Late Starter to FI series #5 – EducatorFI

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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.

Check out other stories in this series:

#1 Project Palm Tree

#2 A Simple Life

#3 Heavy Metal Money 

#4 Adulting World

Please join in the conversation in the comments below. I encourage you to share your story if you too are a late starter. 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, Facebook or Instagram.

Without further ado, let’s meet Ed from Educator FI. He writes about being educators on the path to Financial Independence and has many lessons to share with us. He also brings us stories of other educators on the road to FIOR (Financial Independence Optional Retirement) in his interview series

You can also connect with Ed via Facebook and Twitter

 

Disclosure: Please note that I may benefit from purchases made through my affiliate links below, at no cost to you

A little about me

I’m Ed, from Educator FI and I’m thrilled to be writing for Laterstarterfire today!

My wife and I are both career public educators in the United States. We started out as two broke teachers about 20 years ago and are now in our mid 40s. After ignoring our finances for way too long, we’ve started paying attention and are now on the path to financial independence.

How did we end up here? Well, I’ll take you along on our journey to being financial late starters.

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Starting out

My wife and I both came from backgrounds that were pretty tight financially. I was raised by a single mom (who is amazing!) and my wife is the child of immigrants. We were both always cared for, but didn’t have much beyond the basic needs.

We met and got together in college where we were attending on a mix of scholarships and student loans. Once we left undergrad and started earning a little bit in our first jobs, we enjoyed having money to spend. In fact, we spent more than we earned.

To become teachers, we both had to go back to graduate school. We borrowed to do it – stacking debt on debt, and deferring our existing student loans during that period.

Consequently, we really did start out as two dead broke teachers with about $130,000 in debt.

 

What we did right

While we were reckless initially (and I’m always impressed by people in their early 20s who AREN’T) we didn’t stay in that mode for long. Our childhoods left us with money issues, but we are also both ultimately responsible people. So, we did two things right even though we weren’t thinking long term about our finances:

 

(1) Dealing with debt

My childhood left me with a deep insecurity about money. I’m scared not to have it. So, I naturally hated debt. My wife was raised by very financially responsible parents and had been taught to loathe debt as well.

So, after our initial early years of being stupid, we got serious about paying down our debt. We put ourselves on a cash budget, stopped buying things we couldn’t afford, and put every extra cent to debt.

We took advantage of some of student loan forgiveness options to partially pay off our debt. Then we put extra money towards our student loans once the consumer debt was gone.

We were debt free by our mid 20s and have only carried mortgages or strategic zero interest loans since then. Getting rid of debt is one of the two things we did right!

(2) Growing income

My childhood of poverty left me with a fear-based approach to money. Money was anxiety and limitations. I had a deep desire to never have to think about it. So, I always made sure I made as much as I could.

Education isn’t a great profession for earning huge amounts of money, but there are plenty of ways to earn extra.

We worked every angle we could to raise our base salaries – increasing our education, building up experience, and taking on extra duty jobs for pay. After teaching for ten years, I went into administration and grew my salary. Every year we earned $10-20k more than our base.

We grew our income – which is an important part of our late start story. We now make almost 3x as much as when we started.

What we got (really) wrong

We made more money and never took on debt again. Great, we should be set, right?

Nope. Not if you spend every penny you make.

Our lifestyle inflated in a big way. We bought a bigger house and spent more and more on travel. We weren’t chartering private jets, but we weren’t thoughtful about our expenses.

I had achieved my goal – I made enough money that I could buy what I wanted without thinking about it.

We had been working in our profession for almost 15 years, and had almost nothing saved. No debt AND no actual net worth.

The light bulb moment

I still remember exactly where I was when I had my financial awakening.

We had just bought a vacation house. Yes, a vacation house. Talk about lifestyle inflation!

Sure, it was in partnership with another family. It probably actually saved us money compared to the stupid travel we were doing. But still – a vacation house!

I was sitting in my office, and got a text from a friend about buying another vacation property. My wife also sent a text about the same thing. I suddenly realised I’d be working forever if we just kept spending.

We love our jobs – education is important and teaching kids is rewarding. So working for a while didn’t sound all bad.But, no one should assume they will always love their job.

We’d also talked often about the old bitter teachers that shouldn’t be working in schools anymore but are hanging on because they have to. That could be us.

