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.

It's not 57 until 2028. If pensionsyes is 53, she will be 55 before 2028 so can access it then.

At first, when I was reading through this thread I assumed it was relating to how to light a fire however I now understand it has an alternative meaning or symbolic if you will.

I think financial planning is a great idea and certainly can pay off if you do it right! I need to take a look at my financials at get them in order to hopefully have some sort of retirement plan in place.

Some solid advice and most useful

Hi everyone and sorry it’s been so long since my last post.

We are two weeks away from a friend moving into our holiday cottage for a few months and our first bit of income coming in from it.

We have been working or DIYing 7 days a week so are shattered.
But it could be a brilliant investment in our future and worth the hard work.

We are beginning to seriously considering the idea of retiring abroad, although no idea where.

The pension overpayments are ticking along as standard and I’m about to make another £100 overpayment from extra income made, my direct debit to Vanguard is still going in, so that’s good, yet dull.

We have two more skint paydays where money is already spoken for on normal expenses or cottage renovation expenses and then we will be financially neutral and all income is a bonus., so will definitely be upping things but hoping to have a little fun before we start the next project.

@PensionsYes I get the fed up of work thing too and part of me just wants to walk away and retire now, but DH wants a bigger nest egg and he isn’t ready to go. It can be tempting when you don’t need the cash.

Yes once it's all set up it just ticks over really.

I have just moved provider for my private pension to pay lower fees.
I also opened a pension for DD. Happy 8th Birthday!
I reduced another DDs JISA investments so she doesn't get too much money at 18.
I also linked all our investment accounts so I can access them all via the app. And take more control of the regular investing as I think the way of automating it actually doesn't make good sense in terms of fees.

I'm getting into the detailed finessing now and it's great to think back to 8 years ago when I had NO CLUE. My knowledge gives me choices. And as I'm heading back into a healthier period of life where I can take advantage of those choices it feels great.

I also meant to say well done on your hard work Dashel.

And that I am starting a Death File, for ease of administration in the event of my unexpected demise. My DH is a total ostrich, I run our financial affairs, which creates significant risk should I die unexpectedly

Thank you @Starface. It has been a lot of hard work, I didn’t know about Mr Money mustache when we came up with this idea, but interestingly a lot of Americans into FIRE talk about making property work for them.

The plan is to convert a second outbuilding as well to a one bedroom cottage as well, but it’s going to need more work than the one we just did and right now, I think we just need some downtime.

A death file is such a good idea, my DH is as clued up on what accounts we have as I am, but if anything happened to us both, then it would be a nightmare for anyone else at an already upsetting time. We need to review our wills as well.

I'm interested in the idea of making property work for me.

Was there a particular podcast episode from Mr Money Mustache that talks about it?

We are likely to move in the next year or two to a property that I hope to be in for about 30 years, so getting it right will be important. I'm already thinking about how to choose something that works for us in additional ways but it would be good to refine my thinking around this.

There was this one

www.mrmoneymustache.com/2020/10/23/house-hacking/

I was lucky in that I had a wide area to search in, but we specifically bought somewhere with holiday let potential. I think a lot on MMM talk about renting out part of their house like sectioning off a basement or getting lodgers.

They also talk a lot about LCOL low cost of living areas and this may also be worth thinking about.

We were very firm on sticking to budget when we bought this place, although properties we could have technically afforded were more tempting,

No LCOL living here unfortunately, we don't want to move away from family or change the kids schools so are sticking with the area. I'm not worried about that choice as its manageable.

That was an interesting read although I don't think I'll be stacking the leverage quite like that.

We'd also rather not have lodgers. I like your idea of a holiday let or developing a property within a property. I think this is more likely to be the sort of route we'll explore if the right property for our (probably ridiculously) specific requirements cones up. It's an aspect that will make the desirable not essential list, as we can manage perfectly well without it.

But it's good to clarify my thinking on it, thank you.

I'm currently considering how much I want to invest in pensions and how much in other investments. I'm 35 and currently have a pension pot of about £85k putting in £1.5k a month including employers contribution. I think I will have a healthy pension pot if I continue with this or similar. However, I realized recently that I'm going to need to re think my plans if I am to retire at 50, which is what I would like. As I could get to this age, have more than I need in pension but not be allowed to touch it. I'd be interested to hear how others decide what to invest in.

