As soon as you hear about the FIRE movement, it’s hard to deny the appeal. Short for financial independence, retire early, FIRE adherents aim to save and invest large portions of their income early in their careers in order to have enough money to retire decades before their mid-60s.
However, getting there takes some strategizing, and there’s no one way to do it. Some early retirees start their own businesses and sell at a huge profit. Others aggressively buy up rental properties, effectively replacing their salary with income from their tenants. Others are able to bank upward of 50% of their salary through extreme frugality.
Rachael Camp, a certified financial planner and owner of Camp Wealth, says her clients aiming for financial independence all have one thing in common: They track where every dollar they make goes each month.
“This is a huge, huge priority for them,” she says. “They typically have monthly reviews of their finances where they go through and look at their spending.”
Here’s why Camp says taking regular dives into your finances is essential if you want to increase your savings rate — whether you’re planning to retire early or not.
Track your spending to stay on top of it
While Camp and other CFPs recommend saving 15% to 20% of your pre-tax income to put toward financial goals, such as paying down debt, building an emergency fund and investing for retirement, many FIRE adherents supercharge that rate by upping their income and keeping their fixed costs low.
No matter your goal, you’re unlikely to get your savings rate where you want it without checking in, either by yourself or with the help of a pro, on a monthly basis, says Camp.
“I see this as a huge difference between people who are saving 20% or more versus people who are spending more than they’re taking home,” says Camp. “People who have a healthy savings rate know where their money is going because they track it.”
Checking in regularly makes it harder for you to let your spending get away…
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