No not that type of fire….I’m talking about FIRE! Financial Independence, Retire Early. For the last few years David and I have particularly been interested in this topic mainly for the reason of freedom. Having the financial backing and freedom to actually choose where we spend our time rather than relying on a 9-5 job.
As I sit here writing this blog on my balcony, looking out onto the tranquility of our backyard and listening to the birds sing (literally!) it makes me want this more than anything. I’d love to be able to write my blog, while having the cashflow coming in from my investments. To be able to decide that if I’m not enjoying my job I can quit at anytime, knowing I have the financial backing to be able to do this.
What is your FIRE number?
To work out how much you need to hit FIRE, you take your annual spending and multiply it by 25. So if need $30,000 a year, multiply that by 25 and your FIRE number is $750,000 Obviously, to get this number down you simply need to reduce your annual spending by living more frugal and deciding what’s important to you. Create a budget, sell one of your cars and survive with just the one for your family, meal plan to save on groceries. There are many ways to HUSTLE! To read about my tips on how to travel on a budget click here.
Types of Investments…
There are many types of investments out there but I will cover the main ones below.
Property
Buying a property to rent out is often a great way to start to build your wealth, applying for a mortgage and using the bank’s money to grow your portfolio. Having something physical that you can see and touch is often very attractive to people. In terms of my opinion, I feel that an apartment in a good area is a better investment than a house. My opinion only though! The costs are definately higher with a house in terms of things that can go wrong. You do have the added benefit though, that with a house there is no strata costs. It really comes down to personal preference.
Stock Portfolio
This is something that until fairly recently I haven’t really considered. I always felt it was too risky. But after much research, I feel it’s a really good option. You only need to have about $1000 to invest at a time.
You can trade in individual stocks, Exchange Traded Funds (ETFs) or Listed Investment Companies (LICs) on the Australian Stock Exchange (ASX). You need to first open a brokerage account. There are many out there, but I recommend SelfWealth which is Australia’s cheapest online broker at only $9.50 per trade. If you choose to sign up to SelfWealth, click on this link and you will receive 5 free trades when you sign up!
It’s important to make sure you are diversified in the stock market which is why I like ETFs which are already diversified (with a large number of the top companies in Australia or internationally). Make sure you do your own research before you invest in stocks.
Another thing to consider when investing in stocks is to invest in companies which offer a high yield dividend. This will add to your cashflow and your FIRE! Financial Independence Retire Early number.
“Rentvesting”
This is an interesting one and something that definitely has varying opinions. I’m sure you’ve heard the saying “rent money is dead money”….well this is not necessarily true.With the rising property prices, many people are choosing to rent where they want to live and choose to put their money into an investment property or other form of investment instead. I mean, think about all the costs of owning a house. Quite apart from the cost of the actual house, you have the following additional costs:
- stamp duty;
- legal costs;
- interest on your mortgage;
- maintenance;
- council rates;
- electricity/gas;
- water rates; and
- home and contents insurance.
The advantage of renting is that you can live where you want to live, quite often somewhere you probably couldn’t afford to buy. The only real expenses are your weekly rent as well as part of the water bill and contents insurance. If something breaks, you simply make a call to the agent to arrange to have it fixed. You also have the freedom to move house whenever you feel like it. With the money you are saving by renting, you can deploy into your investments to grow your portfolio and reach your FIRE! Financial Independence Retire Early number.
If you’re interested in finding out more, check out Tracey Edwards’ video on “Why I Rent – Renting vs Buying a House“.
My recommended resources
If you resonate with this topic as much as I do, I highly recommend the following additional resources:
- “Playing with Fire” documentary – even though you need to pay to watch this, it’s well worth the small investment!
- Sugar Mumma YouTube channel
- Tracey Edwards YouTube channel
- “Motivated Money” book by Peter Thornhill – I’m reading this book at the moment
- “Quit like a Millionaire” book by Kristy Shen and Bryce Leung
If you made it to the end, I really appreciate it. You can subscribe to my blog by hitting the “Subscribe” button to stay up to date when I post new content. Feel free to start a conversation in the comments below.
Note: Any advice in this post is general in nature. I am not a financial planner. What works for my situation, may not be suitable for yours. Be sure to access your own financial advice.
