FIRE Your Old Financial Life and Retire Early. Here’s How…

A Chicago flight attendant has hit the news for turning her financial life around.

At 39, Bianca DiValerio was nearly broke after a divorce and the sale of several failing rental properties.

But now, she claims to be just a year away from full financial independence.

And how did she do this? By saving 75 percent of her pay and cutting expenses down to the bare minimum.

DiValerio, who earns $75,000 a year, is part of the growing FIRE movement (Financial Independence/Retire Early).

This movement is made up of extreme savers that aim to get to a point where they can live without working. They hope this will let them live their dreams sooner rather than later.

Let’s look at a few tips from FIRE followers.

Make a commitment

Those who manage to retire early don’t make the decision on a whim. And they’re not always rich, at least not in the conventional sense.

Rather, they’re people who know what they want and take steps to get there. It’s as simple as knowing what you want, making a plan for how to get there, and sticking to it.

Use compound interest

The earlier you start investing, the less you will need to invest. That’s the magic of compound interest.

Saving — and, crucially, investing — from a young age, will mean you are more likely to get a well-padded nest egg, regardless of whether you start off as poor or rich.

Compounding is the simple concept of earning interest on your interest. When it adds up over time, compound interest is practically printing your own money.

If you commit to putting away $500 per month at 25 years of age, invested in stocks and earning an 8% annual return, by 55 you’ll have only put in $180,000 of your own money.

However, compounding means that you’ll be sitting on a $680,000 nest egg.

Minimize housing costs

Housing tends to be the biggest cost for Americans, so choose it with care.

Try to keep your housing costs below 30% of your take home pay. That includes all the associated housing costs: mortgage, property tax, insurance and maintenance.

Develop multiple streams of income

This could be moonlighting from your day job as a freelancer, selling unwanted stuff, investing in property to rent out, or doing odd jobs for friends. Your imagination is the only limit.

It’s not just about working hard but about insulating yourself from the insecurity of having just one way to make money.

Live below your means

This is the key to saving more. Spending less.

To start off you might just make a list of all expenditures, then find cheaper alternatives.

Maybe try riding a bike instead of driving, cutting out cable TV, or reducing the number of times you eat out. A no-frills lifestyle can help you reach your goals faster.

Turn these five ideas into habits and then a lifestyle and you too will find that financial independence is an entirely possible dream.