Save for FIRE
“Save me today and I’ll save you tomorrow!” It states exactly why you need to save. You need to be able to cover (emergency) expenses in cash. When you pay with your credit card or go into debt for (unexpected) expenses it will cost you a lot of interest and it is money you won’t be able to put to work for you. While the idea of saving for FIRE is to have money work for you!
Saving for FIRE
1. Emergency Fund
Emergency funds are for unexpected expenses, such as unemployment, replacement of Essentials, or medical bills. Typically six months of expenses saved is a good safety net. It protects you from going into debt or even losing your home.
Towards achieving FIRE I recommed to increase the emergency fund towards 12 months. If the stock market gets into a crisis you can tap into your cash instead.
2. Funds
Check which irregular expenses you have, for example your vacation, and calculate how much you should put aside per paycheck. Then put it in a separate savings account, and when the bill needs to be paid you will be able to pay for it in cash. Also, taking upon a fund when you really want something expensive will keep you alert and responsible with your expenses.
3. Saving on Expenses
There are many ways to save money on your expenses. The easiest money saver is the yearly bill audit. Check if your provider is still the cheapest for that service. This can be for your utility, cell Phone, mortgage, or even (student) debt. If it is cheaper somewhere else with the same conditions, switch and save money. And note, for every $100 monthly expenses you’ll need $36,000 towards FIRE.
