The millennial’s guide to retiring by 35
Ever looked at those Instagrammers living their #bestlife in campervans by the beach or posing in a different country every week and wondered, WTF do they do for money? Well, we’ve found the answer
If you think there’s more to life than work, set your world on FIRE (financial independence, retire early)
You probably don’t know this, but Europe has a G-spot. It’s a place called Vilnius, the capital of Lithuania. The reason the city promotes itself as the destination equivalent of the much-debated erogenous zone is this: “Nobody knows where it is but, when you eventually find it, it’s amazing.”
Intrigued? So was Kristy Shen. The implied challenge was enough to make her see Vilnius for herself, not that the eastern-european city had ever crossed the 36-year-old’s travel radar before. But as the Toronto native had been travelling for more than three years with her husband Bryce Leung, they had plenty of time to stray way off the beaten track. In fact, they’ve visited so many destinations since they retired from full-time work at the ripe age of 31, Shen sometimes forgets which country they’re in.
“I keep saying the wrong phrase for ‘thank you’ to waiters. ‘Gracias,
– no, I mean danke, no wait, I mean
obrigada. Er, what country am I in again?’ When you travel as much as we do, you tend to have to switch between languages a lot,” Shen says from her current home, an Airbnb in Madrid, Spain. “It gets confusing, but it’s also pretty fun."
“Whoa, back up,” we hear you say. “They retired at 31?!”
Yep, they did – with a hefty amount of money to their names ($1 million to be exact). And nope, they aren’t super-geniuses rolling in the rewards of selling a start-up. Instead, Shen and Leung are the poster couple of the FIRE (Financial Independence, Retire Early) movement, which is spreading worldwide by ordinary millennials who are escaping the stress and drudgery of the lifelong 9-to-5 and are committed to putting their happiness, health and wellbeing first by becoming financially independent (FI).
“In reality, the ‘RE’ part of FIRE is optional; only the FI part is mandatory,” says Shen, a former software engineer. “When you are financially independent and no longer need a job, you choose to work rather than be forced to work because you need the money. So if you want to quit and travel the world like we do, you can do that. If you love your job and want to continue working without fearing lay-offs or the job getting bad, you can do that too. FIRE makes your life better because you are in control.”
It’s not hard to see why FIRE has gained momentum when the current financial state of adulting kinda sucks. What many of us accept as normal – the stress of work and commuting combined with the financial pressures of paying off never-ending debt and keeping up with the high cost of living – is costing us our health and happiness. Financial anxieties have hit a two-year high, according to the latest NAB Consumer Behaviour Survey, thanks largely to the pressure of living costs, while the rate of Aussie household debt is among the highest in the world. Then there are those of us trying to pay off HELP debt, which is currently sitting at a national total of $54 billion. Also not great for our futures? Estimates that when a woman retires at 60-64 years, she’s expected to have $113,000 less
superannuation on average than a man of the same age, according to figures from the Association of Superannuation Funds of Australia.
How does a girl get ahead? Sydneysider Tina Williams* had the same question, so she asked Google. She eventually came across classic FIRE blogs, Mr. Money Mustache and JL Collins’ The
Simple Path to Wealth (essential reading for anyone interested in FI). “Initially, I was really discouraged by the massive amounts of money we would have to accumulate,” she admits. “With no savings in the bank and my entry-level salary, FI seemed really far out of reach.” But the key message repeated by those in the FIRE movement is you can take control of your finances at any time – even if that starting place is drowning in debt (check out the
Choosefi podcast ep with Timika Downes, who went from a $122,000 debt to running a successful side hustle while raising three kids). Ready to light your own FIRE? Here’s how they’re doing it…
Get real with your finances
The road to FI starts with changing how you view money and curbing any wasted spending. “Transforming your relationship with money is to see what it really is, how you behave in relationship with it, and whether this behaviour is buying you a life you love. It’s a wakeup call,” writes Vicki Robin in the book that lit the FIRE movement,
Your Money or Your Life. This approach is about looking at how you’re spending your money, and asking yourself, “Does this bring me genuine happiness?”
When Catherine Coomans, 29, looked at the rent she was paying in an exxy Sydney suburb with her boyfriend Tom, and the long hours she was working in marketing to pay for the privilege, she decided that no, it wasn’t bringing her happiness. “We were really stressed,” she says. “Tom always
had this big dream of renovating a bus and driving around Australia, and so we were out on a bushwalk one day, and we were like, ‘We’ve just had enough of this. This really is not a life to live. We’re not enjoying it.’” That day, they gave their real estate agent notice, moved out two weeks later, bought a bus another two weeks after that, and were on the road soon after.
