If Abigail Van Buren and Ann Landers had teamed up and become personal finance and investing experts -- and if they'd kept working into the podcast era -- one can imagine the result might have been a little bit like the Motley Fool Answers' monthly mailbag episodes. (Though they probably would have done less "awfulizing.") Certainly, there are plenty of us who could use some guidance in the money realm -- so many, in fact, that two advice givers are hardly enough. So for this podcast, hosts Alison Southwick and Robert Brokamp have brought back one of their more popular guests, senior analyst Emily Flippen, to chime in.
In this segment, the question comes from a college student looking to achieve fiscal freedom while they're still young enough to enjoy it. The goal is ambitious -- but it is achievable. The Fools offer some advice on basic strategies and how to approach FI/RE.
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This video was recorded on May 29, 2019.
Alison Southwick: The next question comes from Tamaran. "I am a student at the University of Northern Iowa. I recently started listening and have been bingeing on all The Fool podcasts." Oh! "What advice would you have for college students who are interested in being on track for FIRE?"
Emily Flippen: That's a really good question!
Southwick: And we'll have you define FIRE.
Flippen: Yes, I feel like I should define FIRE first. So FIRE is financial independence/retire early. F-I-R-E. And it's a movement essentially saying I either want to make a lot of money or I want to save a lot of money. Make more money and cut my expenses -- one or the other and probably both -- so I have the financial independence and flexibility to not work in the future if I don't want to.
And I'm a big fan of this movement -- maybe not the "RE" -- retire early -- part of the FIRE, but at least the financial independence, and I feel like that's something every person should consider in their life, is reaching that point of financial independence. It's great that you're thinking about this in college. I'm a recent college graduate myself. -- Can I still say that? -- I'm a recent college graduate myself...
Robert Brokamp: Yes, you can.
Flippen: ...so it's important to start thinking about that earlier rather than later. And the biggest thing, a lot of people say, is cut your expenses. Don't go out to lunch. Make a budget. That's really important, that is.
But the biggest thing that defines people who are able to retire -- if that's what you're interested in doing -- in their 30s vs. their 40s or 50s tends to be their career. So if that's extremely important to you, then think about your career. Think about the big purchases you make in your life. So car loans. Student loans. Buying a house. Even the place where you choose to live and start a family. And marriage, for instance. All of these things are big financial decisions that a lot of people get into without realizing the impact that it's going to have on their FIRE potential.
So think about it. The first thing I'd do is make a budget. Understand your income or your projected income, I guess, if you're in college. Understand your projected expenses. What you can live off of. And importantly, what you can save. And I'm sure both of you tout this; but, save at least 15% of your income for retirement starting early. That makes a huge difference as you age. If you start now, you start when you graduate college, then even if you aren't able to retire early, you'll be able to retire, and that's the more important thing.
Brokamp: Yes. And the people who do manage to retire early -- like by their 30s or even 40s -- are saving much more than 15%. They're saving like 40% to 50%, so that's something to keep in mind. Another resource I'd recommend is RetireEarlyLifestyle.com. That is the website of Billy and Akaisha Kaderli -- who we've talked about on the show before -- who retired in 1991 at age 38. They've been early retired almost 30 years. They're kind of pioneers in the whole idea of retiring early. And they were able to do it because they live all over the world in very low-cost locations and live on less than $30,000 a year.
And I bring them up because they just updated their book, The Adventurer's Guide to Early Retirement, fourth edition. It is chock-full of all kinds of practical and philosophical tips on retiring early. Visit RetireEarlyLifestyle.com if you want to learn more about that.
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