Re the conversations on houses, I have a basement flat below my house. For the past year we have had a friend/lodger in it paying a notional amount but prior to that we were renting it on air bnb and making around £500 a month. It was hard work but a great additional income which I used to overpay the mortgage. I also have a small house where I work which I have just finished renovating. I had planned to rent that out when I wasn't there - but I don't have the motivation right now, so it's sitting waiting for me to stay in it.

@lillg That sounds like a great leverage of property.

Regarding plans to retire at 50. You are right, you can't access money in a pension at that age.
Meaningful money talks about this issue. He is good actually at creating a life plan and identifying what he calls "cash events" or times when you plan to spend your money, and then making sure these link well with the Ts and Cs of the wrapper your investments are held in. So both pension and LISA offer good additional money incentives for using them, as well as inheritance tax advantages for the pension. A regular ISA doesn't bring in additional government money but does have the flexibility of earlier access. So you need to target your savings appropriate to your withdrawal goals. He is generally good at thinking the whole thing through coherently. If you go through his blog posts they are written in such a way as you can follow them from start to finish and get a good plan in place for fairly simple stuff. I would recommend it.

@lillg we have planned to use our ISAs until we can access our SIPPs at 57 or 58 (can’t Remember when it is). But I’m hoping by then, we have good rental income from additional property to make up this gap too. In all honesty I’ll probably be still working as I love my job but I’ll be choosing my hours and doing it more as a hobby.

Just had a look at Meaningful Money as mentioned above and it looks great.

We will be using our holiday let income and I want to do some of the seasonal jobs that come up near me, I love Christmas and we have a local stately home type place that seems to have some fun jobs. I’m not banking on that income at all.

We also have savings which can be dipped into if needed, but the majority of it will come from hopefully two holiday lets and that should enable us to leave the pensions and investments ticking along until we decide to sell. We don’t have a mortgage so dramatically decreases our income requirements, the house will have new big ticket items and travel should be the only major expense.

Planning achievements of the past few days: having plotted a life timeline with various important "cash events" mapped on, I can see when our major needs for significant savings will be. I have set up ISA regular savings plans for university costs and for me to stop working at 59, until other savings vehicles are accessible at 60.
Also, I have redirected car saving into ISA investment. I have a 4k repair and costs fund which I will maintain. Anything additional to that from my regular savings (marked "car" on my spreadsheet) will be invested within my ISA. We plan to change car in about 5 years, so plenty of time for growth, and hopefully therefore more choice.
So now my ISA needs a spreadsheet of it's own so I know what money is allocated to which goal... this gives me sad, perverse pleasure...

Hello lovely FIRE starters.

I thought this kind of thing only happened to other people… however, the impossible has happened and the fabled ‘great aunt they never knew’ has died and left a sizeable legacy, not to me but (even more bizarrely but amazingly) to my 3 DC.

Two are early teens, the other is late teens and heading to Uni in September.

I understand the oldest will be given immediate access to the inheritance—eldest also happens to be the most money-savvy, which is reassuring—but I still want to be able to advise them as they have currently applied (as a necessity) for maximum student finance for their first year.

What should I do for my three kids who are likely to inherit £50-80k each?

Want to set them up as best I can from a FIRE perspective. Does anyone have any advice? Thank you

@ChocAuVin I think in this instance it would be good for you to get IFA. What you do really depends on the level of risks you are willing to take, when they would need to access the money, how much you want to be involved/active with the investments, your financial knowledge etc. So I think people can advise what they would do but that may not be right for you and your circumstances.

For the under 18s, I would open a JISA and max out the annual contributions as a starter. You will need to know which funds/shares to invest in so either you do your own research (I don’t know how financially savvy you are) and choose them or get help to choose. You want to take medium-high risks with these, esp if the kids won’t use the money for a long period of time, so think global equities. Have a look at UK microcap stocks (Liontrust, Marlborough), Fundsmith Equity, Vanguard 100% life strategy. These are just examples and DYOR. For the older one, open a ISA and max out annual contributions and then same as above.

After that, you could invest it in a small property, crypto. The worst thing you could do financially is keep it in cash- inflation has killed cash savings. Good luck and this should be an excellent start for your kids, they are very lucky! Also look at compound interest and pay around with come calculators online. Einstein said compound was the eighth wonder of the world and you will find out why. Regular contributions into the ISAs will become a very hefty sum soon enough

I agree about speaking to an IFA. With the oldest in tow. There are probably things to consider that I wouldn't trust myself to be able to spot. That is an amount of money that is potentially life changing, if handled well, and potentially nothing more than a nice holiday, or a car, if not.