Something had to change.

Our first steps

Immediately after the financial epiphany, I checked on Amazon for financial books. I stumbled on The Automatic Millionaire by David Bach and another book called How to Retire Early by Robert and Robin Charlton. 

They were great starts that opened up a new world. (I now recommend JL Collins’ Simple Path to Wealth as the starter book) That first year, I went down the rabbit hole and began consuming everything related to financial independence – books, blogs, podcasts.

My wife was a willing but not enthusiastic participant as we started to discuss what was possible and I went on a spreadsheet building binge.

After several months, we sat down and had a long goal setting conversation. From that point forward it’s been a joint project and she’s pushing as hard as I am.

That first year, we projected 12 years to financial independence. We got to work setting up automatic investments in our retirement accounts and began reversing 15 years of lifestyle inflation

As we’ve learned more, set more aggressive savings goals, and taken specific actions we’ve cut that projection down every year.

Where we are now and where we are going

Last year, we took a big step. After reviewing the pros and cons, we downsized our beautiful house. We’re happier now, cashed out some equity, and cut our monthly housing costs in half. We’re renting a place for now while we consider our long term options. We’ll eventually buy again, but it will be a smaller place consistent with our FI plan.

 

It was a dramatic step that I wouldn’t have predicted when we started. We are running the vacation home that started it all as a short term rental. It’s not an investment, but it’s not dragging us down anymore.

In 2019, we passed seven figures in net worth. We just reviewed our goals from the previous year and set our goals for this year. We have set a FI goal of 2022 that looks very achievable.

When we hit that goal, we’ll have gone from clueless at 40 to financially independent before 50.

We still love the work we do. We may not FIRE, but we’ve embraced FIOR (Financial Independence Optional Retirement). Financial Independence will give us the ability to work if we choose, not because we have to.

That’s changed my relationship with money. I always approached it with a sense of insecurity and fear of never having enough. Now, I know what enough is, and have a plan to get there. It’s a great feeling. I’m happier at work, more enthusiastic about risk taking, and our relationship is stronger than ever.

Late starter lessons

The most significant challenge for late starters is we’ve lost the big benefits of time. If we could go back and invest in our 20s, it would change everything. If we invent a time machine that would allow that … well I guess we’d be rich anyway and wouldn’t need to go back.

Instead, we just have to accept that time isn’t our friend.

On the positive side, a late starter will generally have the benefit of a higher income. Income, on average, grows over your lifetime. The 40s and 50s are prime earning years for most people. That’s a good thing. Unfortunately your lifestyle may have grown as well.

Once you wake up and get serious about your financial health though, you can create a pretty substantial gap quickly. Instead of scraping out a few dollars in your 20s, you can invest a lot more. You have to if you want to make progress. Or, you can accept a longer time horizon – both are great options depending on your circumstances and goals.

I also believe we are much clearer about our life goals now than we would have been when young. We’ve experienced everything that spending wildly has to offer. We know what full commitment to our profession feels like. We’ve had the big house of our dreams.

Now we can design our life to give us exactly what we find fulfilling – not just what we think we might want. As one example, our late start has allowed us to live in a smaller cheaper home with no loss of happiness.

Our FI target is exactly as much as we need to live a life of purpose with travel and giving.

It would have been easier to start earlier, but we might have reached the wrong targets. Now, thanks to our late start we will be financially independent and living exactly the life we want.

 

Latestarterfire Here

Thank you, Ed for sharing your story of 2 dead broke teachers eventually embracing FIOR and voila, you will achieve financial independence in 2022. And teaching us the importance of not succumbing to lifestyle inflation. The lesson I learnt here is that even without debt, we may end up with not much net worth if we spend it all. 

I admire your decision to sell your beautiful dream home and rent somewhere much smaller. You discover you are happier with less. This is a huge lesson for me – your willingness to deviate from a known script and explore a new path. Sometimes I feel I cling too much to home ownership and love my home to bits. It would require a major mindset change for me to rent again.

I am excited we get to follow your journey from now on. I can’t wait to see all your options as you approach Financial Independence in 2022.  

Update January 2021

Wow, it’s been almost a year since I wrote this and so much has changed – both personally, and in the world. The good news is all the financial things I mentioned still remain true. In fact, that’s the biggest update here: all our financial moves paid off even more quickly than expected.

