As I work out what the RE part of FIRE looks like for me, I have been thinking about the journey to get here and the decisions I made to put me in the position I am now in. The more I think about it, the more I believe that a few early decisions really laid the foundations for what I was able to do later.
I discovered the FIRE movement (Financial Independence Retire Early) in 2014, but that is only part of the story. I was not starting from zero, or worse, from a position of debt, I was building on solid financial decisions. So what were those decisions and what did my journey look like? I suppose the story starts 19 years before we reached our magic number:
- FI -19 years – I started my first job, and my first pension. I can’t remember the exact deal, but it was something along the lines of 3% employee contribution = 6% employer contribution and then they would match additional contributions up to a max 12%. With a salary of £22k, I couldn’t quite stretch to the full 9% required to get the max employer match, but I thought I would be foolish to leave free money on the table, even if I couldn’t access it until I retired. I think I started with something like 6% from me, but perhaps more importantly, I took the decision to increase my contributions every time I received a pay rise. I figured if I hadn’t got used the having the extra money, I wouldn’t miss it.
- FI -17 yrs – I received a small inheritance when my grandmother died. This wasn’t a life changing amount of money, but I was determined to make it count and invest it wisely. £5k went on my half of a house deposit and the for the remainder (around £8.5k), I consulted a financial advisor available through my employer’s pension. She recommended a diversified portfolio of managed funds, so I maxed out the ISA allowance at the time (around £5K) and rest went into a general investment account until the next tax year when I moved it across into the ISA.
- FI -14yrs – Our mortgage was due for renewal, but this time we realised the impact of fees, and had no plans to move, so went for a 5 year deal. We had a little surplus disposable income by now, so considered reducing the mortgage term (and increasing repayments), but decided it would be safer to maintain the term and pick a deal where we could overpay, so we could always stop if we needed to. This was the start of regular mortgage overpayments, which we ramped up over time.
- FI -12yrs – I was made redundant with a generous settlement, and found a new role the same week, so used the money to pay off a car loan (switching to saving that monthly amount in a ‘car fund’ ready for next time I replaced the car). There was also enough left to pay off the last of my student loan.
- FI -11yrs – Remember that ISA I mentioned? Well, my new job also represented a pay rise, so I was able to start saving a regular contribution. This I set up to go out of my account shortly after pay day every month, so it was never really in my account to spend. This started fairly small (£100 I think) and I increased it with promotions & pay rises. I was up to £300 monthly when I started reading about something called FIRE.
- FI -5yrs – I discovered the FIRE movement when taking a little more interest in what my money was invested in and researching where my increased savings could go for maximum effect. It was a bit of a revelation. I had always been more of a saver than a spender, but suddenly retirement came to mean something different; a choice in my control rather than just something that happened when you get to
There were plenty of other decisions made along the way which were less FI friendly and which I only started to question after my FIRE lightbulb moment. After buying a new car shortly after starting my first job, I quickly realised the excitement of a new car didn’t last long. It was a good (if quite ordinary) small car, but after a month or so it was just a means of getting from A to B. Whilst I vowed never to buy a new car again, changing cars was still something I just did every 3 years or so. I never questioned that mindset.
Our mortgage overpayments had a significant impact on the loan balance quite quickly. So much so, that 9 years before FI, we were in a position to pay it off. Instead, we took out a larger loan and moved to a larger property. Looking back on that decision, I don’t regret it. Unlike cars, property has a tendency to appreciate over time, and our quality of life definitely improved with having more outside space and getting away from attached neighbours who were prone to Friday and Saturday night drunken arguments.
With hindsight, would I change anything? I certainly could have been in a position to make work optional sooner if I had focussed on low cost passive investing earlier. If I could do it all again, I probably would have spend less changing cars over the years, but generally, I don’t think there is too much I would change. Life is all about balance and I am happy we managed a reasonable balance between saving well above the average, but still enjoying the journey.