Late Starter to FI Series #34 – Start Where You Are

Start where you are | Use what you have | Do what you can | superimposed on picture of tree and canoe in a lake

Welcome to the Late Starter to FI series!

I am a Late Starter – I discovered the FIRE (Financial Independence Retire Early) movement when 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’s such a relief knowing I’m 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 fit the profile of 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 or Facebook or Instagram

If you’ve missed any of the previous stories, you can catch up here – Late Starter to FI Series

And if you can’t wait to start on your own FIRE journey, check out my step by step ultimate starter guide, Late Starter to FIRE Action Plan.

 

Disclosure: Please note that I may benefit from purchases made through my affiliate links below, at no cost to you. Additionally, as an Amazon Associate, I earn from qualifying purchases

Start where you are | Use what you have | Do what you can | superimposed on picture of tree and canoe in a lake

Today’s late starter is Maz, an Australian reader who has so generously shared her story. You can connect with Maz at Mazfires@gmail.com – here is Maz in her own words …

A little about me

My partner and I are in our early 40s and live in a large regional centre in Australia. We live on a suburban block with our beloved dog.

I enjoy exercise, reading and cooking. My partner loves making furniture and any sort of DIY.

We are both in essential services and value the security of these jobs, especially since the pandemic. We have kept our jobs and maintained our standard of living through Covid – probably saving more since we haven’t been able to go on holidays!

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Looking back ...

I’ve had a budget since I first moved out of home. I was on a basic wage starting out and learnt quickly that if I didn’t put money aside for bills, I wouldn’t have it when they were due. And I also learnt the hard way that credit card interest quickly adds up. Luckily, I learnt this quickly before I did any damage to my finances.

In hindsight, these principles really set me up. I worked throughout my 20s and put myself through university in my late 20s to complete my Masters degree.

At 30 I was starting a new career, with almost no savings, but improtantly, no debt except my HECS (a government funded student loan that covers tuition and is indexed to inflation but interest free)

Lightbulb moment

Like many others, I first came across FIRE via Mr Money Mustache several years ago (maybe 5 or 6). At the time, it did not resonate with me at all.

I thought I had to sell my house and buy a tiny apartment. And sell my car and cycle everywhere. This did not fit the lifestyle I had wanted. I like my house. I like my car. I like my life!

A few years later, I was at a different point – we had a home we love, had great relationships with our extended family but what was next?

We’d been unable to have kids and it led us to rethink the assumptions we had had for our life together.

Sometime last year, I was bingeing on personal finance podcasts and found FIRE and CHILL. Pat and Dave broke FIRE open with their emphasis on the underlying principles.

I remember listening to one of the early episodes and thinking – we already live well below our means, wait! – we already saved a good part of our income – wait! Is this something we could do??

 

Our financial situation at the time

We’d been sensible with our money – putting extra on our mortgage, always lived within our means and, mostly, saved up for the big things we wanted.

But apart from superannuation, we had no investments, just a small emergency fund.

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First steps on the path to FI

It really changed our approach to our finances – to think about how we could make our money work harder to give us more freedom and flexibility.

I looked at our budget and realised we already had the basics covered. We were already saving a good proportion of our income into our superannuation and extra mortgage repayments. I think it was around 30% at the time.

So the jump to FI wasn’t too hard – as compared to when I first read MMM. But it took some thinking and re-thinking about how to apply the principles to our situation.

How we think about our finances now

We think in terms of inside superannuation and outside superannuation. The last few years we’ve made additional contributions to our retirement funds. And with the recent high market returns, our superannuation has done well. It’s only been recently that I’ve realised how well.

Here are the calculations (not our actual numbers).

Let’s calculate our FI number using the basic 25x yearly expenses – 25x $50,000 = $1,250,000 allowing for a 4% withdrawal rate.

Then let’s assume half comes from my superannuation and half from my partner’s. To start drawing down at 60 years of age (when we can access our retirement accounts), we need $625,000 each in our retirement funds by then (half of $1.25 million).

If our current superannuation balance is $200,000 each, let’s use the rule of 72 to project that forward (or a compound interest calculator). If my superannuation makes 7% per year, it will double every 10 years. So if I’m 40 now, when I’m 50 it will be worth $400,000 even if I don’t make any more contributions.