But, broadly speaking, I would still be aiming to take max student loans if at all possible. And personally I would be investing. It is a balance, as Redcart says, of when you want the money. This will determine your "wrapper" ie pension/LISA/JISA/ISA. For the late teen it would be a combo of LISA and ISA, with a view to house deposit, dripfeeding the LISA to the max each year to get the max government top up. And possibly using some to start a pension. For the littlies it would be filling up JISAs for a few years, and a bit in a pension.

What to invest in within these wrappers? As Redcart says, that depends on your level of knowledge and confidence. But essentially you want to be mainly in equities, and personally I would go for a well diversified mainstream fund/etf.

With the wildcard investments, ie bitcoin or individual shares. I personally wouldn't. But if your oldest wants to play, allocate a small proportion (maybe 2 to 5 k) to do this with, and stick to slow and steady for the rest of the money. And depending on the actual amount, you could consider a similar amount for oldest to allocate to experiences (when covid allows) like travelling etc.

It depends a bit on your (as parents/family unit) financial situation. It helps you as you won't need to think now about helping them with house deposits or pensions. So might ease your own savings plans. But it is impossible to know without knowing what your position is.

Thank you both so much. I will indeed take IFA but these posts are the helpful steer I was hoping for, so thanks again.

You’re spot-on in that I get the sense that these sums can either be life-changing or just ‘there’ dependent on my actions! Also that it represents a relief of sorts on my own future planning as it will (hopefully) set them up in a way/to the tune of an amount that I no longer have to factor in.

Just been inspired to post here after reading a pension thread. I've been shamefully neglectful of doing the things I meant to do over the last few months, such as overpaying the mortgage, adding extra pension payments etc. The money is 'in the bank' but I think I have a mental block to putting the money somewhere I can reach it. This is mad, because I have my private pension which I haven't drawn anything from and could, if needed so I am giving myself a kick up the bum!!

A bit of advice needed on my emergency fund. I have £12k in a cash ISA which is earning a pittance. Thinking about putting it somewhere else such as premium bonds - what's everyone's thoughts?

I put £500 in a Nutmeg s and s ISA for my son last April which has now grown by 43%!! I'm thinking if my 12k had been in there how much more I'd have now.......

Hi chimichangaz I know it's really easy to sit out 'just until' ... and then you end up not having done anything. The best thing I've found to break this is to set up a really small payment so that at least I'm doing something. I then really regret having not put more in and start to up it. Much easier to add a bit extra to the amount than it is to break the inertia of not setting it up in the first place.

On the emergency fund, the return on cash is so poor at the moment I've put all mine in premium bonds. Have got a few £25 and the mild excitement at the possibility of something more. The only thing is that for money that is already in an ISA I am a bit reluctant to take it out of the tax shelter. OK that's not worth much right now but it's possible that the allowances and sitaution will change in the future. My plan is to transfer my small cash ISA to my S&S ISA once I have enough in my premium bonds to cover emergency.

Right this has given me the kick I need to set up the extra pension payment tonight!

I keep a small float in an instant access savings account (one month of bills) just to cover if anything unexpected came up but the rest of my emergency fund/savings for work on the house is in premium bonds.

I then pay a lump sum into a Stocks and Shares ISA each month, a direct debit to my mortgage as an overpayment and an additional AVC on my workplace pension....none are huge amounts, all around the £100 mark but I find if I 'set and forget' the direct debits they go out at the start of the month and I know nomatter what I've spread some little pots of money around.

@chimichangaz
One way to prompt yourself might be to think about the opportunity cost of doing nothing. How much is your inertia costing you? Or alternatively how much do you "earn" yourself by an hours "work" setting this stuff up. It is a way of thinking that gets me moving.

WRT your emergency fund. You need to keep some true emergency money easily accessible where it doesn't matter if you have to access it during a market downturn. You don't want to have to cash out in a dip, because that is when you crystallised into actual losses. So keeping a store of cash is a hedge against this. One example is last year at the start of the pandemic. People had to cash out when the markets dropped. I don't do premium bonds for ethical reasons but as a fiscal proposition it makes sense as long as you can access it fast enough. I had the same dilemma, and ended up keeping some in cash, and some in ISA, but earmarked as second tier emergency. I am overall probably too cautious so it makes sense in my internal system.

What’s the ethical issue with premium bonds starface? Not heard of that

It would be the comparison with gambling. Religiously driven ethics.

Ah ok, relieved ns & I have not been accused of something evil!