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

Its been a while since I followed anyone for the FIRE stuff. I sort of absorbed the principles, and now just dip back in to stuff like this thread periodically. There was a Freakonomics episode that I found helpful.
There was someone else I can't remember who interviewed other FIREees. That was the one that made me realise many people don't retire entirely ie do nothing money making at all.

More recently I have put more time in to understanding tax rates, the Ts and cs of SIPPs etc. We have a plan, which needs regular review. Things tick over. I am almost certainly a bit gung ho, more so than a financial adviser would be.

In terms of pensions vs paying off mortgage. Think about getting money out as well as in. Will it be taxed on the way out? Remember 75% is taxed as income, so you have to add it to current income to figure out tax rates. Could this push you into the 40% band? Will it make enough after fees to be worth putting in? Plus remember that you trigger the MPAA once you start withdrawing.
Also remember if your actual (not aimed for) term goes longer, you might be able to ride out a bad patch in the markets and defer paying it off. It's quite intense to look at the last 100 years or so and see when the dips were, how long recovery took etc.

And yy @whysotriggered you can always reconfigure when circumstances change. Or hedge your bets.

Also, if you are encouraging your kids. I had a pension from 18 (thanks Dad). I carried on paying into it once employed because it seemed like a good idea (even though I also had a good works pension and could have lived a lot better). I didn't really understand it, I just kinda carried on. It wasn't perfect (high fees ignored for a long time etc). But it has put me in an amazing position now. And probably helped me get interested in personal finance. I've been playing around with compound interest calculators, with a view to starting SIPPs for the kids. It is phenomenal how very small amounts compound over long stretches of time. I don't want to take away their autonomy completely though.

Also @chimichangaz that's an amazing story of financial recovery. Well done you.

Thanks Starface.
I took pensions out for my grandchildren as soon as they were born. I only pay in £25 each per month but HMRC add 20% (ie my £25 is 80%) so around £30 goes in each month because even though they are tiny they have tax allowances.
Or something like that.

Hi all,

I thought I would check in. My ISA is open and I’m waiting for the first payment to go in.

I have put together a good budgeting spreadsheet and as part of that, I calculated I am paying 41.5% of my take home pay on scheduled fire payments, but that includes £250 to give to DH to OP his pension as he is paying for all the renovation costs - the projected costs for this year are very high, but after that we should get income to save and it will free up his salary.

I am also hoping to put £500 every 2 or 3 months to my ISA, plus all my crazy money making schemes to my pension. These aren’t counted in my 41.5% so it will be higher. I will review this figure in 6 months to see how much higher it actually is.

I have forecast my pension that after my latest £150 overpayment, I should be at £8800 by the end of 2021. This includes all the salary and employer contributions up till 22nd of December plus tax-back, but without any additional overpayments so I feel a challenge is on to get that higher! Then next year we will have the income from the let and DH will have a lot more money available for this.

I am hoping to get my mobile phone bill down by £8 a month this week, which would be a nice saving

I am so impressed with setting things up for children and people starting their pensions so early.

Starface "That was the one that made me realise many people don't retire entirely ie do nothing money making at all. "

that's definitely me, will be doing nowt!

Dashel - sounds good!

I'm curious - when people think of their net worth, do they count their property? I suppose most would. I don't. I'm obviously fine to sell it to pay for care if such a time ever occurs but I don't think of it as part of what I have.

I have seen quite a few posts recently that made me reconsider my view on pensions but I still come back to it not being right for me.

@yellowspanner
Actually it was your post about pensions for your grandchildren that prompted a review of our situation (amongst the massive overhaul we recently did). I was saving for them in an ISA, but it all grew so fast so quickly, and I don't want them to have a massive sum at 18. But your post got me thinking, amongst my own reflections on my Dad, so I'm diverting some of the money. Because of the compounding, even very small amounts really grow. It was fab inspiration, thank you.

@LunaHeather Good for you, if that's what you want. It's entirely about freedom and choice isn't it.
I think the thing is that you choose what you want to do. Which for some people may be money making - the guy in question was talking about his blog. But making money isn't the primary objective. The memory that sticks with me is that he had calculated his minimum viable, but in practise had found he made a bit of money so ended up with more than he expected.

It's also likely to be my personality traits. I literally thrive off goal driven projects. Even if I fired at 40, it would be literally impossible for me personally to do nothing for 50 years. I think that's also why I'm comfortable working part time and firing later. It actually suits me better. Plus I get cake now. Which is nice 😂

Just wanted to share I got my phone bill down to £7.70 a month!!

Dashel nice one!

Star yes, I can't be doing with goals, I'm more of a drifter.

Oh and, I think it was also his comment that made me realise that retirement does not need to be a cliff edge. There can be a winding down, and for many people this is how it is. You can retire from full pelt and do something slower. And I've started to see various people around me do this. Even retire from one job then get a part time role in a supermarket. So not quite FIRE but a retirement of sorts. I think what I am trying to say in a very long winded way is that retirement also doesn't have to be all or nothing, though of course it can be if that's what you want. It's an idea that deserves examining and it helped my thinking to think through what sort of retirement would suit me.

Starface

I don't consider part time as retirement at all!

when people think of their net worth, do they count their property? I never really think about my net worth as such but if you do I would think it would include all assets inc property, DB pension schemes etc. That number doesn't really matter to me in that the value of my home is fairly irrelevant whilst I'm living in it and whilst I might move in the future I'm not relying on downsizing. I'm much more interested in my 'FIRE number' of liquid assets and definitely don't include the value of my home in that.

