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

Women's Health Australia - - CONTENTS - By Lizza Ge­bi­la­gin

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.”

Catch­ing FIRE

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, mon­ 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?

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