When we first started, we had a general thought of financial independence by 2030. After a few years, we refined the goal to the 2022 I mentioned above. Amazingly, we beat that target by 18 months. It really highlights how much our later career income helped us course correct quickly.

The real game changer was getting our housing under control. After our initial downsizing, we continued to make moves and eventually moved back into our starter home that we’d been renting out. We used the money from selling our dream home to pay off the rest of our mortgage and had suddenly freed up even more money to invest.

This meant that in 2020, we were able to continue investing large amounts when the market dropped – even while we were impacted by furlough. Between the (much) lower expenses we have now and the unexpected market run, we hit our FI target in December 2020!

It’s strange to have made so much financial progress during a pandemic that hurt so many others. The financial shifts we’d made helped, but we sill constantly acknowledge the good fortune we’ve had along the way.

It’s an amazing feeling to have come from broke and clueless to financially independent by 50, all while working in a career we were passionate about. The security, freedom, and possibilities are incredible. That sense of possibility caused me to make a surprising decision.

I love the work I do, but after more than 10 years as an education administrator, I’d become fatigued by managing so many people. I’ve shocked even myself by making the decision to walk away from my job at the end of this school year. (The school year ends in June in the US)

My plan is to take a little time to rest and recover from what has been a brutal run trying to keep students, staff, and community safe during a pandemic. Then, I’ll decide how I want to get back into education.

I’m not sure what I’ll do next, but can’t quite describe the feeling of being able to choose anything just based on what interests me. That’s what financial independence allows.

It’s totally worth it, whenever you start!

Latestarterfire : Congratulations, Ed! What an exciting update 🙂 2020 was certainly an unusual year – so happy that all your financial moves worked to your favour and enabled you to reach financial independence! Wishing you all the best in your rest and rejuvenation efforts – and looking forward to hearing more of what you’ll decide to do after that.

 

What lessons did you learn from Ed's story? Do you struggle with lifestyle inflation?

Late starter to FI series #4 – Adulting World

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Hello and welcome to episode #4 of the Late starter to FI series!

In this series, I share stories of Late Starters, specifically those of us who start our Financial Independence Retire Early (FIRE) journeys later in life, in our 40s, 50s and 60s.

Our stories answer questions such as “have we left it too late?”, “how can we catch up?”, “can we still retire early(ish)?” and more.

A special thanks to those willing to share your stories. So far, these are

#1 Project Palm Tree from Australia

#2 A Simple Life from UK

#3 Heavy Metal Money from USA

I promise you – there are many more stories in the pipeline, from a truly diverse group of people – I can’t wait to share them with you.

If you too would like to share your story, please email me at info@latestarterfire.com – you don’t have to be a blogger or podcaster. I would love to welcome you into our conversation.

Today, we meet AW from Australia, who writes at Adultingworld.com – a blog about discovering personal finance in her 40s through finding Dave Ramsey online. Edit: Adulting World has sadly closed her blog

You may connect with AW on Twitter – @adultingworld – we have had many a good conversation here 🙂

And now, it’s over to AW.

Disclosure: Please note that I may benefit from purchases made through my affiliate links below, at no cost to you

A bit about me

Hi, I can’t publish my name as I work in a field where there are very few of us and therefore am reasonably identifiable. At this time, I am a construction project manager in renewables. I’ve worked in resources construction for the last 10 years.

I am in my late 40s – staring down the barrel of the 50s.

Hobbies and passions are a challenge at the moment. But I am keen to develop more interests outside of work, after finishing this current phase of crazy work hours.

 

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Looking back

I had gleefully spent my way through my 20s gathering debt here and there like the pied piper gathers rats. Then, like any ‘normal’ person I decided that, despite all this debt, I needed more!

I decided at 30 that full time university was the way to go. Actually, in my case it was a great life choice, but it could have been better handled financially.

So, here I was, in my early thirties, a full time student with a tiny part time income and lots of debt – what to do? Sell the house or starve? Thankfully, the house sold with just enough to pay out the mortgage & the debts from my 20s.