Then double again between 50 and 60 years old to $800,000. Each!

So, our superannuation can just sit there for the next 20 years, and we’ll have enough! This is what’s referred to as COAST FI. We don’t need to add any more to my superannuation – the compounding and time does the work.

This is amazing! We could both go to part time work, just to cover our living expenses from now to 60, and not need to invest any more.

We can dream bigger!

So now we get to dream and be even more ambitious.

We can both go part time if we like.

We can risk a job change to something new, but lower paying, or less secure than our current jobs.

I’ve already had a conversation with my boss about changing to 4 days a week (we are still negotiating).

So how can we move our ‘work optional’ date forward, and forward again?

Maz's dog
My beloved dog

What are our new goals?

We have 2 big goals at present: the first being to pay off the mortgage. Our lofty goal is to have it completely paid off within 5 years.

I know mathematically we’re better off paying the minimum and putting the rest into investments. But for us, it represents security, and flexibility and will significantly reduce our expenses.

It’s also taking advantage of being fit and able to work full time while we can. You never know when life can suddenly change. One of us, or a family member, could become sick or injured. If this happened, we might not be able to work full time, or might need to take on an increased caring role.

Our other goal is to invest more, to be able to fully retire at 55. The strategy is simple, just low cost index funds. We’re not keen on property, because we don’t want to borrow large amounts, and that’s just our personal preference.

 

Our current budget breakdown

Minimum mortgage payment 15%

Short term expenses 15%

Yearly expenses 15%

Additional mortgage repayments 15%

Outside retirement investments (taxed brokerage account) 10%

Other long term lifestyle goals 20% (includes holidays, home renovations)

Additional superannuation contributions (like a 401k account) 10%

Specific challenges or advantages of starting late

I think for people just discovering FI, especially if you think you’re too old – my advice is just start where you’re at.

You don’t need to side hustle, or start your own business, unless you want to.

You need to spend less than what you earn and invest the difference. Even if all you do is add extra to your retirement, you are still ahead, in my opinion.

I use YNAB, which is a detailed budget tool. But the Barefoot Investor buckets might work best for you.

I was chatting to a friend about this. Late starters may not have as long for interest to compound, but we can still save.

I think later in life you have a stronger sense of yourself and your values, which makes it easier to prioritise the needs of your future self over instant gratification.

Resources I've found useful

Books:

The Barefoot Investor by Scott Pape

An Aussie Finance Classic. If you really feel like you have no idea where to start with your finances, this gives you a step-by-step framework. It includes banking, getting out of debt, budgeting and starting out investing.

The Simple Path to Wealth by JL Collins

If the calculations I’ve included don’t make sense, this is your book. It’s in the title – the basics of investing and compounding for passive income. If you’re knee deep in analysis paralysis ot side hustle YouTube, it’s great for perspective.

Budgeting:

YNAB – You Need a Budget

This is an envelope style, or zero-based budget tool. It really helped me find the extra percentages to add to our savings rate. A great tool for prioritising your financial needs and wants.

Podcast

FIRE and CHILL

As I said above, it really emphasises the principles of financial independence over tiny details. Both hosts have their own blogs too.

Dave from Strong Money Australia

Pat from Lifelong Shuffle

What's next?

Once our home is paid off, we’ll turbo charge our saving and investing, to move our retirement date closer and closer.

We’re planning a holiday in Australia next year, as things open post pandemic. We’re also planning an overseas holiday in the next few years.

I love talking about this stuff and bouncing ideas around. Drop me an email if you want to chat about your own ideas – Mazfires@gmail.com

 

Back to Latestarterfire

Thank you, Maz for sharing your story.

For me, your story highlights the importance of sharing our own stories with others. Even though reading Mr Money Mustache did not resonate with you at the beginning, it did many years later.

Another point that strikes me is that if you have the basics right from a young age, the stretch to FI is not big. It’s just a matter of tweaking a little here and there and you could be at Coast FI very soon.

And I love your advice to other late starters – just start where you are. It truly doesn’t matter how you start or what you do – the key is to start today.

Did FIRE resonate with you when you first found out about it?

