The ultimate early retirement - FIRE guide for expats in the UAE
The premise of achieving early retirement by following the “Financial Independence, Retire Early” (FIRE) methodology is fairly straightforward. You save aggressively when you’re young, with the aim of retiring by your 30s, 40s or 50s.
The movement has spread considerably since the seeds of the idea were planted by Vicki Robin and Joe Dominguez through their 1992 best-selling book Your Money or Your Life. The idea was further propagated through Jacob Lund Fisker’s 2010 book Early Retirement Extreme.
Getting on this path might seem daunting at first, but once you know what’s required of you, the transition can be relatively smooth. The general idea is that you increase your income, lower your expenses and invest widely into long term growth and passive income investments.
So, how can you, as an expat in the UAE, look forward to early retirement?
Understanding FIRE - Early Retirement
The F.I.R.E movement encourages saving and investing as much as you can during your 20s, 30s and 40 so you may retire early in life. Its core principle is that you save and invest around 30% to 60% of your income in instruments that can generate passive income and high returns over the long term. These can come in the form of stocks, bonds, mutual funds, ETFs, Property and Gold.
Types of F.I.R.E
The different types of F.I.R.E include:
- Lean FIRE. This requires following a minimalist or lean approach, where you save as much as you possibly can by living on bare minimums. Lean F.I.R.E can get you on the path to retirement sooner than other types.
- Fat FIRE. Unlike Lean F.I.R.E, Fat F.I.R.E lets you follow a more financially relaxed approach, where you don’t have to make too many changes in your existing spending pattern. However, this might mean that you take longer to reach retirement, unless you have a significantly high income.
- Barista FIRE. This is when you follow the F.I.R.E system but have quit your regular nine-to-five job and are supporting your existing expenses through some type of part-time or freelance work.
- Coast FIRE. While this term also applies to part-time workers, these individuals have already met their retirement fund requirements and also have enough money to meet existing expenses. They, in essence, are already coasting through.
Then, there’s regular F.I.R.E too, where you don’t make major sacrifices in your spending, but continue to save and invest with gusto.
Is FIRE Right For You?
Early retirement is possible by following the principles of F.I.R.E, provided you start saving and investing at an early age.
If you are unsure about how and when to start investing, if you feel overwhelmed by the wide range of investment alternatives, or if you’re getting mixed signals from different sources and have become skeptical, you might benefit by getting professional assistance.
Thinking about investing while you’re still young is particularly important now. This is because technology is disrupting employment opportunities across sectors, and the need to update skill-sets and switch careers has become more pronounced than ever.
Early retirement in the UAE
Global markets are conducive for investments across different sectors that remain well poised to provide growth opportunities in the medium to long term.
This is an excellent time for young people to invest as their investable surplus will continue to remain high until they go the family way. Understand that your priorities are bound to change once you have children, and it is only normal for expenses to rise. Besides, postponing your retirement is never a good idea.
Expats in the UAE want to continue experiencing their high standards of living as they explore potential retirement opportunities in or outside the country. What helps is that there’s a positive economic outlook for the UAE over the next three to five decades.
From a young investor’s point of view, it’s best to make hay while the sun shines – by putting your tax-free income to work in the right manner. For all you know, you might even be able to retire in your 30s or 40s if you play your cards right.
5 tips to achieve early retirement through FIRE
Achieving early retirement might be easier than you imagine if you follow these pointers.
- Create focused retirement goals
- Cut back on major expenses
- Pay off you credit as quickly as possible
- Create multiple streams of income
- Diversity your investments
Following a few simple steps can also ensure that you have a relatively big retirement corpus for when the time comes.
Benefits and Challenges of FIRE
The pros of following the F.I.R.E approach include:
- Increased flexibility with your time at a relatively young age
- The ability to follow your passion once you retire
- Not living an extravagant life
- Not having to worry about finances upon retiring
Seeking early retirement by following this approach comes with its share of drawbacks as well.
- Need to make lifestyle changes
- Unpredictability about the future
- Not finding retirement fulfilling
- Difficulty in rejoining the work force, is so desired
Common misconceptions about FIRE
Some common misconceptions have made people wary about following the F.I.R.E process. The following statements DO NOT hold true.
- Early retirement requires that you have a high income.
- You need to save at least half of what you earn.
- You cannot retire early if you have children.
- You will have to live an extremely frugal life.
- You need to be in your 20s to begin.
- The method works only if you’re lucky or privileged.
- F.I.R.E is just a fad.
- This trend will last only until the market goes bearish again.
Bear in mind that the aim of following the F.I.R.E system should not be you wanting to spend the rest of your life partying in Ibiza. It should be making your money work for you so you may gain financial freedom early in life.
How I Can Help
With over nine years of experience, I have worked with scores of young expats who have begun their careers in the UAE. I follow a holistic financial planning approach coupled with a diversified investment strategy to ensure that my clients make the most of changing market conditions. If you choose to use my services, you may also expect regular reviews and rebalancing of your portfolio.
Contact me for your free consultation now and find out how I can help you get on the path to early retirement.
Author, Blogger & Independent Financial Advisor. My goal is to give you actionable tools for creating passive income and building wealth. More than 10,000 expats have already used my ideas to jumpstart their journey towards financial independence. Connect with me to start yours...