FIRE stands for Financial Independence, Retire Early. It’s a financial movement growing in popularity as more and more people seek to eliminate debt and build savings so they can retire earlier than usual. Regardless of your target retirement date, this movement focuses on some smart financial strategies:

Reduce

One of FIRE’s focus is on eliminating all debt and reducing expenses. Paying off debt is the first step with a focus on not accumulating new debt. Start by scrutinizing how you spend your money to identify unnecessary expenses.

Increase

FIRE followers also look for ways to increase their income. Things like switching jobs for a significant pay increase, working side gigs or generating passive income from owning rental property add money toward the early retirement goal.

Invest

The last tenement of FIRE involves sound investing strategies. Start by maxing out retirement plan contributions. And if your employer offers a matching contribution, be sure you’re saving at least the minimum amount to get the maximum contribution.

An umbrella insurance policy is a tool to help protect your family and your assets. It adds an extra layer of protection above your other liability policies like automobile or homeowners. If you are involved in a major accident, having an umbrella policy can save you from costly legal claims and judgments.

All About You

Having an umbrella insurance policy kicks in when your other policies are exhausted. If you’re involved in a serious car accident and you’re sued for injuries that exceed the limits of your car insurance, your umbrella policy will kick in and help cover the costs saving your wages and assets from garnishment or liens. It’s important to note that umbrella policies won’t cover your own injuries or damage. You’ll need to access other insurance policies like your health or car insurance for these costs.

Your Family

Often umbrella policies will extend to cover liability and damages caused by your spouse or children who may not have liability insurance in their name.

Be Alert

Umbrella policies can contain a list of excluded activities that won’t be covered. Common exclusions include breach of contract, boating or other watercraft use, injuries resulting from criminal acts or business activity or losses. If you have a business, consider getting a business-specific policy.

What’s Your Number?

Work with an insurance professional to determine how much coverage you’ll need. Some use net worth as a guide. For example, if your net worth is $1.5 million and your auto insurance has a $300,000 liability cap, you’ll need $1.2 million in umbrella insurance. Most insurers sell umbrella policies in $1 million increments and some will require you to have a minimum amount of coverage from your other policies before you can buy an umbrella policy from them.

Umbrella insurance is generally affordable costing a few hundred dollars a year for a million dollars in coverage. With some policies covering your hobbies and vacation activities like renting jet skis or motor bikes, buying umbrella insurance is an affordable solution for your insurance needs. Consult with your insurance agent to learn more.

If you’re looking for a steady source of income before you start collecting Social Security, consider an annuity* to fill the gap.

Immediate Need

Whether you’re planning to retire soon or recently retired, delaying when you begin collecting Social Security can potentially increase your monthly payout.

To fill this time gap, consider purchasing an immediate annuity. The regular annuity payments can delay the need to draw on your retirement funds for your day-to-day expenses. An immediate annuity begins paying you immediately, as opposed to a deferred annuity which starts paying you at a future date. Depending on your situation, you can purchase annuities that pay over the period of time you need. If you retire at age 62 but want to wait until age 70 to begin collecting Social Security, you can purchase an eight-year annuity that will provide monthly payments until you reach age 70.

Consider Inflation

Work with your financial professional to determine how much monthly income you’ll need to fill the Social Security gap and what type of annuity will work best. Don’t forget to factor in inflation. Consider adding a cost of living rider** to your annuity that will boost your payment in line with changes in the Consumer Price Index.

By locking in income now, you’ll avoid the possibility of having to sell your retirement holdings in a down market.

*Fixed annuity contracts guarantee a minimum credited interest. For immediate fixed annuity contracts, annuitants receive a fixed income stream based, in part, on the interest rate guarantee at the time of purchase. Annuity products are not FDIC-insured, and their contract guarantees are backed solely by the claims-paying ability and strength of the issuing life insurance company. Withdrawals prior to age 59 ½ may result in a 10% federal tax penalty, in addition to any ordinary income tax.

*Riders may incur an additional premium. Rider benefits may not be available in all states. Riders that pay benefits for events other than death will likely reduce the policy’s death benefit and cash value.

The holidays are behind you, but chances are paying the bill is not. Starting the New Year with a thoughtful spending plan can help you make progress throughout the year. Include your entire family in the process to help ensure they are on board with this goal.

Plan in Advance

Planning for holiday shopping should be part of your regular budget. Starting with last year’s spending history, document necessary expenses such as mortgage, insurance, transportation, food, utilities, etc. Determine where you might be able to cut expenses. Subscriptions, dining out and convenience purchases, such as coffee should be considered. Then add savings goals and some disposable income. Be sure to save monthly toward holiday spending, so you won’t have to rely on credit.

Track Every Dollar

Now work the plan. The key to successful budgeting is recording all your expenses. Choose a recording system that works best for you. Electronic methods like a spreadsheet or bookkeeping software will allow you to create reports to easily summarize your monthly and yearly progress. There are several online options, that can connect directly to your bank accounts. Choose a system that will be easy for you to stay faithful in updating your spending.

At the end of the day place all receipts in a designated space. Don’t forget to hang on to receipts for cash purchases.

Remember that creating a budget isn’t very helpful if you don’t track how much you spend. So log your receipts regularly to update your spending against your budget. Monitor your savings goals, too. Update your records weekly or monthly and you’ll be grateful for these routine updates at the end of the year when it’s time to prepare next year’s budget.

Get a Checkup

To increase your chances of success, scrutinize your progress each month—not any longer than that—and share what you’ve learned with family members. Together you can review where you could improve and encourage everyone to keep a lid on impulse spending. Staying on track will result in less stress and no spending hangover after the holidays next January!