Late Starter to FI Series #33 – FIRE as an Accelerant

Road with trees in autumn foliage on either side, leading towards snow capped mountains

Welcome to the Late Starter to FI series!

I am a Late Starter – I discovered the FIRE (Financial Independence Retire Early) movement when 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’s such a relief knowing I’m not alone.

getting started checklist

Feeling Overwhelmed?

Use this FREE Checklist to start your journey to Financial Independence

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 fit the profile of 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 or Facebook or Instagram

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

And if you can’t wait to start on your own FIRE journey, check out my step by step ultimate starter guide, Late Starter to FIRE Action Plan.

Road with trees in autumn foliage on either side, leading towards snow capped mountains
Autumn in Colorado mountains

While I don’t read blogs or listen to podcasts specifically to determine if the author or speaker is a late starter, I’m always excited when I find out later that they are indeed fellow late starters.

That is true of today’s late starter, FI for the People – whose humour and writing I connect with 🙂

In his own words, here is FI for the People.

A little about me

I’m a 50-year-old, married (to The Missus), father of two teenagers (Thing One (The Elder) and Thing Two (The Younger)). I live in a city in the Mountain West of the United States and work in the legal field.

Aside from having been partially responsible for creating Things One and Two, my net positive contribution to the good of society is questionable. At best.

As for hobbies, I like long walks along the beach, dinners by candle light, . . . Uh oh, wait a minute. Wrong context, I think. That presumably being the case, my hobbies include traveling, hiking, biking, cooking, and generally reading and learning new things.

In terms of how to reach me, best is email (fiforthepeople@gmail.com). I’m also barely active on Twitter (@FIForThePeople), an almost nonpresence on Facebook (https://www.facebook.com/fi.forthepeople.75), allegedly on Instagram (@FIForThePeople), and apparently on Pinterest (@FIForThePeople).

Lightbulb moment

I’d long been interested in personal finance—and was a regular reader of many mainstream publications. But in 2016, I discovered FIRE as a term and as a concept after reading a New Yorker article about Mr. Money Mustache (MMM). I then binge read MMM’s blog, which turned me on to hundreds of other FIRE blogs.

My long-time interest in the topic of personal finance and in improving our own personal finances specifically was just the fertile ground needed for me to immediately connect to the concept of FIRE. I started to question everything, and changes we soon made had an immediate and substantial impact.

Are you READY to TAKE ACTION today?

🔥 practical tips & strategies

🔥 step by step guide

🔥 cut the overwhelm, second guessing & paralysis by analysis

Our financial situation then

We were doing OK financially when I discovered FIRE. Our rising incomes increasingly exceeded our expenses, and our debt comprised a mortgage on a relatively sensible condo, and a small loan on a relatively sensible car. But we were far from where I now know we should (or at least could) have been financially.

In terms of investments, we had retirement accounts. Though not huge, neither were they a pittance. We modestly funded them via automatic, and increasingly larger, pay check deductions. We also finally had built an amply funded emergency fund and were building equity in our condo, which was the only real estate that we owned.

 

Our kids were younger and generally more expensive then, due mainly to after-school care expenses and our ongoing contributions to college savings accounts. We also had fairly high and unavoidable medical expenses.

So, although our revenues exceeded our expenses, our cost of living was pretty high. But because we were nearing the end of the after-school-care stage, and the expenses associated with it and with younger kids generally, our expenses were trending down.

First steps on the path to FI

Wow. That’s a tough question to answer because: (1) my brain is too decrepit to hold those memories; and (2) there were so many things we fired on (ahhh, do you see what I did there?) almost simultaneously that I can’t be sure.

That small loan on the sensible car? Gone with a phone call to pay it all off.

Finding any number of expenses to eliminate or lower? Done.

Jacking up our retirement account contributions? Oh, yeah!

And so much more.

Our initial proactive measures largely focused on cost cutting. And that helped. A lot. But we also opened our first taxable brokerage account and started funnelling money into it.

I also started down the road of side gigs. Nothing major, but a little here and a little there. Also, as we were in the prime years of our careers, raises that we received on our salaries had a larger effect dollarwise.

How far along the path to FI are we now?

In terms of our place on the FIRE journey, I plan to FIRE at the end of 2021.

