How to Reach FIRE as a Software Engineer in Europe
A Blueprint for FIRE (Financial Independence Retire Early)
Introduction
In the evolving world of technology, the dream of achieving Financial Independence, Retire Early (FIRE) is becoming increasingly tangible, especially for software engineers and other high paying professions. But what does FIRE entail? Simply put, it's a lifestyle movement focused on saving and investing heavily to retire far earlier than traditional budgets and retirement plans would allow. This concept has gained momentum among professionals who aspire to enjoy life on their terms, free from the constraints of obligatory work.
While in the U.S. the typical route to FIRE for software engineers often involves joining big tech companies and amassing wealth quickly to maintain a high-cost-of-living (HCOL) lifestyle in location such as California or New York, the European path to FIRE can be distinctly different. In Europe, the strategy is less about reaching the highest possible earnings and more about strategic lifestyle planning and geo-arbitrage – taking advantage of the cost differences between countries. This approach is not just about earning and saving; it's about making smart choices where you can work in HCOL areas while exploring the affordability and charm of low-cost-of-living (LCOL) regions. The diverse and accessible European landscape offers the unique benefit of living and working in different economic environments, allowing for a smoother transition to the desired FIRE lifestyle.
This guide explores one particular blueprint for software engineers in Europe to achieve financial independence and retire early. It's important to note that this is just one of many paths to FIRE. The guide will cover maximizing earnings, investing smartly, and ultimately transitioning to a life where work is a choice rather than a necessity.
Our approach transcends simple financial strategies; it advocates for a significant lifestyle shift that emphasizes personal joy and freedom. Whether you are starting your career or are a seasoned engineer, this guide offers actionable steps towards financial freedom within Europe's unique economic landscape. Join us on this journey to uncover how your career in software engineering can unlock a financially independent and fulfilling life, remembering that this is just one route among many to reach your goals.
The Blueprint
In this section, we delve into the specifics of our proposed blueprint for engineers to reach FIRE in Europe. This is a step-by-step guide that balances high earning potential with strategic lifestyle choices and smart financial planning. Remember, while this path is laid out with clarity and precision, it's important to tailor it to your personal circumstances and goals.
Detailed Steps:
Maximizing Income in HCOL Areas: Start your journey by securing a high-paying job in a high-cost-of-living area. Aim for a total compensation (TC) between 100k-250k, depending on your lifestyle and frugality. This step is crucial for building a strong financial foundation quickly.
Fostering a Strong Saving Habit: Develop a robust saving plan. Your savings rate is a key determinant of how quickly you can transition to FIRE. Aim to live below your means while still enjoying your life.
Exploring LCOL Locations: Begin exploring low-cost-of-living locations. Spend time in various LCOL areas to find one or more that align with your lifestyle preferences. This step is about balancing quality of life with affordability.
Transitioning to Remote Work: Work towards gaining remote work permissions. This flexibility allows you to spend more time in your chosen LCOL locations, further reducing your living expenses and allowing you to learn more about those locations and your preferences among them.
Investing in Cash-Flow Assets: Channel your savings into assets that generate good cash flow. These could include real estate, e-commerce, online businesses, gas stations, or other investments that yield over 10% returns. Choose options that are more active (i.e. require more work from your side) than ETFs but yield higher returns and still align with your risk tolerance and interest.
Coasting Towards FIRE: Once your passive income is sufficient to support a coast FIRE lifestyle (one where you still need to work, but not that much thanks to other income sources), transition to a lower-stress, fully remote job, even if it pays less than your initial HCOL job. Continue to save and invest, but with less pressure.
Achieving Full FIRE: Reach the ultimate goal when your passive income covers all your expenses. At this point, you're financially independent and can pursue what brings you joy without financial constraints.
Quantifying the Journey:
Income Goals: Aiming for a TC of 100k-300k USD is ideal. This range is broad enough to accommodate different lifestyles and saving goals.
LCOL Lifestyle Cost: An ideal LCOL location should allow for a comfortable/luxurious lifestyle for less than 4k USD per month.
Savings Thresholds: Accumulating 100k-250k in savings and investing in assets with a return of over 15% can set you up for coast FIRE.
Income During Coasting: A coast FIRE job bringing in 3k-6k per month after taxes can be sufficient during this phase.
Additional Remarks:
Family Planning: Consider postponing having children until you’re fully FIREd, or at least coast-FIREd, as raising kids in HCOL areas while you are still in the accumulation phase can significantly impact this strategy.
Timeframe Expectations: Steps 1 to 6 could take between 3 to 6 years, while transitioning from coast FIRE to full FIRE might take another 3 to 6 years.
Career Progression: Achieving a salary in the 100k-250k range should be feasible within 3 years of focused career development.
Alternative FIRE Strategies: While this blueprint offers a harmonious approach to FIRE, there are other methods, such as focusing on career advancement to attain a high net worth and then investing in lower-risk assets like bonds.
Closing Remarks:
This blueprint is designed to offer a structured and strategic approach to achieving FIRE for software engineers in Europe. It blends high earning potential with the advantages of geo-arbitrage and smart investing. As you embark on this journey, remember to adapt the steps to fit your personal situation and goals, and always stay informed about the financial decisions you make. With dedication and a well-executed plan, the path to financial independence and early retirement is not just a dream, but a reachable destination.
Conclusion: Laying the Groundwork for Your FIRE Journey
As we wrap up this introductory article, it's important to remember that what we've outlined here is just the beginning – a skeleton or a blueprint – of a larger and dynamic strategy for achieving Financial Independence, Retire Early (FIRE) as a software engineer in Europe. Our journey together doesn't end here. Instead, it's a launchpad into a series of in-depth explorations where we'll dissect and examine each component of this strategy.
In the upcoming articles, we'll dive into the nuances of choosing the right countries and companies during the accumulation phase, strategies for exploring low-cost-of-living (LCOL) locations while working in high-cost-of-living (HCOL) areas, and methods to achieve 10% to 15% returns through active investing. Additionally, we'll explore other viable strategies for reaching FIRE, managing finances as a professional in today's European landscape, and draw more comparisons with the U.S. financial scene.
Your curiosity and interests are the driving force behind these discussions. I encourage you to engage actively with this content. What aspects of the FIRE journey intrigue you the most? Are there specific topics within the realm of financial independence and early retirement that you're eager to learn more about? Your feedback is not just welcome – it's essential. It will shape the direction of our upcoming articles, ensuring that the content is not only informative but also tailored to your specific interests and needs.
As we embark on this exciting series, remember that the path to financial independence is as unique as each individual pursuing it. Whether you're just starting out or you're well into your career, there's always room to grow, learn, and adapt your strategy. So, let's continue this journey together, exploring, questioning, and building a roadmap that leads to a life of financial freedom and personal fulfilment.
Stay tuned for more insights, and don't hesitate to reach out with your thoughts, questions, and areas of interest. Your input will help shape a comprehensive and engaging series that resonates with the aspirations and challenges of software engineers in Europe striving for financial independence.
This is really great stuff! Thanks Nicola!
I'm having trouble finding the rest of the parts to this series. In particular, it would be really interesting to know how you are managing to invest in assets with a return of over 15%? Thanks