One of my favorite topics in the world of personal finance is FIRE (financial independence retire early) because I find it so liberating and ridiculously simple to understand. I find that this topic, unlike any other, encourages people to dream bigger than they thought they could and still get hyper-specific about their numbers.
So, what exactly is FIRE?
FIRE is a movement in the personal finance world that stands for Financial Independence Retire Early. Essentially, it means maximizing your income, reducing your expenses, and investing as much as possible in order to live off of your investments– this is what being “financially independent” means. Once you have reached FI, you have the choice to retire early or take work that significantly reduces your income; work is now optional for you. “Early” means anytime before 59.5 years old (traditional retirement age). This could be 35 years old or 58 years old, for example.
How does it work?
FIRE is based around a concept called the 4% rule, which is actually extremely simple and easy to understand.
Based on data from stock market returns, you can safely withdraw 4% of your investment portfolio and never run out of money, as your portfolio will grow to make up for the 4% that you took out. This means that we can stop thinking about retirement as a specific age and start thinking about it as a goal number. The math also works in a stupidly simple way in reverse: you can take your annual expenses and multiply them by 25 to see an estimate of how much you need in retirement. For example, if you spend $35,000 a year, you’d need $875,000 to safely retire.
That being said, to account for market fluctuations and unexpected expenses year-to-year, some experts believe it’s safer to go aim to a 3.5% or even 3% rule.
Either way, it’s a very liberating concept. But a lot of the faces and media around the FIRE movement are high-earners, because they have a unique opportunity to invest huge chunks of their paychecks if they lower expenses. So the question remains: Is FIRE possible on a teacher’s salary?
There’s no doubt that teachers don’t have the same earning potential as more high-paying careers, but FIRE is absolutely still possible and there are teachers all over the place who are seeking it or have already achieved it.
So how can you reach FIRE as a teacher?
It’s the same concepts, but we can specify them to our profession.
- First, keep expenses low.
- Lots of teachers are already pretty good at this since there’s a degree of forced frugality in our profession, but the easiest way to analyze and adjust your expenses is to keep a budget (need a template? I’ve got two free ones here).
- Secondly, increase your income as early as you can.
- Get to the highest salary lane as quickly as possible by pursuing more education.
- Look for opportunities to get recurring stipends. Some districts give yearly stipends for National Board Certification or National Teaching licenses.
- Consider a side hustle– this could be stipend positions at your school, selling lessons on TPT, or something entirely unrelated to education where you can pursue a separate passion.
- Consider moving to administration. It’s not for everyone, but if it’s something you care about, it’s a great way to increase your income.
- Consider changing to a nearby district that pays more. Again, this isn’t for everyone, but if you’re already looking for a change, make sure salary is part of your formula.
- Balance your lifestyle inflation.
- Don’t let your expenses increase every time you get a raise; instead, if you invest a certain percentage of each raise, you quickly speed up your retirement.
- Know your investment options
- I have an entire video on investing as a teacher that I’ll link below. You need to know what options are best for you, so check out that video when you’re done watching this one to start understanding the difference between a 403b, a 457b, an IRA, and more.
- Get inspired by reading stories of teachers who are already doing it.
- Subscribe to my blog and YouTube channel (Teachers Talk Money) or follow my Instagram (@teacherstalkmoney) to follow my journey. But, chances are, there’s also probably someone else who reflects your journey even closer than I do…
- Check out the website EducatorFI.com to read tons of interviews with teachers pursuing FI and get more information about how to pursue FI as a teacher– this is one of my favorite resources.
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Remember, if you’re ready to get started with budgeting, use one of my free templates below!
And if you need more guidance with goal setting, mindset shifting, and budget brainstorming, you can purchase my Money Map Workbook for just $9 🙂