FIRE Movement: How P2P Investing Can Help You Reach Early Retirement

Do you ever dream of being able to leave the workforce?

As in… quitting your job and never returning?

If you do, you’re not the only one. Many people in the workforce see their job as a chore and would rather spend their days doing something else. Maybe you were pushed into a career you didn’t like, maybe you don’t get a long with your boss, or maybe the type of work you really want to do wouldn’t pay the bills.

The FIRE movement (FIRE stands for Financial Independence, Retire Early) is a movement that was started by people who realised they didn’t want to work until the age of 65. With some saving and planning, many people can choose to retire much earlier.

This allows them to spend their days doing whatever they want to do, whether it’s travelling the world, taking care of family or starting a business.

What is early retirement (FIRE movement)?

As the phrase suggests, early retirement means retiring earlier than the standard retirement age in your country. In most European countries, the retirement age is 65 (although this will likely increase over time). Anyone retiring before that age is considered an early retiree.

In order to reach your FIRE number, you need to save up as much money as you can while you’re working, invest it, and then accumulate enough capital so you can live off it. This is called being financially independent, and it’s what allows you to be independent of your salary and therefore leave your job.

This is an attractive option for those who don’t want to work for the rest of their lives and are comfortable with prioritising time over luxury. Interested in learning how to retire early? Read on to find out…

How do I retire early?

The math is relatively straightforward.

According to the FIRE movement, in order to retire early, you need to save 25 times your annual expenses.

Sam’s expenses amount to €30,000 per year. In order to reach his FIRE number, he needs to save €750,000.

 In order for this to work, you need to put your monthly savings into an investment such as the stock market, which will return an average of 8% every year. Once you hit your FIRE number, the rule of thumb is to withdraw 4% per year.

Sam earns €50,000 per year. If he manages to save €20,000 per year (or €1,666 per month), it’ll take him just over 15 years to reach his FIRE number. In other words, with a 40% savings rate, he can retire at 45 – if he begins saving at the age of 30.

He’ll reach his number a lot faster if he increases his savings rate to 60%.

Of course, life is rarely this straightforward. Throughout those 15 years, you may have promotions, children, house deposits and other life events (i.e. a pandemic). That’s why people create FIRE plans and adapt their savings rate to their ongoing situation.

Advantages of early retirement

You don’t have to hate work or your job in order to want to save for financial independence. Many people in the FIRE community emphasize that reaching financial independence is more important than early retirement. That’s because being financially independent offers some tremendous advantages.

These advantages include:

Enjoy more flexibility

We can all agree that there’s nothing worse than being stuck in a job you dislike just because you need to pay your bills. Whether dislike your coworkers or hate your day to day work, not enjoying what you do 8 hours per day is incredibly draining.

When you have a large nest egg saved up and are close to financial independence, you won’t ever have to worry about being stuck in a job you dislike. Hate your work? You can easily switch gears and take your time to find a much better job.

Take a sabbatical

Want to take a break from working? If you’re financially independent you can afford a 1-year sabbatical and hit the career reset button. Take this time to explore the world, try new hobbies and maybe even go back to school if you’re thinking of switching careers.

Start a business

Setting up a company while working a full-time job can be draining in every sense of the word, and it means your attention is fragmented rather than focused. If you’re considering setting up a business, taking a year or two off to focus on building the company is great for both you and the business. You can also use that nest egg to pay for some of the initial business costs.

Spend more time with the family

As a new parent, you’ve suddenly realised that there is something more important in your life than you. You now want to spend more time with your children without having to worry about work. By being FI and retiring early, you can choose to leave the workforce and completely focus on your children. Or maybe just take 5 years off and return when you’re ready!

To engage in activities that don’t make money

You’ve done enough job-hopping and career switching, and you’ve come to the realisation that the traditional workforce is simply not for you. Instead of working at a desk, you want to travel, paint, create music and do something every day that doesn’t pressure you into making an income. If you don’t mind living frugally and refocusing your energy, then early retirement might be for you.

How can P2P lending help me retire early?

It’s quite simple:

P2P lending helps you reach your FIRE number a lot faster.

And when we say a lot faster, it could mean years faster.

Why? Because instead of an average stock market return of 8%, P2P investing returns are as high as 14%! This takes several years off your time in the workforce.

Compound interest can make a huge difference.

With a return of 8%, Julia has a nest egg of €262,520.97 after investing €200 per month for 30 years.

However, with a Swaper return of 16%, her growth is more than double, and she’s on course to become a millionaire with €1,190,131.66 in her pocket. That’s more than enough for her to retire early.

Returns make a big difference, and the P2P investing world works very well for people trying to reach financial independence:

Many people saving for financial independence shift to P2P investing to help them reach their goals a lot faster and join the FIRE movement.

As a P2P platform, we can help you build a comfortable nest egg which will give you more time, freedom and energy.

And at the end of the day, isn’t that what money is for?

Create an account today and start your journey towards financial independence.