Author: Latestarterfire

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Late Starter to FI Series #28 – FI is Freedom

Welcome to the Late Starter to FI series!

I am a Late Starter – I did not discover FIRE (Financial Independence Retire Early) concept until I was 47. This was way later, I thought than others who seem to have it all together in their 20s and 30s.

Since I started to write about my own journey, I have discovered there are many more Late Starters like me, yay! It is such a relief knowing I am not alone. 

I want to share our stories, our unique perspectives and show that it is absolutely not too late for us.

So in this series, I particularly highlight those of us who start our FI journeys in our 40s, 50s and 60s. And explore questions such as ‘where do we start’, ‘can we still retire early(ish)’, ‘what are the specific challenges for us late starters’. We look at our past, not to castigate ourselves but so that you can learn from us.

Please join in the conversation in the comments below. I encourage you to share your story if you are a late starter. AND especially if your story is not reflected in any of our stories so far. You absolutely don’t have to be a blogger or podcaster to share your story. 

Please email me at info@latestarterfire.com or connect with me on Twitter or Facebook or Instagram.

And if you’ve missed any of the previous stories, you can catch up here – Late Starter to FI series

FI is Freedom. Amen. Enough said 🙂

I invited FI is Freedom to share his story here as his approach to retirement income is not the usual strategy of using the 4% rule (withdrawing 4% from your portfolio forever, based on the Trinity study). He changed his strategy in his late forties and still managed to retire at 55.

You can find him on his blog – www.fiisfreedom and on Twitter as @FiisFreedom

A little about me

I am 55 years old and live in Middle Tennessee, USA. I’ve been married for 34 years and have a daughter in her freshman year in college. I retired this March after a long military and IT career.

I have always been an avid backpacker, to the point of, probably, an obsession. I’ve hiked over 1000 miles this year since retiring in March 2020 at 55.

I just started a FIRE blog focused on monetising your nest egg to replace your salary with dividend income. Financial Independence is Freedom is my motto – www.fiisfreedom.com

Lightbulb moment (or not)

I did not have a lightbulb moment that drove me to pursue FIRE but really always planned to retire at 55. I did have a moment where I realized that to make my goal of 55 happen, I needed to change my strategy after several cycles of making money on high flying stocks, losing some, saving more, losing some, making a little more and repeat.

This led to some early fear that the volatility I experienced would never make me comfortable giving up a salary. That led to some serious planning as to how I could better monetize wealth without the ups and downs.

This planning led to passive income, which for me means dividend investing for the long term.

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My financial situation at that point

I really started to worry about the volatility I experienced as a growth investor when I knew I was going to make what I considered my number. Probably about 6 years from retirement, so in my late 40s, I knew I would never feel comfortable pulling down principal as a source of income.

At this point, I was probably 80% ready for retirement assuming an annual income in retirement from $70k to $120k. I was in a very stable “C” level technology position with particularly good income allowing me to save more in my last couple of years than I did in the previous ten.

It is easier to save enough to hit the crossover point than invest your way to success.

 

First steps on the path to FI

This is a tough question since saving and investing has been important my entire adult life.

Probably, opening up a mutual fund in my late teens. I can’t even remember what it was or who it was with but I had it a few years before I opened up my first brokerage account. I have always preferred picking my own investments.

I have undergraduate finance education and have spent quite a bit of time in finance tech consulting and business leadership that I feel I have the ability to analyse a business well enough. That education and experience have been crucial to what I consider my current success.

My current financial situation

At my blog, I cover one of my main portfolios in depth with full transparency. I am not comfortable sharing all my financial details but will talk about the other things at times besides this portfolio. It is a focused dividend income portfolio that I will not touch for at least the next 5 years so it will be exciting to blog about how I plan to double that income from now till I need it.

The Freedom Portfolio, as I have named it, is the IRA I’ve used since 2006 to rollover 401ks. The current value is around $550k and 12 month forward dividends should be a bit over $40k. I consider all the holdings near permanent positions. I may do some rebalancing at some point because of some positions that have performed very well. That rebalancing would be done with dividend reinvestment allocations rather than selling equities.

