The path to financial freedom: Lean FIRE and the 4 percent rule

More and more people want to enjoy life without being dependent on a pension or an employer. In this pursuit, the Financial Independence, Retire Early (FIRE) movement plays an important role. In particular, the "Lean FIRE" approach is gaining popularity among those who aim to retire early from working life by adopting a minimalist lifestyle.

The basic principle of Lean FIRE is quite simple: Save as much as possible, keep your expenses to a minimum, and live off your investment returns.

THE 25 TIMES RULE AND THE 4% RULE

Experts state that to reach financial freedom, you need to have savings equal to 25 to 33 times your annual expenses. For example, if your annual expenses are 500,000 TL, you need to accumulate a fortune between 12.5 million TL and 16.5 million TL.

The sustainability of this strategy is based on a financial plan known as the "4% Rule." According to statistics, if your portfolio provides an average annual return of 7% and you withdraw 3% to 4% of your principal each year, your capital can remain intact without running out, despite inflation and expenses.

Those who want to reach Lean FIRE enter a period of serious saving at some point in their lives. Money saved by avoiding luxury expenses grows with the effect of compound interest when evaluated with the right investment tools.

News Source: 12punto