Move on 3 more years and I’m out of university and right into the next dumb debt thing – credit cards and a car loan! Yes! I had both and spent with reckless abandon! At that time I had a peek at my finances and realised that my income did not match my spending. So, what did I do? Learn how to be smart? Pay off my debt? No! I got a high paying FIFO (fly in fly out) job. 

So, here I was, high income, FIFO job, credit cards, spending heaps on travelling & think – Hey, I know what would be great – I could buy a house! Anyway, I’m sure you know where this is going – as Dave Ramsey says – I really did have “stupid, spoiled brat debt”.

Fast forward to 2013 – I was now working in a job in the city that paid EXTREMELY well (but was enormously stressful), several credit cards, mortgage debt, 2 personal loans AND a brand new car. Yes I had them all!

 

The 'Oh SHIT!' moment

I’m walking the dog across an oval, wondering why I always seem to be broke, and start calculating the daily interest charges. To my horror, I realised my daily interest rate on my consumer debt alone just about exceeded my income. Talk about your ‘Oh SHIT! moment!

Thankfully the internet had an abundance of information and so my searching began. Such great classic search lines like – “how do I dig myself out of debt” and even such great life choices like “how can I marry someone for money”. Needless to say that second one did not reveal any options that appealed, so I continued to look for resources that could help me with this mess I had made.

And then, lo and behold, I discovered this crazy American on YouTube screaming on a stage about cheetahs, gazelles and how debt is dumb. Yes, I discovered Dave Ramsey’s “The Total Money Makeover”

Now, us Australians are not usually drawn to over the top personalities, but the more I read about his methods, the more I thought that this might work. My personality type is all in, passionate and I want to see progress EVERY SINGLE WEEK. Dave’s gazelle intensity debt payoff suited me to a T.

Quite simply, The Total Money Makeover changed my life. 

Over the course of the next 4 years I went from consumer debt, which at its height was in the $200,000’s, to …… drum roll please….. ZERO! (I still have the mortgage) Yes, finally in 2018, after 4 long, hard, painful years I finally climbed out of that hole and onto flat ground.

I did it using the debt snowball method* and obsessively watched Dave Ramsey YouTube channel on other people getting out of debt.

One thing I didn’t do was spend a lot of time watching or reading about those that had already done it. I’m the same with FIRE. It’s great that many people like to do this and find success stories motivating. I have great respect for those who have done the hard yards and made the touchdown. Oddly though, if I read more than the occasional one or two, I find these stories can be a bit disheartening because it inevitably leads to thinking about how far away my own end game is, so my preference is to spend time reading/watching those that are ‘still in the trenches’.

*Debt snowball method – pay the minimum off all debts but throw everything at the smallest debt (irrespective of interest rate) until it’s gone and repeat for the next smallest debt.

Discovering FIRE

I read about FIRE in Vicki Robin’s  ‘Your Money or Your Life’ in the 1990s but didn’t really understand it until I started looking into financial independence on the internet and processed Dave Ramsey’s book ‘The Total Money Makeover’.

Only my step mother understands this concept. But I never understood her approach. Everyone else in the family sees smart investment choices as only achievable through property rather than shares. Personally I tried that but hated the high debt level that stressed me out too much so sold quickly and just barely broke even. 

The attraction of FIRE is mostly the FI part. I am keen to achieve this. I had always wanted to be in a position where I wanted to work, not had to work. Unfortunately information on FIRE on the internet has really only exploded in the last 5 years from my perspective, so I didn’t have much simple guidance available when I was at the heights of my debt driven life to set me on a good path.

I am so grateful it’s out there now and keen to spend more time with FI minded people as time allows. My friends see what I’m on about but most have kids so don’t have a focus on FI the way I do.

 

Taking steps on the FI path

My first step as detailed above was to clear my life of all debt using Dave Ramsey’s method.

My current step is to throw as much as possible into my mortgage to get that gone and start building my share portfolio outside of superannuation. I am also throwing the maximum into superannuation that I can.

My current acceleration of the FI journey is driven by working remotely. All my housing costs and car come with the job but the hours are unbelievable – usually 70ish per week and high stress.

However, if I wanted to, this would be my last project and I could start winding back as soon as the project is complete. It would slow things up a little. I am working my way through processing this financial position.

