How to Get Started on Coast FIRE in Your 20s

Youth represents the idea of hope and holds the essence of invigoration. Youth is when we feel we can achieve anything and everything under the sky. Our display of energy and enthusiasm is through the roof. This is the time when one is encouraged to do basically whatever they want. From exploring the world to achieving world peace, everything seems doable if enough efforts are channeled towards it. However, this is also a point in life where it can seem that the struggle one is facing is a financial one. Students and individuals just paving their paths in the ‘real world’ can feel such obstacles while trying to achieve stability.

Following the basic rules of FIRE (Financial Independence, Retire Early) can provide a breather to cope with the stress of financial burdens. FIRE is a vast concept on its own. Financial independence is a goal that many aspire to achieve and has gained popularity in recent years. It further diverges into various categories. One of its categories is Coast FIRE, which is a concept that involves reaching a point where you have saved enough to cover your future retirement expenses, even if you don’t actively contribute more to your savings. Starting on the path to Coast FIRE at a young age can set you up for a more secure and stress-free financial future. In this blog post, we’ll explore practical steps to help young individuals kick-start their journey toward Coast FIRE.

Understanding the Basics of Coast FIRE

Before diving into the specifics, it’s crucial to understand the fundamentals of Coast FIRE. Unlike traditional FIRE, where individuals aim to retire early by saving a substantial amount, Coast FIRE involves reaching a point where your current savings can grow to cover your retirement needs without further contributions. In this model of FIRE, one grows their nest egg through investments in various assets. These assets combined with their interests lead to a financially independent life. This strategy is especially beneficial for those who want to prioritize other life goals, such as pursuing a passion or having a flexible career.

Conventionally, Coast FIRE is followed by individuals who already have an ongoing career and are looking for ways to save up enough to enjoy a lifestyle similar to Adam Sandler. By starting at an even younger age, you can get a kick-start on this journey.

Set Financial Goals

Starting the journey of Coast FIRE at a budding age can feel overwhelming and if not guided in the right direction, you may feel lost and confused. Hence, the first and foremost step in this journey is to define your short-term and long-term financial goals. Identify the age at which you would like to achieve Coast FIRE and estimate your future retirement expenses. This will provide a clear picture of the savings needed to reach your target. Be realistic and consider factors like inflation and unexpected expenses in your calculations. These elements influence the economy heavily and will indefinitely manipulate your financial status at the respective time. Therefore, these are the things that need to be kept in mind while planning your financial goals. The devil lies in the details.

Start Saving Early

The power of compounding works best when time is on your side. Begin saving a portion of your income as early as possible. Any gigs and/or small-paid jobs sound exciting. However, it is crucial to stay focused and set some of the many aside. If you are an individual who has a full-time job but is still understanding the variegated world of finances, learn to utilize tax-advantaged accounts like IRAs and 401(k)s to maximize your savings potential. Automate your contributions to ensure consistency. Remember, whatever you earn, consistent saving has to become a deep-rooted habit.

Invest Wisely

In the recent times, the world has become all about investing. To make the whole journey to achieving stability easier, one needs to learn how to make their money work for them. Grasp knowledge regarding different investment options and create a diversified portfolio that aligns with your risk tolerance and goals. While you have the advantage of time, consider incorporating a mix of stocks, bonds, and other assets to optimize your returns. Regularly review and rebalance your portfolio as needed.

Live Below Your Means

Adopt a frugal lifestyle and resist the temptation to inflate your expenses as your income grows. Living below your means allows you to save more and accelerates your journey to Coast FIRE. Differentiate between needs and wants, and prioritize saving over unnecessary spending. Inculcating basic practices such as finding cheaper ways to travel, and bringing food from home instead of buying from outside, etc. can curb your costs by a great deal.

Educate Yourself

The rules of personal finance as a whole change with changes in the economy and various trends that impact the same. To keep up with these changes, learn and relearn. Continuously educate yourself on personal finance, investment strategies, and economic trends. Stay informed about changes in tax laws and financial regulations. Knowledge is a powerful tool for making informed decisions about your finances. Once you gain knowledge and learn to use it to your advantage, you can gain experience, which always comes in handy. Experienced individuals can always get themselves out of any situation.

Regularly Review and Adjust

Periodically reassess your financial goals and adjust your strategy as needed. Life circumstances, economic conditions, and personal priorities may change with time. What your priorities are currently, may not feel as crucial 5 years in the future. Hence, your plan should be flexible enough to accommodate these shifts. These changes are more instinctive. Your human intuition will guide you through.

Lastly,

Starting to prepare for Coast FIRE at a young age is a proactive and strategic approach to achieving financial independence. Not many people are aware of this initiative. You can be unique in your financial approach and start as soon as possible. By setting clear goals, saving consistently, investing wisely, and staying informed, you can lay the foundation for a secure financial future. Remember, the journey to Coast FIRE can only be cultivated through discipline, patience, and consistency. These three amigos will help you reach your end goal.