They’ve been travelling around Australia for more than a year now (check out their envy-inducing pics at @adventuresinabus). Even though they’re working less than they ever have (doing freelance web development and marketing work, three to four days a week, for up to five hours), they’ve saved more money than was ever possible in their previous life. Enough for a deposit on an investment property.
Their new life has had a positive effect on their health, too. “In the afternoons, we have time to explore ... and be healthy and get out in the sun. I’ve got the best tan now,” Coomans laughs. “We’re a lot more active, and [that] makes you eat healthier. It’s been this big rollingball effect. I genuinely love it.”
You don’t have to do anything as extreme as trade in your current home for a DIY bus. However, as painful as it might sound, you need to look closely at your expenses.
For you, it might be questioning whether you need two gym memberships (one for pilates and one for the 24-hour gym to use the cardio equipment) when in reality you only love going to one (pilates, naturally), or asking yourself if you could find a job closer to home to save time and commuting costs.
“Sometimes we avoid reviewing our personal finances similarly to how we avoid going to the dentist – we know we should have that check-up, but everything ‘feels’ OK, and we’ll see someone when we ‘have to’,” says financial planner Shayne Sommer of Shadforth Financial Group. “Just like our dental hygiene habits, it’s best to get on top of any financial decay before it gets too extensive, or expensive, to repair.”
Cut the waste and save like a demon
As your journey towards financial wokeness continues, and you start to become more conscious of your spending, you’ll also find ways to make your current wage go further (see box, page 105). Most FIS try to save 50 per cent of their salary, while those obsessed with retiring early will save up to 90 per cent.
That percentage can seem overwhelming, especially if your current life ain’t cheap. “Not everyone can save half or more of their salary, so they may be able to ‘tighten their belt’ or find more cost-efficient arrangements for their spending,” Sommer says, “but it’s important to tailor your savings plan and your goals to your situation.”
Williams eventually found a way to save money to get them on the FI path. “All we had to do was keep our living expenses fairly low. We rented a one-bedroom apartment, bought a cheap second-hand car and made sure we kept our overheads low,” she says. “We aren’t hardcore [savers] like others in the FI community. We still eat out, enjoy holidays and meet up with friends at the pub. It was important to us not to sacrifice our happiness today to reach FI in the future. It’s all about balance.” Rather than retire
completely, her aim is to quit her full-time corporate career to work part time in a job she’s passionate about. Williams is currently counting down her days until freedom on her website, moneyflamingo.com. She has fewer than 750 days to go.
Finding it tough to save? Don’t despair. As David Harvie, national financial wellbeing manager of Shadforth Financial Group, adds, “There’s an approach to most areas of life that works – whether it be losing weight, running a business or building your own wealth. You can’t manage what you don’t measure. So, by merely starting to focus on this area, suddenly there is a mindfulness of one’s finances and goals start to become clearer."
Find other sources of income
Once you’ve saved money, start paying down your debts and building up a financial cushion
(FIS recommend having at least six months’ worth of expenses saved). Some people even start a side hustle to save more. Then, the key to making FI possible is by growing other income streams to the point they’ll eventually cover your expenses, so that you don’t have to work for money. For those who want to retire, their aim is to save 25 times their annual expenses. For Williams' semi-retirement goal, she’s slashed her savings aim to 12.5 times that amount.
Shen and her husband were able to fund their early retirement by taking a less traditional path. Instead of buying a property with the money they’d saved for a deposit, they “math[ed] that shit up!”, and realised they’d be better off investing the money in a portfolio and travelling the world while keeping their expenses down. Shen admits, “It wasn’t easy, but it was worth it.”
When it comes to an investment strategy, most FIS swear by index funds, but always do your own research and talk to the right experts. Financial planner
Katie Pecotich of Connect 4 Financial Services warns: “I think it's dangerous to call any investment a no-fail, however I understand the appeal of index funds as they’re low cost and market/algorithm-dependent.” Sommer adds, “It’s important to remember, when investing, that there is always going to be some risk associated with a portfolio with a growth component.”
However you decide to invest your money, becoming FI can be life-changing. Other than being one of only a few thousand who have visited the G-spot of Europe, Shen’s retirement has led to a new career as a professional writer. “I still don’t make enough from my book to cover my rent, but by becoming FI, my portfolio now pays me to travel the world and live out my dreams,” she says. “I discovered that in the end, it’s not about money. It’s about time. And FI lets us buy our time back so we can choose how we want to live our lives.”
Who needs luck?