FIRE starter

[Mia85]

This is a thread for discussing FIRE (Financial Independence Retire Early) and supporting each other in planning for the future.

For anyone new to FIRE, the idea is that you live significantly below your income and invest the surplus, usually in low cost funds. The aim is to amass enough that you can live off the returns. At that point you are finanically independent and you are free to spend your time as you wish (which might include working if you want to do that).

There's a huge amount on the internet about it. Lots of news stories e.g. here and here One of the main gurus of the movement is Mr Money Mustache and his website is a good starting point www.mrmoneymustache.com

A lot of the FIRE discussion out there seems to be very US based and/or men in their 20s with no kids trying to retire extremely young so I though it'd be great to talk here and hopefully find likeminded people.

@yellowspanner I hope you are ok, I don’t know you well, but if there is anything I can do then please let me know. Even if it’s just some online company.

Thank you Dashel.
The funeral went well and he would have been pleased with it.
I am not ok but I'll get there.

I've heard of fire for a few years now but It seems like a pipe dream for me but maybe I've misunderstood it.

. Everyone seems to be on decent incomes and manage to throw lots into savings. I'm a low earner as is my DH. We are already frugal and budget every penny that comes in out of necessity. We are already doing the right things - have a very cheap car which is falling to pieces, no credit cards, rarely go on holiday, house is too small for our family's needs so no chance of downsizing, cook all meals from scratch, cheapest utilities etc etc.
We are trying get rid of our mortgage as much as we can but tbh after that I'm not sure how I could ever be FI?
Is anyone doing this on a minimum wage job with a family?

Sorry if my post sounds a bit moany but I really would love to become FI but maybe I've missed something.

This is a really interesting flowchart - the top line would be great for young adults just starting out, even teenagers managing their monthly allowance.

I'd like to join this thread if I may.

I'm 39, my husband is 35. We both work from home, I work in the creative industries and enjoy what I do, so I'm not so concerned about early retirement as such (it would be easy for us to go part time in the future too).

We do want to be financially independent as soon as possible though.

Here's an outline of our current situation:

We moved from the UK to Portugal two years ago. We can see ourselves living here permanently. My husband brought his job with him, is employed and works remotely. I quite my full time job when we moved and have been freelancing since then, as well as renovating our house.

Our household income is fairly low at the moment. My husband's job nets about £1600 a month (he had to take a small hours cut during covid, but is expecting a pay rise this year), I've been bringing in about £500 a month.

I'm aiming to build up my freelance business this year until it's a full time income.

Our household expenditure, excluding mortgage, averages out to about €700 per month (that's absolutely everything - groceries, car maintenance, vet, council tax, insurance, internet, mobiles etc etc).

Mortgage is £1000 per month (we're overpaying). We have about £180 left on it.

No other debts except student loans (mine 12k, his 10k, but I'm not currently repaying anything).

We have a good life here - a bit of land so I'm starting to grow food and keep poultry. We're very thrifty, do a lot of DIY and buy everything second hand where appropriate (i.e. not things like sheets and mattresses). We have two old, reliable cars that we bought for cash.

We're not parsimonious though - we love to eat well so we won't buy cheap, intensively-reared meat. We just don't eat a lot of it. As we're in the countryside we have made contacts with local farmers to buy free range pork and lamb.

We don't think it's wise to live so frugally that we don't enjoy life now, because we might not live to see retirement, or might get sick.

We each have about 40k in our pensions, though I've not paid into mine for two years. I've got my pension investment stream set to "adventurous" for now.

Our plan is to focus on paying off the mortgage as quickly as possible, as well as investing in the house so that it's as low cost to run as possible in the future. Solar panels, insulation, that sort of thing. It's very sunny here so return on investment with solar is excellent.

As soon as my income has built up I plan to start paying into my pension again. Any other excess between us will be divided between mortgage overpayments and house renovation / solar infrastructure for now.

Does this all seem wise, or should we also be looking at other investments at this stage? Neither of us knows anything about investing.

Hi Peacock

Interesting and sounds a lovely place to live.

What about instant access savings? I think it's important to have those myself.

Well we don't have much saved at the moment - about 5k and it's all in our current accounts. We had to spend a lot of our savings last year for various boring reasons. We're building it up again now though.

Not sure whether to just keep a savings buffer for emergencies and plough the rest into the mortgage and house renovations for now though.

One thing I do need to do is find out how UK NI contributions relate to Portuguese ones post-Brexit. I think it's the case that within EU member states you can have paid into any social security system. We need to know if our NI contributions to date are worth anything!

I always saved for emergencies - illness, unemployment, boiler replacement etc

I don't have a house to renovate but spent minimally partly because of the above.

Yes exactly - I never let the savings get below 5k so it's there for emergencies, but I think I should get that emergency fund a little bigger.

I'm in the midst of a DIY solar hot water project, so yes, boiler replacement! I'm trying not to dip into the savings for it though. I'm experimenting to see if I can renovate the old water tank and refit it with a fancy new immersion heater (which I've already bought). Still need the solar panels and roof fixing materials - should be able to buy them in the next few weeks.

I'm doing the renovations slowly, as and when we have the money.

Hi! What a fascinating read this thread is. I didn't realise FIRE was a thing, but I want it!

We live frugally and paid off our mortgage last year. Have 10k in savings, DH will have a good pension but mine not so much. NHS part-timer.

Decisions next are: prioritise pension (no idea where to start), look into purchasing a BTL property, or just save up for private school for 3 kids 🤦‍♀️

Docket, if you’re in the NHS pension, it is really good.
Even if you’re part time, as it’s a defined benefit pension, it will be far superior than a defined contribution pension and you’ll have to pay vast sums into a private pension to match the retirement income you’ll get out if your NHS one.

