Here’s a retirement planning tactic: trade options in a brick-and-mortar retailer that sells used and new video games and turn $53,000 into $11 Million! Yeah, that’s the ticket!
Alas, we don’t all have the foresight to invest in “Gamestonk” prior to the massive pump. And even if we did, would we time it right to get out before the inevitable dump?
Mere mortals like you, me, and today’s guest author Chris, had best stick to tried and true tactics that may not lead to riches overnight, but are sure to help us make steady progress towards our personal financial goals over time.
Chris, a millennial whose life was upended with a medical diagnosis a year ago, will share five such tactics. I’ll let him introduce himself and carry on with some thoughtful advice.
“Hey, I’m Chris. I have a degree in Business Economics from the University of Liverpool, own a small fast food business, and I run lifeupswing.com. I will help you to make money, save money, and think about money in a way that will give you back your freedom.”
5 Retirement Planning Tactics to Aid Your FIRE Journey
At the start of 2020, aged 33, I was diagnosed with Type 1 diabetes after losing a considerable amount of weight and entering into a state of ketoacidosis. This was a dangerous medical situation to be in, and although I am now much more in control of my sugar levels, it did make me stop and think.
I have been on a personal FIRE mission ever since I started my own brick and mortar food business over a decade ago, and more recently my finance blog, which is on track to earn $1,000 a month this year. The diagnosis showed me that fate is a fickle mistress – and the only way to defend against the unknown is to plan and allow that plan to be flexible.
Although everyone faces different life challenges that are unique to you, these 5 retirement planning tactics can be universally applied to anyone’s personal FIRE plan.
#1: Know Your Planned Time Horizon
When planning your own FIRE journey, it is important to know your time horizon, but why?
The goal of investing your money is for that money to grow into a larger amount. On the surface, investing money to make more money sounds straightforward. However, to ensure you are making the right investments and maximizing your returns, you need to understand your time horizon. This is because knowing how long it will take your investment to hit your financial goals means that you can better plan your FIRE journey.
There are some differences between a short time horizon and a long time horizon. If you have a short time horizon, there is less time for your investment to grow. Plus, if there is a downturn in the stock market, your investment has less time to recover. Therefore, short time horizons are generally better suited to conservative investments.
A long-time horizon means your investment has plenty of time to recover any losses should there be a stock market downturn. You can also take advantage of long-term investment plans plus higher risk strategies that can then be moved to lower risk funds the closer you get to your horizon.
Knowing your time horizon is an essential part of building a successful investment plan. Once you know your time horizon you can effectively plan your FIRE journey towards your preferred timescale.
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#2: Meticulously Track Your Budget
Over the last 10 years of my FIRE journey, I have owned and managed my own successful fast-food business which has expanded to include a second store. As well as running my physical business, I started my finance blog that is steadily growing all the time – and I hope to flip it for 6 figures in a few years time.
This means I spend a lot of hours working but one important thing I have learned is that to be successful in business and by extension achieve my FIRE goals means having a budget that I monitor down to the last cent. Having a degree in economics certainly helps with this!
Budgeting is a key part of managing your financial health. It helps you see where your money is going and where savings can be made. To achieve your FIRE goals, it is vital to have a detailed budget. Tracking every transaction to the cent will mean you only spend exactly what you need to, leaving more to invest.
To set up a budget you could use one of the many mobile apps that are available or create a spreadsheet on your computer. You could even create a budget the old-fashioned way using a pencil and paper! Whatever method you use make sure that you are constantly reviewing your budget and adjusting it accordingly.
#3: Organize Essential Documents
One thing my diabetes diagnosis made me realize is how quickly things can change. In a short time, I had to overhaul my lifestyle to be healthier and manage my diabetes, plus my engagement with my long-term fiancée also came to an end. Suddenly, I was single, learning how to manage being a diabetic, and still working hard on my FIRE goals.
I realized that it is necessary to ensure all essential documents are always up to date and kept in a secure place. The benefit of this is that should the worst happen, then an authorized party can easily deal with your affairs. In my case, my business partner and best friend could handle all my financial affairs should I happen to be incapacitated due to ill health or worse.
Let’s look at these essential documents in more detail. [PoF: This is where a legacy binder such as Chelsea Brennan’s ICE Binder can be extremely useful.]
