Avoid these financial mistakes if you want to retire early
Before FIRE
Underestimating expenses Have a realistic understanding of expenses in retirement, including healthcare, housing and other costs. “Inflation levels, especially for critical illness and children’s education, have been scaling up over the past few years.
Apart from monthly expenses, it is also important to get to a realistic number for larger milestone expenses,” says Dinesh Rohira, Founder & CEO, 5nance.com.
Overly aggressive savings
Being overly aggressive can lead to a poor quality of life that may not be sustainable in the long run. “While frugal living is central to FIRE, it will come with the constant pressure of living within your means.
You’ll also need to find a way to deal with big responsibilities before you retire. A frugal lifestyle may not gel well with a big home loan EMI, for instance,” warns Adhil Shetty, CEO of BankBazaar.
Inadequate emergency fund
You may want to invest all your liquid corpus in financial instruments in a hasty dash towards the FIRE target, but having a safety net is important to avoid derailing your financial goals.
“Most retirement portfolios will have risk assets and their returns won’t always deliver as per expectations. Such potential risks have to be accounted for,” says Rohira.
Neglecting insurance
Insufficient insurance, both for life and health, can leave you vulnerable to unforeseen events that can disrupt your path to FIRE, especially if you have dependants.
After FIRE
Not factoring in inflation Failing to account for inflation can erode the purchasing power of your savings over time.
