My FIRE, How I plan to get there.

Financial Independence and Retire Early, Work hard, earn enough and put your money to work so you never need to work again. That is what the FIRE movement is usually about.

Through the use of ETFs and LICs, we have started hearing more often these success stories which detail how people have been able to achieve this amazing life goal.

For me I see the FIRE movement as something a little different. I see FIRE as a way to be able to reduce financial stresses and pursue other lines of work that may bring more enjoyment and meaning. I don’t see myself as the kind of person who would just quit my job and never look back, but I would happily change my line of work to something which I may find more rewarding.

How I plan on getting there.

Anyone already familiar with the FIRE movement will know there are 3 main things to do to help you reach your financial Goals.

1) Reduce your expenses (and therefore increase your savings)

2) Increase your day to day Earnings.

3) Put your money to work for you through investments and passive income.

Let’s look at these one by one and see how I am applying these to myself.

Reduce you expense: Back in 2018 when I started this journey of getting on top of my own finances, my then girlfriend (now wife) and I started tracking our expenses in order to understand exactly what we were spending on.

After several months of tracking our spending, we created a budget, which was difficult at first but got easier. We still budget every month and it’s like second nature to us both now.

Through this process we managed to bring our unnecessary spending down and really increased our savings rate by not sacrificing too much of our day to day life. If you want to see more about how I reduced my expenses, check out the post called My First steps Towards FI which goes into a lot more detail on this topic.

Reducing unnecessary expenses is a great way to start but there is only so far this can take you. You will always need to buy food, pay bills and have other expenses which cannot be avoided. Yes you can shop around for the best energy rate but until they give us free electricity, there will be bills. So it’s important to remember that you need to find a balance which allows you to save but still enjoy your life.

Increase your day to day earnings: This is a little easier said than done there is no doubt. For me, I am fortunate enough to have a job which has strong growth potential and relatively solid income. For me the increase in income will be possible as time goes on I will hopefully climb the ranks at work and take on more responsibility and the wage benefits which goes hand in hand with that.

As well as my day to day job, my wife and I have entertained the idea of a side hustles as well and we have on a number of occasions started small ideas to try earn some extra cash. These ideas have never really got much traction for us, but they have brought in small amounts every now and then. Some of the ideas we have tried are around my wife’s Art (both paintings and digital Prints) which we have sold. Check out her Instagram pages, @jessiepoetry & @popdogartwork and some animal sitting services where people who are traveling have paid us to look after their dogs.

The idea of a side hustle is a great way to increase your income and boost your savings rate. Keep in mind that these are usually fairly time consuming and requires effort to get them off the ground to a point that they bring in a regular income. However if you have the time to do it, they can definitely be rewarding.

Putting your money to work through investment: This is the stage that we are currently really trying to develop. The idea is easy enough for us to understand but the execution is another matter entirely.

The concept is that our money should be parked in an income generating investment which would be funnelled back into the investment pool to help grow our financial position. Fantastic!!! The only problem is there are so many different opinions on how to do that.

The general rule of thumb for the FIRE movement is to utilise an investment vehicle know as an ETF, which stands for Exchange Traded Funds. Without going into too much detail of what an EFT is in this post, the main ideas of an ETF which are so appealing to the FIRE community are that they are known for producing regular Dividends with low costs, and depending on the ETF can be fantastic way to simply diversify a portfolio as by their definition ETFs track a particular index which means, with a single share, you are getting exposer to multiple companies.

Currently we have a basic plan which aims to utilise but not exclusively rely on ETFs. Our plan is to setup a Portfolio which has the following breakdowns. Approximately 70% of funds invested in ETFs, 20% in individual low risk stock picks and 10% in higher risk stocks.

The reason behind this breakdown is we feel we are in a stage of life where we are able to tolerate a slightly higher risk profile due to the fact we don’t have kids yet and our overheads at this stage in life are relatively manageable, despite having a mortgage and student debt.

Our mortgage also has a 100% offset facility. One of the big benefits to an offset account is that it saves us interest each month on the loan based on how much is in the account which in turn helps us pay off more of the loan faster. Due to these benefits we plan to utilise this facility as well but only for a small proportion of our funds which we keep as an emergency or rainy day fund. The reason for not putting high amounts into the offset account is because of today’s interest rates here in Australia. Currently we have an interest rate around 2.5% which we feel we would be able to beat as a rate of return with our money invested in the share market. If interest rates climbed back above the 5-6% mark, then we would need to reconsider our strategy and look at our performance in the market together with Fees and time spent managing the investments etc. and then decide which was the better option of the two to hold our funds.

Our first road map to FIRE.

This is how we are currently planning on achieving financial stability and security and hopefully one day achieve financial independence. I understand that this plan may change several times along the way, however through the use of

- Budgeting to reduce unnecessary expenses,

- Growing income from our jobs and side hustles, &

- Investments

We hope, we are taking a step in the right direction.

Once we have our portfolio a little more established, I plan to wright about each selection in a little more detail.

Thanks for reading,

I would love to hear from anyone if you are currently on a similar journey or thinking about starting down the path to Financial Independence.