Will and Trust
No one likes to think about their own mortality, but it is essential to have a plan to cover all eventualities. Creating a will or trust can ensure that the people you want to benefit from your estate will. This could include children, a spouse or partner, or any other person you wish to inherit from your estate.
Proper estate planning can protect your legacy and means more of your wealth passes on to loved ones rather than paying for other costs such as taxes.
Estate planning can also minimize tax liability which varies from state to state. Getting advice from a qualified estate planner is essential to help navigate this and set up the best plan for your family.
You may also want to consider creating a living will that specifies how you will be cared for in the event you are incapacitated and need constant care. You can specify a trustee to manage your affairs including assets ensuring continuity of the estate you have built and that your care is paid for.
Power of Attorney
Setting up a power of attorney can give you peace of mind that should you be incapacitated you will be cared for according to your wishes. A power of attorney can give decision making powers to a trusted person relating to matters of health and finance.
It is important to arrange this through the proper channels using an experienced lawyer to make sure everything is done properly as rules do vary between states.
This means your estate can continue to be managed whilst you get the care you need.
Make sure to set up appropriate insurance policies to cover all eventualities including life insurance.
When setting up a life insurance policy make sure to specify who you want the beneficiaries to be. In some cases, you can specify the money goes into a trust and the money is used by the trust for the specific uses outlined by you when creating the trust. For example, you may specify a certain amount of the money to pay for your child to go to college.
Health Care Documents
Make sure all documents relating to your health care are accessible and up to date. In the event you can’t manage your own affairs anymore, it is important that your trustee or power of attorney can access your health care documents.
Having access to these documents will help avoid delays in your care. It can also mean your wishes are carried out exactly as you want. Important health care documents might include a Do Not Resuscitate form, a living will, or a HIPAA form.
Always make sure your documentation is up to date.
Whomever is dealing with your estate will need a record of all investments. Whether this is to close all accounts or to continue managing them, they will need to know details of each investment.
Many investments are managed solely online so make sure to also print off a copy of the investment at regular intervals. Doing this makes sure that the latest investment information will always be at hand should it be needed.
Also, make sure all paper documents are stored securely in a safe or bank deposit box to prevent unwanted people gaining access.
#4: Get Professional Help And Advice
Thanks to my economics degree, I had a slight advantage when starting my FIRE journey. Understanding financial markets, risks, and analyzing the data was a little easier for me thanks to my background.
That doesn’t mean I know everything or that I don’t need any help at all. There are many areas where seeking professional help and advice isn’t just recommended but is instead essential.
When it comes to financial planning and investments, getting advice from a qualified and experienced professional is a must. Doing this can help you avoid making any investment mistakes and ultimately help you achieve your FIRE goals sooner as you aren’t recovering losses made by inexperience.
Anything that requires knowing the law should be looked at with the help of an appropriate lawyer. This can help navigate differences in state laws for things such as creating a will, a power of attorney, or a trust.
Don’t put off asking for help from a professional. After all, we would come to a doctor with any medical questions!
A professional can help you turn your dreams into a reality. Plus, you save time as you aren’t having to teach yourself everything about investments and financial planning.
#5: Set Realistic Goals And Be Flexible
At the start of 2020, I was expanding my fast-food business and planning a marriage. Within months I was single, living under lockdown, and diagnosed with type 1 diabetes!
These are a lot of major life changes for anyone to deal with, and there was a period of time spent adjusting to my new life. However, once the dust had settled, I knew I had to up my game and get back on track.
To do this meant realigning my goals. At the start of the year, I had planned on building a life with my fiance, but now that changed to having a business partner to help deal with the physical business. I also started putting more hours into building my blog and growing my supplemental income. These new goals are keeping me on the path to FIRE.
When setting your goals decide what you want to achieve and a date you would like to achieve them by. Keep in mind that things can happen fast so be prepared to make changes if you need to. There is nothing wrong with having to amend timescales, investment strategies, or anything else on your FIRE journey. Ultimately you want to achieve FIRE with your mental health intact.
This article outlines one person’s journey and how they have had to amend their goals. It is worth a read to get an insight into how things can change and how best to approach changes.
Financial independence is an ongoing process that requires planning, discipline, and flexibility. These 5 retirement planning tactics can help you navigate the way to FIRE no matter what challenges life might throw in your way.
Although thanks to the pandemic, my love life hasn’t recovered, at least in business matters I can give my all. I am confident that my hard work and planning will help me achieve my FIRE goals. If you stick at it, then I am sure you can too!