I woke up on New Years day to find my ugly mug splashed across the NZ Herald web page. I was one of the subjects on an article about kiwis planning to achieve financial independence at a young age.
I deliberately use the words financial independence, instead of retire early. Despite the articles click bait headline, achieving financial independence is not about retiring early. It is about doing things that you want to do, not things you have to do.
Many of us find life purpose and happiness through doing things that challenge us. Quite often that may involve work. I don’t want to just retire and do nothing. I want to remain challenged, but I want the options that financial independence allows. That may involve paid work or it may not. If someone wants to pay me for something that I want to do anyway then great.
You can read the article here.
The idea of saving a large proportion of your income is not common in New Zealand, and if you are like me, you will be considered an outlier. This was more than evident in the Facebook comments section of the Herald article. The comments got so ugly, that the article was removed temporarily and newly reposted later.
Common objections to FIRE (Financial independence retire early)
The majority of the comments were negative and can be summarised as follows:
1/. “It would be easy if you have a paid off house”
Yes, I paid off my mortgage a couple of years ago. But it wasn’t luck like this type of comment makes it sound like.
I lived with roommates for over five years by renting out spare rooms. I downsized houses to live in a house half the size of my old one. I moved to an area that most people didn’t want to buy in. I bought a house that needed some TLC work done to it.
Not everyone wants to do what I have done and that is fine. But if you want to pay your mortgage off quicker there are plenty of ways to do it, so don’t complain at someone that has done just that.
2/. “He only has one child under the age of one. He has no idea about the cost of raising children hahahahahahahahahahahaha”
There were a few more haha’s but I’m trying to keep this post to a limit. Yes, I have a daughter and yes she is younger than one. This doesn’t mean I can’t make predictions about what my own child will cost me to raise.
I am under no illusions as to the cost of children. I have factored this in to my planning, so the people making this comment need not worry about me. I stress test all my plans so they protect me as best as possible from any situations.
A simplified example of such planning is I have added an extra $15,000 per year to my forecast budget for children. They may cost more, but they may cost less. I have added this buffer though.
Another layer of buffer that I have added has been the assumption that I, or my wife, will never earn a single dollar ever again. EVER. In 40 years! This includes income from a job, income from superannuation, or an inheritance. This is significantly unlikely, and earning anything above zero dollars will increase our protection against running out of money.
We also have compound interest on our side. By saving aggressively over the last 3-4 years we have built up a reasonably sized investment portfolio that will continue to grow. The magic of compound interest is that the more money you have invested, the higher the returns you will get. It’s pretty basic stuff, but many people either underestimate this or just don’t get it. Once you get to a certain level, then your annual returns from your investments will be higher than the amount you contribute. Let compound interest do all the heavy lifting. You can check out the calculator here (calculator #17).
Finally, I have assumed a very low rate of return of 3% (after inflation) on my investments. Chances are, over the long term, that our returns will be much greater than this. But this low level assumption adds another margin of safety to our planning.
I think the greatest thing I can give my children is my time.
So, thanks for your concern, but we will be fine with kids.
3/. “Must be nice having a high income”
Yes, it must be nice. Can someone tell me how it feels, because that is definitely not the case for me. The people who make this comment must think that only high income earners can save aggressively for their retirement. It is an option for many lower income earners too, albeit more of a challenge.
My average income over the last 15 years has been about $60,000 (adjusted for inflation). The average household income in New Zealand is a touch under $100,000, so being a single income household we are well below the average.
Don’t use not having a high income as an excuse for not saving. Heck, some high income earners also don’t save, so what’s their excuse?
If I did, I wouldn’t be where I am today.
4/. “Must be a boring life. I would rather live for today”
With this comment, the assumption is that spending less equals lower levels of happiness.
I can categorically say, that I have never been happier than the last few years. In a recent article I detailed my old lifestyle and living expenses. I didn’t sacrifice much to save tens of thousands of dollars each year.
Saving money does not equate to sacrifice if done right. We love food, so we still spend a lot on food. Whereas we don’t care who our power, phone and internet is with, as long as it the cheapest deal. With a few phone calls we saved a lot of money and guess what? We still have power! No sacrifice.
We downsized house. Again, a house to us is just a few walls and some windows. What makes a house great is the people in it. Again, no sacrifice. In fact, having a smaller house has increased our happiness levels. We are closer as a family. It is easier to heat. Quicker to clean. And of course, it has freed up some money for our future.
I have also deliberately sought jobs with company vehicles, significantly lowering transportation costs. No sacrifice whatsoever.
The point here is we have made intentional decisions that can maximise our savings, whilst minimising the sacrifices made.
By eliminating the wastage, you can simplify your life and finances. In such a busy world, simple is a great thing right?
Going over your finances forces you to focus on what is truly important to you. Not only do you save money, but a neat side effect is you actually end up living more for today than anyone. Because you have inadvertently removed all the excess.