Early retirement

I am financially independent and retired at 55 last year. I guess that is considered early but if I had started early or learn my lesson in 2000, I could have done it earlier. Not sure I was ready earlier but 55 was just in time.

I am kind of surprised at how happy I am being retired, even after planning for it my whole life. Not just happy with my current circumstance – I mean I’m genuinely happy I do not have to pursue work any longer. My family is very blessed to be in the situation we are in.

 

 

The most significant step to reach FI

I would have to say the most significant step is just understanding the need to save in the first place. So many of my friends, older and younger, are so far behind just because saving hasn’t been a priority. I am retired right on time but in 2008, I got scared I wouldn’t make it.

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How my relationship with money has changed

First of all, no regrets. I’ve made mistakes. I’ve made bad decisions and I learned from them. Luckily we have a long time to correct our experience deficiencies and buckle down and get serious.

My relationship with money has definitely changed. For quite a while in my career, I was earning enough to buy things I didn’t need, spend freely and still save the normal 10%.

I think my mistakes were chasing growth at all costs and getting slammed in both 1999-2000 and in 2008-2010 market crashes. 2008 especially made me rethink everything and led to my first dividend stocks.

In hindsight, which is always 20-20, I wish I had learned of dividend income as my retirement funding source a lot earlier. I had always planned to follow the safe withdrawal rate theory of 4% a year and potentially deplete my principal at death with little leftover. Now just by living off of part of my dividends, I have an eye towards building generational wealth.

Specific challenges or advantages of starting late

For me, it was pure career burnout and knowing I wanted out early.

I imagine someone else starting their retirement journey early would just have to put their head down and get serious with earning and saving.

The only advantage I would think for starting late is most should be at the peak of their earning years and hopefully beyond big expenses like saving for a home or college.

The key is to start. If you don’t start, you will not meet any goals.

The effect of COVID 19 on my strategy

Quite the contrary, 2020 has been great for my strategy. I retired on March 1st and rolled my 401k into the Freedom Portfolio in April at the market low.

All I really did was increase all of my current postitions but the yields I bought in at were like rocket fuel to not just this year but the whole five year income projection I had before retirement. Just the right time to enter the market.

Sometimes we do get lucky.

What's next?

I plan to hike the Appalachian Trail beginning this Spring. Probably the only goal I’ve been working on longer than FIRE and to me, the epitome of the freedom I’ve gained. This effort will consume me through 2021.

After that, I plan to enjoy life with my family and continue to live an adventurous life. More hiking is definitely in my future. Maybe the Pacific Crest Trail or Continental Divide Trail or both. I’m not young enough to commit myself to those but that would complete the Triple Crown of hiking.

Back to Latestarterfire

Thank you for sharing your story and retirement income strategy with us, FI is Freedom.

I would love to pursue a dividend income strategy for my own retirement, thereby not touching the nest egg and passing that on to my niece when I die. I’d always assumed that starting late would make this strategy difficult to execute.

But after reading your story, it may be possible if I can live off the dividends and supplement it with another source of income eg working a regular evening or weekend shift and monetising this blog. Hmmm … lots of food for thought.

Wishing you all the very best for your Appalachian Trail hike – stay safe and keep us updated on your progress! It’s definitely not for the faint hearted 🙂

 

How will you fund your retirement income?

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2021 Goals – What is my Focus?

Hand holding a camera lens with an autumnal background | What is my focus for 2021
Image by Jonas Svidras from Pixabay

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I was never one for making New Year resolutions, because I could never keep them. Discipline has never been my strong suit 🙂 So what was the point of making resolutions that I can’t keep?

But waking up one morning in January 2018 in a cold sweat, in a panic over my ability (or lack thereof) to retire, changed that mindset forever, I hope. I only had one thing to accomplish that year, the year I turned 47.

All I wanted to do was “sort out my finances”. How vague is that?

