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.

Autocorrect censored my swearing there.

AlwaysCheerful would you consider a stocks and shares ISA? Mine has gained significantly in value, even with the crash earlier this year, but you have to be prepared to tolerate some risk.

LunaHeather ah I see - I just can't imagine being in a position to be able to move back in with my parents, it's a nice position for people to be in even if they have no interest in going back there

Thank you for such an interesting thread.

I am reading further around this and the principles of FIRE and feel like a lot of it has been things we do anyway.

I pay into a Lifetime ISA instead of a pension as I don't earn enough for a workplace pension and want the option to withdraw the money if it's ever need for anything (albeit that is at a fee). I'm wondering whether I need to look into a SIPP instead though.

@FakeFruitShoot You say you don't earn enough for a workplace pension but did you know that you may be able to opt-in and get an employer contribution? If you are an employee, then talk to HR/Payroll/Pension Administrator about opt-in.

SIPP is another option, there are some low cost what I would call 'simple SIPP' which just have mutual funds as an asset choice. Vanguard Investor for example have a SIPP with a 0.15% annual management fee, plus fund fee.

I would also look at S&S ISA. A useful tax wrapper to use for money that is destined for long term but which you want accessible.

Alwayscheerful do you work? If so, what does your employer to about pensions? In your position I would prioritise the pension to get the tax (and employer?) contributions and then look at S&S ISA. Though it does depend on your plans for the money and whether you're likely to need it in the next few years. It looks as if the next few years might be quite bumpy...

I use Vanguard for my S&S ISA as the fees are low and I generally prefer the passive approach. The only thing is that you are limited to their fund and I am wondering whether it would be better to have the option of putting some more interesting funds in too. What do other people use?

There is a tracker vanguard I think and it has low fees. I would have a look at that.
And definitely go for a pension through your employer if you have one. There is the tax addition and usually an employer contribution. It's worth it just for the 20%extra that HMRC add.

I agree with speaking to your employer do you earn over £6240 as I think if you ask to join they have to let you and contribute themselves, but if you earn under that, they can still let you join, but don’t have to contribute

worksmart.org.uk/work-rights/pay-and-contracts/pay/am-i-entitled-workplace-pension

@Mia85

Alwayscheerful do you work? If so, what does your employer to about pensions? In your position I would prioritise the pension to get the tax (and employer?) contributions and then look at S&S ISA. Though it does depend on your plans for the money and whether you're likely to need it in the next few years. It looks as if the next few years might be quite bumpy...

I use Vanguard for my S&S ISA as the fees are low and I generally prefer the passive approach. The only thing is that you are limited to their fund and I am wondering whether it would be better to have the option of putting some more interesting funds in too. What do other people use?

I am self employed currently looking at the simple SIPP (Vanguard) @nannynick mentioned.

[quote nannynick]@FakeFruitShoot You say you don't earn enough for a workplace pension but did you know that you may be able to opt-in and get an employer contribution? If you are an employee, then talk to HR/Payroll/Pension Administrator about opt-in.

SIPP is another option, there are some low cost what I would call 'simple SIPP' which just have mutual funds as an asset choice. Vanguard Investor for example have a SIPP with a 0.15% annual management fee, plus fund fee.

I would also look at S&S ISA. A useful tax wrapper to use for money that is destined for long term but which you want accessible. [/quote]
What are your thoughts on the Vanguard stocks & shares Isa's?
the fees appear lower than Nutmeg HSBC Isa has recommended too.
Any suggestion at funds to look at ?

Alwayscheerful I like Vanguard and use them personally for S&S ISA and SIPP. I use a Lifestrategy fund as that is nice and simple and has good diversification, if a little weighted to the UK. They come in various risk profiles which is handy... personally I do 80% equities.

I mainly do the same as Nick and use the LS 80 fund, though I've also added a little of the global all cap recently.

I seized the day and set up a Vanguard Life strategy Pension.
They are inundated with applications.
Would it be a bad idea to stick with Vanguard and also go for their sticks and shares Isa?

It's easy enough to setup the S&S ISA as long as it is the only one you have. They will be very busy trying to get things setup before end of tax year (5th April).
By having SIPP and ISA in same place you will eventually get to a point where the platform fee is capped - though by that stage there are other platforms like Interactive Investor that are lower cost.

Well done @Alwayscheerful, half the battle is just starting and doing it. You can worry about fine tuning later - getting the best fee platforms etc. You will learn and refine as you go along. It's too easy to procrastinate.

@nannynick
I went for the lifeStrategy @80% equity fund too.

I have £8,000 set aside to put it a stocks and share ISA and hope to feed in £1000 a month by direct debit =the annual allowance of £20,000
I wonder if I should drip feed in 12 equal direct debit amounts?

Anyone have any thoughts on ETFs ? Uk funds seem to have lower chargers. Global funds are higher charges.

@Starface

Well done *@Alwayscheerful*, half the battle is just starting and doing it. You can worry about fine tuning later - getting the best fee platforms etc. You will learn and refine as you go along. It's too easy to procrastinate.