How many years have you been in it?

I am notorious for worrying about everything

But I'd always want a cushion bigger than 5k - or 10k in the case of 3 kids - so would prioritise that. I do realise that some people have amazing insurance packages for if they get ill and can't work though. In fact, a friend who has only ever worked for corporates was genuinely stunned that I've never been offered anything like that in a job.

I wish careers advisers had told us this kind of thing but they certainly didn't at school or uni. I had paid work throughout uni and my tutors didn't approve!

But yes, in the absence of that kind of thing, I tend to plan for crisis. Mine have included two bouts of severe pneumonia and two major injuries. One of the injuries was completely covered by full pay but one wasn't. Then there's all the taxi to hospital bills, random things like cleaners - though the second time I just had friends to do all that.

Oh and redundancy...

I don't mean to sound like a walking crisis! Perhaps people are better covered for this kind of thing in couples.

No I totally agree, I want to build the savings up to a bigger buffer. We've just had a bad year with some unexpected stuff* that has meant dipping into it. Which is what it's there for, so...

We don't have children and don't want them, so it's only us two to think about. I don't know if my husband has illness cover with work. I had a policy at my old job. We probably need to take out some personal insurance (we have life cover for the mortgage), but it's tricky for him because he has a chronic medical condition.

*well, hasn't everyone, though ours wasn't covid-related!

Thanks LionLily that is a great flowchart !

We are currently doing an experiment of tracking spending in a lot of detail, for the year of 2021. The aim is to challenge our assumptions and check about what are we spending on.... So far I have realised that we spend more at the supermarket than I thought, by a long way !

I’m maintaining a 10k (inheritance) cash easy access isa as my buffer and I have another 5k coming out of a fixed term soon that I’m going to drip feed into an vanguard isa, I think.

I know that reduces my tax free allowance for the year rather than just transferring it all in but I’m planning to merge the two into the easy access, use some for investment and the rest for funding some hustle stuff. I’m quite looking forward to April. I don’t really know if I’m doing the right thing but it makes sense to me with what I’ve got.

Have to add that I don’t have any kind of pension, which I’m planning to sort this year. I’m only really getting serious about finance now in my mid 30s from having children at a young age

@riae

I’m not in your position, I don’t have children and our salaries are ok. But I would strongly urge you to have a look at Mr Money Mustache website. They are big on compounding interest made and savings made, so if you start now by minimising spending and also look to increase earnings if and when you can. If you look at a lot of posters on here, we talk about side hustles, Mr MMM also posts about not being afraid to change jobs or learn new skills.

As part of your research I would consider looking into considering how much you overpay on the mortgage and how much you pay into pensions.

If I hadn’t already paid off my mortgage when I found this, I would have reduced my overpayments and used some of that to put extra in my pension.

Do you have access to your pension? I would find out what the smallest overpayment you can make to it are and maybe do a bit of decluttering and selling/general money making and see if I can make that payment out of odds and ends if needed. For example I was on PayPal earlier, noticed there was £5 if you downloaded the app (admittedly it was only open to the first so many and you needed to wait a week) but I figured I have nothing to loose so I now have the PayPal app for the next week, hopefully there is another £5 that I put in a sub bank account for a pension overpayment when I get to the minimum level.

I used this method to clear my mortgage and buy premium bonds. So as well as the big stuff, lots of little things add up, plus you end up doing stuff you wouldn’t normally do, for only £5

Even if none of us make it to financial independence, we are going to have a more comfortable retirement in our old age!

+1 for Mr Money Mustache. It's very American but I find it friendly, supportive and some of the advice is good. And there is a UK section but it's not well used

@Dashel You give great advice
@yellowspanner Sending my best wishes.

@riae I’d second what Dashel said about diverting any spare pennies to the pension rather than overpaying the mortgage. Anything extra you can do brings benefits no matter how small.

At the end of the month I’ll do a tally on the pensions and ISA. I’ve made a few small extra contributions this last week or so, and they’re slowly climbing-so pleased with that.

I could do more if I embraced the frugal mindset - I’m working on this.

I also want to carry on working for as long as possible but then I’m not the breadwinner... (& have 20+ years to go yet!)

I think emergency fund needs to start small first build up about £1000 for emergency car repairs broken boiler etc, then work up first to 3 months then 6 months basic living expenses, the fiirst 1k should be accessible today / tomorrow the rest can be in something that normally requires notice but could be accessed in an emergency this year we needed our saving as though I got the self employed help DH did not as had not started long and was interpersed with employment contracts etc so we had about 80% of one inclome plus what i could make in lockdown maybe 35-40% of normal I hope provided lockdown ends end of april for retail and there are no further restrictions that in 12 months we are back where we were in March 2020 at least we have no mortgage left and DH did lots of maintenance on our own home

You know what else will be great about early retirement?

No NI payments, and in my case, low or no tax payments.

I have a question if anyone knows the answer? DH intends to retire in 6 years, he has a DB pension and a SIPP. I’ll still be working FT then. If he takes his tax free lump sum and pays off the house he will have about 16k per year from his DB pension. Can he then pay 8k per year from his pension income/our joint income into his untouched SIPP and get the 2k basic rate tax relief? Thanks all!

I don't think you trigger the MPAA by taking the lump sum from a DB scheme SeasonsInTheAbyss but I would check with the exact scheme becuase if he does trigger it then that would halve your plan.

Season,
I can see no reason why your DP can't pay money into his SIPP after he has retired.
I don't think his employment status matters nor does the origin of the money...as long as it is legally acquired, which it is.
There are no rules saying the contribution to a SIPP has to be from employment income.

Yes but if is doing it for tax relief he must make sure he doesn’t trigger the money purchase annual allowance. I don’t think this is likely to but would get specific advice