This case study is part of our Australian Financial Independence, Retire Early (FIRE) course available for free on Rask Education.
We’re Alex and Ellie – a married couple in our mid-30s living in Brisbane, Australia. We’re both fully devoted to the pursuit of early retirement. Although we’re high income earners and earn about $220,000 between us from our jobs (plus investments), we aren’t afraid to live a frugal life to accelerate our time until retirement. We save around 90% of our post-tax income.
We’ve been blogging about our exploits and progress (or lack thereof in 2020!) since the start of 2019 at HisHerMoneyGuide. In our weekly posts we also cover off on our thoughts on the financial landscape and provide some hopefully useful tips on how people can make the most of their money to save and invest for a wealthy future.
When did you first discover the concept of FIRE?
We had plans to retire early well before we ever even heard about the FIRE movement. Alex had a great start to his working life before the Global Financial Crisis hit and the only job he could then get was frankly horrible. That ignited the spark in him.
For Ellie, financial independence was always the goal since the start of her working life. It was about building wealth to provide freedom of choice; not being locked into any particular course because you’re saddled with debt. Meeting Alex – who already wanted to retire early (without knowing about any snazzy acronym) – really opened that door though to want to take the next step of financial independence, which is having enough money to not need to work at all.
Combining finances made us realise what was possible to have an amazing life in retirement – not just avoiding offices. Together we only first heard about FIRE as a movement in early 2018 in a media article and we went, “That’s us!”
What is your motivation towards achieving FIRE?
Our goal is currently to retire early by the age of 45, under what’s known as FatFIRE. Our goal is to retire with a combined pre-tax income of $150,000 per annum. Basically it’s the opposite of LeanFIRE, which is living a frugal life with lean expenses.
We see this as enough money to enable us to have a retirement where money isn’t a constraint, and it will allow us to do what we want to do (things like months of international travel each year). Essentially, it means that we’ll be able to not worry about work (a giant stress) or money (which is the average person’s biggest worry in life).
That’ll allow us to have the freedom of time and financial freedom of choice to pursue hobbies, interests and passions to make the most of our lives.
We really don’t want to be couch potatoes in retirement though, which is what some people seem to think a life without working is. A successful life in retirement isn’t just about sorting out your finances, but it’s also about knowing what you want out of life and how you want to spend your freedom when you do achieve FIRE. For us that’s travelling the world, living by the beach, sport, recreation and volunteering to causes we care about.
How close are you towards achieving your FI goals?
Our primary financial goal is to reach our passive income target (which will fund our early retirement) of about $150,000 gross a year. Before coronavirus hampered that, we were a little over half way there.
We’ve also got a net worth target of about $4 million in total assets (investments, superannuation, as well as our future home). In the latest quarterly report that we do on our HisHerMoneyGuide blog, we had total assets of over $2.4 million after taking out debt. So that’s also tracking quite nicely.
The last thing we want in retirement is to worry about returning to work – let alone actually needing to.
Some people have asked us why we haven’t retired yet. But as 2020 has shown, it pays to have a healthy buffer in your budget. Other crashes will happen in the future when we’re retired, and we’ll need to cut back expenses on things like travel.
What investment journey have you taken and why did you choose to do it that way?
We’re primarily invested in shares, as well owning two investment properties that currently still have debt on them. We started out in individual shares in the ASX that have good dividend yields, before moving to Listed Investment Companies (LICs) that invest in Australian and international stocks, and then active ETFs that have an international dividend focus. The end result is asset diversification, and not just holding one or two diversified stocks.
At the heart of our approach is the idea of having a truly passive income. We don’t want to be making investment decisions about when to sell shares or worrying about things like capital gains tax. It’s easy enough when you’re young. But we think that having a draw-down investment approach and facing an event like the coronavirus crash with a dwindling portfolio in old age would be an agonising situation to find yourself in.
What’s the hardest part of working towards FIRE?
Many people have looked at our expenses and said that they couldn’t do what we do. But for us, living frugally is fine enough to do. What’s difficult is the actual work involved in our day jobs that helps fund our investments, and that’s multiplied by the amount of time it takes to actually achieve a properly funded, sustainable early retirement.
We have some concerns around LeanFIRE, but the numbers generally stack up. However, even then if you’re starting from scratch you’re realistically looking at needing to work 10-15 years in a decent job, and be pretty dedicated to your goals.
People struggle to achieve New Year’s resolutions, so keeping motivated and surviving that day-to-day grind – the very thing you’re trying to escape – for years and years is the hardest thing.
Your best advice for others just getting started on their FIRE journey?
A lot of people focus on trying to find the most optimal, efficient investment strategy. But the only one that will work best is the one you know in hindsight. “Past performance is no guarantee of future returns” isn’t just a legal cop-out; it’s absolutely correct – no strategy will be perfect all of the time.
So we don’t worry too much about getting it perfect, as long as we avoid getting it wrong.
Instead, if FIRE is your goal, the biggest barrier to your success will be you and getting distracted or giving up in the years that you’ll have during your journey. The secret to reaching FIRE is actually pretty simple: spend less than you earn, invest the rest, and you’ll get there. Good luck!