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Fire Movement Philippines For Beginners

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    Fire Movement Philippines: The dream of retiring early in the Philippines is something that we have all questioned from time to time. Still, with the speed of inflation and the current economic developments, is it possible to retire early in the Philippines and grow your financial independence?

    In today’s article, we will be exploring some ideas and processes behind the fire movement in the Philippines. We will discover the fire movement, the rules and theories, and how you can build financial independence retire early in the Philippines.

    Fire Movement Philippines Explained

    Over the years, this idea of financial independence has transformed. With the desire to live a financially free lifestyle and retire early came the modern-day movement referred to as FIRE in the Philippines

    So the burning question is … what is Fire? The abbreviation stands for Financial Independence, Retire Early. The process of this movement changes slightly depending on individual circumstances and personal goals.

    Typically, however, the lifestyle involves saving as much money as possible and investing this into an investment that will allow the investor to retire early and live off the interest of their investment.

    The rules are somewhat nonlinear, but most aim to retire in their 30s and 40s, and to do this, they save anywhere from 40% – 80%. But as mentioned, this is not set in stone. Some invest less and retire much later. Some try to burn this idea, and we will take a look at criticism in a moment.

    What Is The 4% theory

    Financial independence retire early in the Philippines & the 4% theory. Online the 4% theory has become like wildfire as it’s gained popularity among those who wish to retire early in the Philippines.

    The 4% rule is the percentage a retiree should withdraw from their investment each year in its simplest term. This is also referred to as the safe withdrawal rate. The reason 4% is 4% and not 2%,5% or 15% is because inflation on average is at 3%, and investment returns are typically around the 7% mark, which means that you can withdraw 4% without worrying.

    This, of course, is based on an average, and each country will differ on their specific percentages, but as a guideline, the global inflation rate has been between 2.7% – 3.5% over the last 5 years.   

    Please note that the fire movement is often discussed online using the principle of inflation on a US market. Therefore, the inflation rate for the Philippines needs to be taken into account.

    The inflation rate in the Philippines has been known to be slightly volatile over the years based on a month-by-month comparison. In September 2019, the rate was only 0.9%, while in October 2018, the rate reached 6.7%

    When looking at inflation regarding the fire movement in the Philippines, remember that the rate balances itself out over the years. Normally ranging between 2.5% – 4%. However, there are times, such as in 2018, when the inflation rate grew to 5.2%.

    Nonetheless, many factors influence the 4% rule. I recommend reading about the trinity study for more information.

    So now that’s out of the way, let me turn my attention to you. If you are like the other 7.7 billion people in the world at this moment, you wish to enjoy life and not worry about your financial situation. So thus, the question is, how do you get started with FIRE?

    Financial Independence Retire Early In The Philippines

    1. The Drawing Board

    The first stage is to build your plan. Our understanding changes depending on perceptions, judgments, and speculations. And this is why it is best to focus on the facts when playing your strategy.

    Details include your current age and the age you wish to retire. The location you are planning to retire. Your current investments. How much you will need and so on.

    There are certain questions that you may find difficult to answer as unless you have lived in the country before; you will not know specifically how much you will spend. Most gurus recommend an x25 method, which means that you take your annual living expenses and times this by 25 to reach the total amount you need to invest.

    As an example, if you live in Manila and your yearly expenses come to P250,000, then 25x of this will be 6.2 million, which means that you will not need to have 6.2 million invested (Some refer to this financial target as their FIRE number) to achieve the goal of financial independence retire early in the Philippines.

    2. The Strategy

    So now that you know how much you need as an estimate, you may be wondering what the next stage is? The next stage is building your strategy.

    Strategies such as this are difficult to summarise to a generalized audience as investment vehicles (and investor status) can greatly differ; however…

    According to historical data from TGE, the return from the Philippines stock market can range from 8-12% on average. The biggest loss in our modern times happened during 2018.  Back in 2010, the highest increase was just under 42%. So typically, the return is around 10-12% yearly. But is the stock market the best option?

    Some investors have started to turn to other forms of investing, such as cryptocurrency. Unfortunately, as the crypto world is still relatively new in relation to other investments, the future of cryptocurrency remains unclear.

    Other investors decide to take a more physical investment and invest in real estate. The reality is there are plenty of investment options both locally and internationally. This is the stage where you decide where you will place your money and what area will generate the best returns in the long term.

    3. The Tactics

    A common misconception in the business world is the word tactics. Many people believe that tactics are the same as strategy, but the strategy is more about planning and deciding, whereas tactics are more about action, commonly daily actions. In this scenario, tactics include regularly investing.

    Once you have decided where you will invest, the next stage is to decide what steps to take to reach your fire number, AKA financial goal.

    In addition, the tactics you may wish to include are …. Reducing your current living expenses and paying off high-interest debt. Both of these tactics will lead to more available cash.

    4. The Lifestyle

    One characteristic of the fire movement is that it is a long-term lifestyle. This may not be suitable for every investor, but it is key to retire early. To reach that financial target within a certain time frame, you will need to either increase your wealth or decrease your living expense.

    It’s often recommended for those who wish to embark on this lifestyle to consider every factor of their life. Some decide to move outside of the city and leave a more minimalist lifestyle to achieve their goal sooner.

    What Do The Critics Say

    1. FIRE Won’t Work Unless You Are Rich

    One of the most common criticisms is that most people will not achieve financial independence from the fire movement unless they are already wealthy. As we discovered when we looked at our example previously, you would need to save at least 6.2 million pesos, but please note, this is based on an example only, and this figure can be more or less in your circumstances.

    2. Your Life Experience Before Retiring Will Be Of Lower Quality

    This process is more than a habit or an idea. It is a complete lifestyle, and it is argued that those who follow this lifestyle live at a lower quality of life as they do not get to enjoy the luxuries of life while they’re young.

    3. The 4% Rule May Not Be Enough

    Another common criticism is that some suggest that the 4% rule may not be enough in the future. As we know, the world is full of surprises, and some believe that its definition will look very different in the future than what it looks like currently.

    F.I.R.E Philippines, What Should I Do?

    The fire movement is a particularly well-designed idea, but it may not be appropriate for everybody. However, the principles of this model are robust, and even if you choose not to retire early, you can still use this method ready for your new journey.

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