple calculation to determine how much you need for retirement. All you must do is apply the Rule of 25, where you multiply your desired annual expenses by 25 times.
Example of calculation:
Total retirement savings = Annual expenses x 25
Annual expenses during retirement: RM80,000
Total retirement savings needed: RM2M
Double Your Investments with Rule of 72
Rule of 72 is a classic financial formula that’s been around for decades. (Source: Investopedia, 31 May 2024) It estimates how long it will take to double your investments at a given return.
Formula:
Y = 72/r
Where Y= The years and r=Return rate
Example:
- How long does it take to double your investments with an 8% annual return?
9 Years.
- How many % estimated annual return do you need to double up your investments in 9 years?
8% annually
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