I feel over the moon good about it. The thought of not working for as long as I so choose, and all but total control of the terms I’ll work under (whenever I decided I’d like to do some work), has me feeling as giddy as a school boy dropped into a tub full of candy. Maybe even giddier.

The Missus will continue allowing us to take advantage of her employer-subsidized health insurance working until she comes to her senses for the foreseeable future.

Our current financial situation

We’re already at the point that I could FIRE. But I decided to ride out the year working.

I’ll certainly be FIREing far, far earlier than I’d anticipated pre-discovery of FIRE, but even far earlier than when I first discovered FIRE.

When we first started down the FIRE path, I benchmarked where we were. I figured that we’d be lucky to reach FI in our early-60s. And we might possibly have to work past 65.

As it turned out, I wasn’t factoring in all possible revenue (sources), and certainly didn’t anticipate the crazy bull market we’ve enjoyed for most of the last five years.

Regardless, under no circumstances did I anticipate being able to FIRE as early as I now plan to.

How my relationship with money has changed

Due to events in my past, I’ve long had money-insecurity issues. As our net worth has grown and I’ve gained a firm and clear grasp of our financial situation and where we’re going, those issues have receded. But they’re still there and certainly keep me on my toes.

That’s a double-edged sword. Good that our finances are something very much on my radar so that I remain on top of them; bad that I’m nowhere near as relaxed about our finances as I’d like (and probably ought) to be at this point.

As for mistakes, there are many.

Owning instead of (at least considering) renting, for example.

Not opening a taxable brokerage account and not maxing out our retirement account contributions earlier being other major ones.

Not figuring out how to lower the amount I took out in law school loans is yet another (tho, the experience of paying off those loans was some of the best education I ever received).

And taking out a car loan (even if small) because “that’s just what you do, you know” is another one that comes to mind.

I also once invested in a single company’s stock. The company promptly went bankrupt. That, however, also was a valuable learning experience.

As for what I’d do differently, it’s almost a cliché at this point, but I’d have started investing far earlier. Had I been able to have seen others’ well-funded accounts and passive income streams, I probably would have.

Lake in front of mountains
Dream Lake in Rocky Mountains National Park, Colorado

Specific challenges or advantages of starting late

Challenges that immediately come to mind are:

(1) fewer years for compounding to work its magic (or, that the bigger (dollarwise) effects of compounding are realized at a later age than those who start younger);

(2) for some, more (severe) health issues;

(3) for some, more (financial) obligations, such as those related to care for others.

Advantages are:

(1) for many, the valuable experience and perspectives that often come with age;

(2) for many, higher salaries, enabling higher-dollar contributions to wealth-building (or debt elimination);

(3) for many, greater knowledge of oneself and what brings one joy and contentment.

What's next?

Once I FIRE at year’s end, I’m going to enjoy me some time not working. I hope to de-stress, learn how to sleep again, and generally enjoy just being.

We also have some travel we hope to do; some of the plans are new and others are ones that we’ve had to cancel because of the ‘rona.

After an indeterminate period of time, I’m likely to do some income-generating work. But as I choose, and in a job and industry completely different from the one I’ve been in for the last 30 years or so.

 

How has Covid 19 pandemic affected our strategy?

The ‘rona hasn’t affected our strategy.

We’re vaxxed, and when boosters become available, we’ll sprint to get them. So, we hope to remain able to physically not feel much or any impact from the virus. That said, as mentioned, the little bug has made a mockery of some of our travel plans and may yet still. So, travel we might have done after I FIRE may have to be put on ice, or revised.

Back to Latestarterfire

Thank you, Mister FI for the People for sharing your FIRE journey with us.

Reading your story, I’m reminded that being on the FIRE path is the accelerant needed to turbo charge our finances. Especially if the foundations are there – it just makes sense.

And even if we don’t think we are where we should be when we first discover FIRE, our numbers soon improve. They have to – when we reduce our expenses, eliminate debt, invest and delve into what our priorities are and how our money is best utilised to serve our lives.

Sometimes these are big steps and sometimes they only need tweaking, but the fact is that you took action. And a mere five years after discovering FIRE, you are set to retire early!

Congratulations! And I look forward to reading about your early retired life in the very near future 🙂

How has your FIRE journey accelerated your financial goals?