I’m not going to look back on my life and wish I spent more on bigger houses and better appliances. Otherwise i’m going to wish I had more time with my loved ones or I will have regrets I didn’t get to pursue my passions.
5/. “What will he do all day? Sit on his hands and watch his beer belly grow”.
I do like a good beer, but no. This couldn’t be further from the truth. In fact, I imagine with less time spent sitting in a cubicle for 40 hours a week, I will be fitter than I have ever been.
I am already coaching others towards financial independence and I hope to do more of that. I will be volunteering more in the community. I will be educating my daughter and taking an active role in her upbringing. I will be cooking more at home. I will read more. I will exercise more. I may learn a language. I will travel off peak.
These are just a few of the things I plan to do when I have more time. I am already doing some of them now, but having more time will allow an even greater focus on doing the things I love.
I can think of hundreds of things I would rather be doing than a full time job I am not entirely passionate about.
To those who say they love their job, I ask “would you do it for free?” If the answer is no, then you would be better off financially independent. Because Financial independence is doing things that you would do for free. If your answer is yes then that’s great. I hope nothing changes for you, but there are external forces that can change how you feel about your job, or your ability to do your job.
If the best thing that you can think of outside of work is to sit and watch TV and drink beer then you my friend, are not ready for financial independence. You must first find your passions so that you have something to retire to.
6/. “He moved back home to live with his parents for two years. No wonder he could buy a house. I don’t have that luxury.”
Yes, this helped me immensely in saving for my first property. You can read about it here, where I am very open about the help I had along the way. But there were also things I didn’t get so lucky with.
My course of study was only available in Dunedin. So this meant moving out of home at 18 and incurring all those out of town costs such as travel and accommodation. Lots of people got to stay at home until their early to mid 20’s for very little cost.
I was also of the generation that had to pay interest on their student loans. Not everyone can say that.
Living at home for two years in your mid to late 20’s is also not an easy thing to do. I was fiercely independent and it is was extremely difficult having family know all the goings on of my life. Not everyone is willing to do this.
I also bought an apartment as my first property. Apartments are smaller and cheaper than houses and are not everyones cup of tea. I would have much preferred a house, but I made the sacrifice and started from the bottom of the property ladder. Again, not everyone is willing to do so.
We all have our doses of good and bad luck. I saw an opportunity and I took it. You can’t begrudge someone for doing so, especially when I make no effort to hide the fact.
Is FIRE (Financial independence retire early) for everyone?
So is FIRE for everyone? You could love your job.
Even if you love your job I think it is a worthy goal to have. You may love your job NOW, but you may not love it forever. Things could change. Your health could deteriorate, preventing you from the ability to work. You could get a new boss that really makes your life difficult. Your industry could have changes such as new regulations or administrative duties that take away from your core duties.
These things can sometimes happen in an instant with no warning. Wouldn’t it be nice to be in the position where you have options available should you want to leave once it is no longer enjoyable? You don’t have to, but more like a just in case of emergency use.
FI creates these options.
The path to financial independence is the path least taken. And it’s for a reason. I’m sure most people know how to get ahead financially. By saving and investing. The hard part is following through with it for decades. It is hard work. The path least traveled often is. But the reward is sweet. And if those that took the easy path of spending all their money want to attack you for your decisions or your lifestyle then don’t take it personal. You are in the minority and your lifestyle does not fit societal norms.
If you don’t have an urge to keep up with the Joneses or the Smiths or whoever it is with the flash cars and houses, then FIRE may be just right for you.
At the end of the day, if my plan fails then my worst case scenario is my current situation. Having to work full time at a job where I would rather be doing something else, but need the money.
However, I’m confident in the buffers we have put in place, and although no one can predict the future and what may happen, we are more adaptable than we give ourselves credit for. We can adjust, pivot and move on.
Even if you still hate my plans then that is fine. I am not here to convince you to change. You have your way, I have mine. But if you want to listen or take anything away from my experiences then that is great. Some things may work for you and some may not. Take what you want out of my thoughts, but they are not gospel. It is just one man’s thoughts.
I am just hoping that my story resonates with a few people that want to consider this path.
With a national savings rate of less than 0%, I realise that New Zealander’s love their toys and material goods too much for this to ever become mainstream. But if my story can help just one person make the change for the better then how can that be a bad thing?
*** Shortly after this article was aired, there was an influx of new members to a New Zealand based Facebook group called Kiwi Mustachians. This is a community of like minded Kiwi’s that are chasing, or have already achieved, financial independence. If you are not already a member, you can request access here so that you can be part of this great community where you won’t be judged for what house you live in, what car you drive, where you work, or how you dress. Plus you will pick up lots of great ideas and help for any questions you may have.
Having new people learn about financial independence is what makes all the hours I spend writing worthwhile for me. It has changed my life 4 years ago and it is great to see the effect it is having on others.***
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here.