From that one simple goal though, I read The Barefoot Investor in one afternoon , in one sitting. I discovered the FIRE community and went down the rabbit hole of reading personal finance blogs and listening to podcasts. Mind you, I had NEVER read a blog or listened to a podcast before. I didn’t even trust recipes on the internet! Oh, how far have I come, haha! By the end of 2018, I had my own blog …

And yes, I began sorting out my finances. By the end of 2018, I had consolidated two superannuation accounts, switched super fund from REST to Hostplus, started saving an Emergency Fund and importantly restarted salary sacrificing into super and investing in a share portfolio again. I started tracking my expenses and cut out the easy things first eg the takeaway cappuccino and lunch at work.

And I haven’t looked back since. Every year, I’ve built on what was started in 2018.

So I understand the power of setting goals.

And a pandemic is not going to stop me from setting goals for 2021.

I need direction, something to aim for, something to look forward to, something to celebrate.

Too many goals, no focus?

But I am guilty of wanting to accomplish many things all at once. I also love multi tasking. Putting coffee on the stove, stacking or unstacking the dishwasher plus eating toast at the same time. Zoom meeting? Start the dishwasher. You get the drift.

Then I listened to Afford Anything episode #293 – The One Question That Makes Everything Easier, with Geoff Woods. It was so good I listened to it twice! He talks about the principles in the book, The One Thing by Gary Keller and debunks 6 productivity myths, one of which is multitasking.

Apparently, you waste 28% of your time when you multitask and to put it in a 5 day work week context, multitasking wastes 2.4 days. Wow!

And I learned that it is ok to have many goals but I have to be ruthless in prioritisation of these goals and habits.

The question I need to ask is “What is the ONE THING that I can do, such that by doing it, everything else will be easier or unnecessary?”

The reason why it’s taken me so long to write this post is because I struggle with focusing on only one thing. I kept asking myself – but which is the FIRST thing you want to focus on?

There is so much I want to do in 2021, despite often not having the energy. I slept a lot in 2020 and by the looks of 2021, the pattern continues.

I have 4 goals in 2021 and I will drill down with each one to the smallest task / habit to make achieving the final result easier.

But I will also focus on establishing one habit at a time, do things sequentially, do one thing at a time. Once I’ve mastered the first one, I then have permission to move on to the next habit.

So my phrase for 2021 is ‘One thing at a time’.

My decade goals have not changed – retire at 55, visit Antarctica and run a marathon.

My goals for 2021 will help to get me there.

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1. Create another income stream

Apparently successful millionaires have 7 streams of income.

Me? (disclaimer – not a successful millionaire … yet) – I have two income streams.

My major source of income is from my full time job. Because of burnout a few years ago, I transitioned to a lower paying role with less responsibilities. I am far happier and less stressed. I am therefore wary of creating side hustles that will impinge on my new work life ‘balance’.

However, 2020 was a trying year. It was scary seeing how forces outside of our control eg a pandemic or government response to said pandemic, which I 100% support – can mean loss of jobs and livelihood for so many people overnight.

While I still have a job, my workplace has to respond to less customers and revenue. We haven’t replaced anyone who has left. Fingers crossed, things will improve and we actually start hiring again.

So … it’s time to look for an additional source of income. Not to replace my full time job, but to supplement it. It just seems prudent.

Plus I want to visit Antarctica, which is COSTLY!

My second income stream is from dividends from my share portfolio. It amounted to around $5000 in 2020, all of which was reinvested. This will continue to grow slowly over time.

The most obvious source of another income stream is from this blog. I already spend the majority of my free time here, besides the amount of time I spend sleeping and reading. Obvious but not easy. There is so much to learn about monetizing a blog.

Plus I really hope I can continue blogging after I retire – I will need something to get me out of bed. Although I’m sure I will spend the first 6 months after retirement, living in my bed – I love my sleep ins. The blog will be a bonus (and my safety net) if I also earn an income from it. The truth, though is I would still do it even if it doesn’t earn a cent.

2. Invest $30000 in shares portfolio

I missed last year’s goal of investing $25k by $1800. So if I add that $1800 to $25k and stretch it … I arrive at $30k.

It should absolutely be doable especially since I reduced my salary sacrificing into superannuation (retirement account). I know it is much more tax advantaged if I salary sacrifice into super. My super contributions are taxed at 15% whereas I will pay 34.5% (includes Medicare levy) otherwise.