We have been extremely disciplined in paying down mortgages but very much tunnel vision, we neglected pensions and investments. I will encourage my husband to tidy his pensions into one pot and set up a new direct debit. It feels a huge relief to have sorted mine. I must speak to neighbour she is 80+ Cambridge educated, incredibly wealthy and manages her own investments because she is too mean to pay an advisor, but ,Money can be a delicate subject, it's a crash course I need. 😂

@Alwayscheerful A fund (OEIC) is traded once per day. An ETF is traded like a share, so many times a day. There can be other differences, some ETFs are synthetic meaning they don't actually hold the underlying assets, so you need to be careful about what you buy. They can be lower cost than a OEIC. For more listen/read this: meaningfulmoney.tv/2014/03/05/mmp050-exchange-traded-products-podcast/

I wonder if I should drip feed in 12 equal direct debit amounts?
Do you have the money available sooner? If so then mathematically putting it in ASAP means it is there to grow longer. Putting in monthly is what is known as Pound Cost Averaging / Dollar Cost Averaging. You are splitting the lump sum and paying it over a period of time with the aim of smoothing out the ups and downs of the market.
If you don't have the money available as a lump sum, then putting money in as soon as it is available is sensible... but there is something to be said for automating things, such as having £1000 a month going out of your bank account into an investment without you needing to do anything - Click & Forget!

@nannynick
Thank you for taking the time to explain , really helpful, I do wish I had started sooner

@Zorra
Yes stocks and share iSA is the way forward for me.
My cash ISA is currently reaping the grand sum of .5% interest not even keeping up with inflation!

Just jumping back on here having done some reading and listening to podcasts (and thanks for the suggestion for those!)

I'm on a relatively low income which is currently even further impacted by covid however it does have some room for growth in the next five years.

My quandary is this: do i put my efforts into overpaying my mortgage as I have 15 years left on it but only six years until my youngest hits 18 and I lose maintenance/tax credits (which is currently half my income) or do I plough money into a pension/S&S ISA and worry about making it mortgage payments a bit further down the line? Or do I try and do both?

I'm rather going round in circles with this.

My quandary is this: do i put my efforts into overpaying my mortgage as I have 15 years left on it but only six years until my youngest hits 18 and I lose maintenance/tax credits (which is currently half my income) or do I plough money into a pension/S&S ISA and worry about making it mortgage payments a bit further down the line? Or do I try and do both?

I would try to do both. Dave Ramsey gives the percentage of 15% of income to retirement, then the rest to children's higher education and paying off home mortgage.

S&S ISA you can always take money out of again... so you could sit it in there for 6 years and then take it out and pay off a chunk of the mortgage. Pension you can't take money out of easily, so I would do enough to that to get an employer contribution.

Mortgage rates are low right now but who knows what they will be in 5 years time. So if the rates go up you would want to look at paying more towards the mortgage.

Thanks @nannynick that's along the lines I was thinking.
I just need covid restrictions to lift a little so I can get my income up again!

@AgnesWaterhouse1566

Just jumping back on here having done some reading and listening to podcasts (and thanks for the suggestion for those!)

I'm on a relatively low income which is currently even further impacted by covid however it does have some room for growth in the next five years.

My quandary is this: do i put my efforts into overpaying my mortgage as I have 15 years left on it but only six years until my youngest hits 18 and I lose maintenance/tax credits (which is currently half my income) or do I plough money into a pension/S&S ISA and worry about making it mortgage payments a bit further down the line? Or do I try and do both?

I'm rather going round in circles with this.

I think this probably depends on how difficult it will be to meet the mortgage payments once your DC is 18 and you lose tax credits and maintenance. If it will be really difficult, then overpaying now will mean that you can have lower payments later.

However, if you think you will be able to afford the mortgage, then I'd recommend paying as much as you can into a pension while you are on tax credits. Any pension contributions you make will increase the tax credits you receive as they reduce the income that tax credits are calculated on. Basically, you benefit from the standard tax relief that you would get for pension contributions (20%) plus another 41% relief (the tax credit taper rate). So, for example, a £1,000 pension contribution would only cost you £390.

Happy Friday everyone!

It feels like forever since I opened up my S&S ISA with Vanguard, so I have been impatiently waiting for my account to be verified and for the first payment to go in, well today it’s showing as pending on my online bank account.

DH didn’t share my childlike excitement, so I thought I would share with you all.

Other small progress news this week: I claimed back a student loan overpayment from when I paid it off but they still took the money that month. I claimed a free Aussie Hair mask and I called Tesco to ask to get some points refunded back to my account that we traded in for a hotel break that we couldn’t go on because of COVID. By the time we can spend them again and with the extra we have already earned and will earn, we will probably have enough for a nice week away next year. DH gets a lot from work fuel and on purchases from work so kind of a free holiday! We get our shopping from Tesco as well as they deliver and we are 30 minutes each way to the nearest supermarket.

@AgnesWaterhouse1566 if I was you I think I would probably do both, although I would try and do a budget on when you loose the extra money and see how tight things are. Interest rates can only go up, so making sure you can afford your mortgage with say a 5% rate would be essential to me.