When I took on this project, I knew I could do it slower, but it was way too tempting to be able to smash out 2 decades of mortgage payments in about 2 years, even with the cost of work/life balance. Also the rent from my property pay the current mortgage payments so this is one of my contingency plans should anything happen to my plan.

Current financial situation

My situation is pretty good. I have no debt beyond the mortgage – I HATE owing money now. Most of my investments are in the value of my rental property and superannuation, so I can take advantage of approximately 20 years of compound interest if things go well.

The percentages below are exclusive of debt.

Superannuation: 70%

Emergency Fund: 2% (30% of this is in cash and 70% as redraw against mortgage)

Investments outside super: 28% – which comprises of one rental home, shares & tiny cryptocurrency amount

I feel like I have a long way to go, but in reality, I could do the part time transition as noted by Money Flamingo (flamingoFI) at the end of 2023, once the mortgage is paid off and I’ve got one year of share investing at my current high income level.

Provided I could earn enough for living costs doing part time work ie Coast FI or Flamingo FI, then FI is in 3 years. Doing this will lower my overall money at 67 but would give me a number of years to take life a little easier, learn to focus on interests outside work, do some slow travel.

 

Challenges and benefits of starting late to FI

The way I see it, the biggest challenge is the perception of time and the feeling of being ‘behind the eight ball’. This has driven me to accelerate my FI journey to make it as fast as possible because I don’t have the luxury of 30+ years of compounding interest.

Don’t get me wrong. I recognise I have the privilege of earning a high income so that becomes easier for me. But it doesn’t free me from the ‘why didn’t I do this earlier’ thoughts. And ‘why didn’t I pay off the mortgage earlier, like I could have” thoughts as well.

How to overcome them? There are probably healthier ways to do it than the way I’m doing it. Liker learning to accept that mortgage payoff will take longer and achieving FI slower.

Also, I am doing this on my own. There is internal pressure to make sure I earn as high an income as possible so I wouldn’t be left struggling financially as my mum did.

My mum was brought up in the generation when education was not valued for women. So she relied on my dad for all the income. When he left, it put her in a very difficult position financially for years and she had to work in a minimum wage job for at least 15 years. This took a toll on her health. Avoiding her life situation has been a driving force for me as well. 

The advantages of starting later for me was getting emotionally settled and earning a high income so I could use the income in an intelligent way. Also, I’ve gotten past all the stupidity and short range perceptions I had when younger.

 

Any regrets?

My good money decisions were – going to university full time at 30 to fundamentally change my career and get cosmetic surgery in my early 40s on something that had bothered me since I was in my early teens. Also spending money on travel. I could have paid off my mortgage but chose to travel around the world – I’ve been to all 7 continents. I am so grateful I did that.

The only thing I would change would be to have made better choices on debt. However I wasn’t in any way financially educated until about 6 years ago. I had no idea about debt and what it does to your future. So I don’t regret my choices as I really didn’t know any better.

What's next?

My long range target is to not touch superannuation until 67. This gives me the best chance to have the maximum amount to last me for the retirement phase of my life, without trading off too much more of my life with my crazy work/life imbalance.  

Assuming that things go according to plan, then yes I will get to FI. And yes, I will retire a lot earlier than I thought possible prior to embarking on the FI journey. But I’m not sure if I will retire – I am open to seeing how it will go.

When I get to the next phase in this FI journey, I may volunteer in project management for the Red Cross or others that help in areas hit by disasters, which is something I would love to do. Or maybe teach, another area I’m considering for the future. If I can afford to live off investments. These items are easier when you are financially independent.

Beyond the few items mentioned above, I’m actually not sure what’s next. At this time, I’m really focused on getting to FI and when I get close, I guess that is when the ‘what’s next’ will become clear.

Latestarterfire here

Thank you very much, AW for being so honest about your past struggle with spending and debt. I admire your laser like focus to crush your consumer debt and you did it in 4 short years.

Sometimes the criticism among FIRE circles is that it is easy for people with high incomes to achieve FI; it is certainly easier, not necessarily easy. The higher your income, the more you have to spend – that lifestyle inflation is oh so tempting.

We all wished we made better choices in our past. You are making tremendous progress marching towards your future – I look forward to the day when your ‘what’s next’ means you no longer have to work. Or that you can transition to part time work.

Do you struggle with debt? What is your debt reduction strategy?

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