@Mia85

when people think of their net worth, do they count their property? I never really think about my net worth as such but if you do I would think it would include all assets inc property, DB pension schemes etc. That number doesn't really matter to me in that the value of my home is fairly irrelevant whilst I'm living in it and whilst I might move in the future I'm not relying on downsizing. I'm much more interested in my 'FIRE number' of liquid assets and definitely don't include the value of my home in that.

Same here.

I have a few friends who always include it and I find that a bit odd.

I also wouldn't include my home as part of my FIRE number, because you can't live off it. I guess I would include some of my equity if downsizing were an explicit part of my plan though.

I do get that part time isn't necessarily seen as retirement. Some of the people I know who went part time had reached their FIRE number, so had no need to work but did choose to still work just differently or in less demanding roles. I don't know if that's semi retirement, could retire but choosing to work or what. I know when I first heard that podcast it shook up my ideas about what retirement meant. Similar to you LunaHeather, I was thinking, that looks a lot like working to me. But I think the point they were emphasising was they were FI, so had no need to work, which put them in a totally different relationship to it all. They had also significantly role shifted, and were doing activities primarily for interest. It's that freedom and choice that feels so different. It certainly challenged my thinking at the time about what retirement looked like and meant, when I was exploring the FIRE concepts. I suppose there are two bits, FI and RE. And each is going to look quite individual. But understanding both what you want yours to look like and your numbers and process to get there, is just so wonderfully empowering. I have certainly found it so.

I know others who have done this who weren't fully FI but did work PT out of necessity until state pension kicked in, which isn't FI, but still not a bad cop for them. Again, not uncommon if you have a DB pension that starts at 60 but won't quite be enough until you hit state pension.

I told you I hold the concepts lightly...

I am would count any income generated by the house, driveway rental, air B and B etc and/or the value of the downsize.

As for part time, if I think DH and I are both open to the idea of a part time job if it was a job we wanted to do. There is a difference between a part time job doing something you don’t enjoy and say working on a steam railway or doing the occasional bar shift in your local country pub or doing something you enjoy.

Dashel "I am would count any income generated by the house, driveway rental, air B and B etc and/or the value of the downsize."

I meant the home you currently live in.

Thanks for suggestions- I think splitting it is a good idea.

My decision to move to a cheaper house was 100% driven by FIRE principles. I would never have thought of it - only about trying to 'better' myself with a bigger or more expensive house....

I'm pretty good at shopping around for savings on big ticket items but not so good at the small habits like grocery shopping more wisely - and I have an addiction to stationery.... And I like spending money - I think the psychology of money habits is interesting and your past definitely has a massive impact. My childhood was quite poor, and we lived in an old fashioned household where dad doled out the housekeeping and mum had to make it stretch. Absolutely no doubt that's shaped who I am today - fiercely independent and completely in charge!

I'm finding this thread very motivating!

chimi yes, I can lose hours looking at stationery.

I don't count the value of my house in my net worth because I have already downsized and don't intend to move.
For me FIRE was about choice but also feeling financially secure.
I work now in a voluntary basis for a national charity. I was a trustee for the charity and it took a lot of time.
But it was and is optional.
I don't need to earn money but can if I want to.
The financial security gives me choices

I count some of the equity in my house as the plan is very much to downsize when the DC have flown the nest and we retire.

I don't count it all though and I count the capital payment off the mortgage as savings - psychologically I treat the interest part of my mortgage as "rent" and the capital as savings because in my mind all I am doing is increasing the equity in the house which will be liquidated at a later date.
I am very aware that I will still need a home but that could be a lot cheaper than where we live now.

Yellow and fleur, yes, makes total sense.

I was thinking more of people who perceive themselves to be worth x because the flat is worth x.

I had a surreal chat with a colleague once, she suggested I cut my hours by putting my flat on Air B and B. When I asked where I was meant to live, she looked baffled and said "with your parents of course".

LunaHeather, how the other half live!!

I count my house equity in my net worth but not in my FIRE calculation. So I want to know about it (and tbh celebrate it since I've put so much effort into paying it down) plus I could sell and move or downsize, or rent a room out when the kids leave. But since it's illiquid I don't count it toward my FIRE goal since it wouldn't help. Even if I rent it out then go and rent somewhere on a beach in Thailand using the rental income it would still have the same impact of just reducing my outgoings since accommodation is covered, but I like the options!

It's definitely the liquid bit of the income that counts!

I don't know what you mean by other half. Her parents aren't wealthy.

It was just the mere concept of going back to being a child again. I was like 'hmm, yes, desperate to work less but - not THAT desperate"!

I'm glad I found this thread.

I'm 40 with 1 toddler and 2 more on the way. Eek.
We have 2 btls and one family home. We save around 30% of our income via a combo of workplace pension and ISAs as well as a modest amount into a JS&S isa. With 2 more kids on the way that isn't going to be sustainable long term.

We are aiming to retire by 60 as opposed to sooner. The childcare costs at £1500 each are crippling so once that's out of the way we will aggressively save again.

Rental profit is saved into a S&S isa.

Can I join you all please.

Embarrassed to say I am 55 and have no pension.

Planning on opening a Nutmeg SIPP or a Vanguard Life. Before the end of the tax Year. I need to look at the charges and decide. Any thoughts please?

We have a healthy emergency cash fund and maximum premium bonds.

I have also invested the £20K Isa in cash savings for a few years but .5 % is not even keeping pace with inflation. I feel I should change over to tracked fund investments. Any suggestions?

Mortgage free so have been prudent but I have left it so late to start a pension and not taken advantage of the tax top ups. ☹️

Hello both!

I know rates are shut but I don't think about inflation much either..don't buy beyond essentials.

I've got a few fixed rate bonds maturing in June, it's going to be bizarre seeing what rates they will go to.