But I need to build up my ‘bridge the gap’ fund if I am to achieve my decade goal of retiring at 55. I can’t access my super fund till 60. So I will just pay the tax and invest outside of super.

Because by my calculation, my super balance should grow to my target by the time I am 60 without me contributing anything extra and just relying on my employer’s contribution. I will monitor annually and readjust my strategy if needed.

3. Lose 10kg

Let me tell you a secret – pandemic eating and menopause is not a good combination. Seriously!

My weight has been increasing every year and I am now the heaviest I have ever been in my life. I can’t fit into my clothes! And I refuse to buy more. So the time has come to focus on losing weight, not just wish it aloud and moan about it with my mates.

I know 10kg is a stretch goal. The minute I put a number on it, I gave in to my craving to have fish and chips.

But I have committed to walking every evening with my friend after work, weather permitting. And if the weather is not cooperating, I will run up and down my stairs (or something) for 30 minutes to increase my heart rate.

4. Be semi self sufficient in vegetables

This is for my mental health more than my hip pocket.

It is so satisfying watching something you plant, grow into something that you can then eat! I would love to be totally self sufficient but that is really a stretch goal. At the end of last year I bought 3 more wicking beds to increase my capacity.

I will learn how to plant from seeds – it was a disaster last year. Seedlings and seeds were out of stock as people decided to grow their own veggies. As a result, I didn’t plant my veggies at the right time. And my yield was not as good.

Looking after my veggie gardens also forces me outdoors. Which is a good thing as I spend too much time indoors and living a sedentary lifestyle.

Dwarf bean plant with lots of beans
My productive dwarf bean

But what is the ONE thing I need to focus on first?

Ah … this is where I have thought long and hard and got stuck.

Goal 2 is the easiest to achieve if my spending pattern remains the same as 2020. I have spoken to HR and once they adjust my salary sacrificing, I can increase my automatic deduction into my investment account. When it hits $4000, I will invest in VAS. Easy.

Goal 4 is in place – I just have to make sure I plant at the right time and continue to take care of them daily.

Goal 1 and 3 are more difficult to achieve.

In order to monetise my blog, I need to work on it. Since I work full time, I can work on the blog either before or after work. Generally, I find that I work better in the mornings before I go to work. This means I have to get up early eg 5am.

I HATE getting up early. And I hate my alarm – I used to press Snooze many many times before I get out of bed. Then I graduated to having a few alarm times eg 5am, 5.15am, 5.30am etc before finally rolling out of bed at 6am. Then I run out of time to do everything – stretch, work on the blog, get lunch ready, have breakfast, exercise etc.

So the One thing I need to focus on FIRST is my night routine.

At the moment, I am so tired after having dinner that I lie on my couch and fall asleep in front of the TV. The most I accomplish is making a cup of tea. Then I wake up groggily around midnight or 1am and head off to bed. Sometimes I sleep through but most nights I don’t. Then the alarm goes off at 5am. It’s a win if I get out of bed before 6am.

So … I’m going to focus on my night routine. Delay sitting on the couch after dinner until I’ve cut up my salad for the next day’s lunch, load or unload the dishwasher, get my exercise gear and work uniform ready etc. Set an alarm for 10.30pm and go to bed whether I’m tired or not.

The weekends are my downfall – I need to keep to the same routine so it doesn’t feel like I’m starting over every week. I often give myself permission to relax eg finish reading a book before doing my chores. Then I fall asleep on the couch … (maybe my one thing is to get rid of my couch … NO! I LOVE my couch, probably too much!)

So once I’ve got my night routine down pat, I will focus on my morning routine. Add a run somewhere in the week in addition to my evening walks after work with my friend.

Final Thoughts

That is the plan anyway!

Focusing on one thing at a time. Giving myself enough time to have a routine or habit be a habit. And only then will I move onto my next ‘thing’.

I’ll keep you informed as to my progress 🙂 I’m looking forward to extraordinary results, haha!

What is your One thing for 2021?

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