How to achieve FIRE
You might already know from this recent post on my site I’m more curious about FIRE – which stands for Financial Independence Retire Early in the personal financial community.
Tamarindo Beach, Tamarindo, Costa Rica.
Over the years of running this blog I’ve been fortunate to meet and learn from a number of very bright and successful early retirees – to help tailor my own financial plan. You can read some of these retirement success stories here.
This month is no different. I’m happy to share a new early retirement story from a financial blogger ‘down under’. Martin at Get FIRE’d asap achieved financial independence recently at the age of 50. I reached out to Martin to learn about how he got there, what he learned during the process, how he’s going to sustain his wealth and what advice he has for other investors on their financial freedom quest.
Martin, welcome to the blog, thanks for the time.
Hi Mark and thank you for the opportunity to feature on your blog and share my humble story with your readers.
Martin, some background first. When and how did you get started in investing? What did you start investing in?
I’d consider myself a bit of a ‘late starter’ on the investing front although I did try my hand at share trading in my twenties, not very successfully, I might add. In fact, I don’t think that any of the companies I invested in back then still exist.
It wasn’t until I was about 36 that I had one of those unexpected 2 am epiphanies where you wake up with the ‘best idea ever’ and lay awake for the rest of the night working through the feasibility of it.
My ‘idea’ was that perhaps I could use the equity in my home to purchase an investment property. Yes, seriously, I thought that I had just discovered a new way to leverage my existing house to buy more property!
It wasn’t until I ran the idea past a friend in real estate, that I discovered that, yes, this is what you can do, and no, I didn’t just invent it. Darn!
So that’s what I did. I initially bought a 2-bedroom apartment with a small cash deposit and used the equity I already had to secure a loan.
Since then, I’ve bought and sold seven properties and still have two left. These have all been rented out while I’ve owned them.
When did you realize that investing, real estate or otherwise, could help you realize financial independence? Tell us about your journey…
I’ve always been interested in how money works, and the power of investing and compounding interest.
I also saw my parents working well into their 60’s because they didn’t have a sufficient financial buffer to allow them to retire any earlier.
I decided that I didn’t want to be in the same financial position as my parents and I wanted to be financially independent well before the official retirement age of 65.
This could be achieved either through saving money for most of my working life, or by leveraging the funds and the equity in the house that I had to accelerate the process.
Now, I do have a small caveat here for anyone who thinks that investing in real estate properties is a sure-fire way to getting rich. I consider myself to have been very lucky, and a good dose of luck doesn’t hurt, but I ended up with a number of properties in a market that has since gone ballistic with huge increases in property prices over the last 10 years. I’ve now sold several of them to reduce my mortgage (which at one time was on the wrong side of seven figures) and reinvested the money into a more diversified portfolio of mostly Exchange Traded Funds (ETFs).
At this time, the ETF portfolio provides most of my income, topped up with a couple of side-hustles. In time, the other properties will be sold and I’ll go fully the ETF route so that I don’t have to deal with any of the ongoing requirements of being a landlord.
You’ve obviously done very well with real estate. Do you have an investing philosophy? If so, what is it? What were some of your keys to becoming financially independent?
Hmmmm, I have never really thought about whether I have an ‘investment philosophy’ per se. I have always taken a fairly pragmatic approach to investing and have never become emotionally tied to an investment, besides the early days when I may have become a little emotional as my shares went down the tubes. Who wouldn’t?
I decided, years ago, that I wanted a million dollars invested before I would retire. I’m still not sure how I got this number and back then, a mill would have been worth a lot more than today. However, that number stuck in my mind and now, it appears to be about right.
I believe a million dollars, invested well and working hard on your behalf, gives you a 4% safe withdrawal rate of around $40,000 (or so) per year which is more than enough to afford my relatively frugal lifestyle.
I can live a pretty good life on even less than that and not want for anything. And that’s where the cruncher is for many people. If your annual spending is well above that, then you can either work much longer, or reduce your frivolous and excessive spending to match your income, and retire much sooner.
That’s what I did and haven’t looked back.
It’s partly why I started writing Get FIRE’d asap. Because I wanted to share what I did to retire early with the rest of the world. It’s a shame most of them aren’t listening eh?
What have you learned about money? What did you learn about yourself during your journey?
Through much trial and error, I have learned that money is merely a tool to provide you with a lifestyle.
Obviously, not having any money won’t give you much of a lifestyle, but having far more than you need isn’t necessarily going to improve your levels of happiness either.
Studies have shown that in many cases, once a person earns an annual income of $75,000, their level of happiness and fulfillment doesn’t improve much further when earning in excess of that amount.
Sure, they can afford bigger and better toys, take fancier holidays, and live in bigger McMansions, but are they any happier? The research suggests not. The more you have, the more time you spend worrying about losing it or trying to keep up with the Joneses’.
One of the most important lessons I learned was knowing when ‘enough is enough’. Enough to say that I am now financially independent, enough to enjoy the rest of my life and never run out, and enough that I never have to work again if I don’t want to.
When you determine you have ‘enough’, as I did at age 50, it’s like a huge weight being lifted from your shoulders. The freedom from knowing your ‘enough’ number makes all of the hard work getting there rewarding.
How are you going to sustain your wealth?
I now have around 40% of my capital invested in a variety of ETF funds, mostly with Vanguard Australia, because the returns are consistently positive, Vanguard’s low fees, and the fact that I can just let the funds do all the hard work for me.
The other 60% of my capital is still invested in real estate and that’s unlikely to change for 3-5 years. It’s a safe bet that over time the capital gains will easily out-pace inflation in the market where my property is located. Better than money in the bank I reckon.
Eventually, the properties will be sold to buy more ETFs due to the simplicity and security of these as long-term investments.
Around this time, the plan is to make a move to live in some as-yet-to-be-decided location in South East Asia. Thailand, Bali, and Malaysia are currently on the shortlist and the next few years there will be some extended stays in these locations (we’ve just returned from a month in Bali) to determine where we want to live.
Why you may ask? Because we love life in this part of the world, and in many locations, you can live very comfortably for half to a third of the average cost of living here in Australia. That should not only provide us with a great lifestyle, but doing so will ensure that the financial pool will never run dry.
What advice do you have for anyone seeking to achieve FIRE? What advice do you have for savers and investors in general?
My advice for a successful FIRE plan is start early. If you cotton on to the benefits of financial freedom at a young enough age and start planning your savings and investment goals from your first pay packet, you can honestly be financially independent in 15 years without making too many sacrifices.
If you’re planning to start this FIRE journey later in life, the best time to start is in fact, right now.
Start tracking your spending. Cut back the habitual and excessive purchases you make all the time, such as coffees and buying lunch every day. Set savings goals and aggressively work them. Push back from your spendy friends who knock you for being more careful with your money. (Remember, I’m retired and almost none of my friends can afford to be!). Start reading plenty of blogs like this one (and mine) that will share how others are achieving their FIRE plans. This can help you stay focused on your goals.
As for making smart investments, don’t be afraid to ask for advice from those who know what they’re talking about and have a track record to back it up. But make sure that you maintain full control of your investment portfolio. Maybe I’m being a little over-cautious but I wouldn’t turn over control of my hard earned cash to anyone who claims to know how best to invest it for me.
I could go on for hours, Mark, but I hope that helps motivate a reader or two to travel the journey to financial freedom and retire early like I have.
Thanks for this Martin.
I want to congratulate Martin on fulfilling his early retirement dreams and I look forward to staying in touch with him as he plans to move to Asia – sounds like an adventure!
Any questions for Martin? Have you considered striving for an early retirement? What does your financial future look like and how are you getting there?