Are you ready to decide on your FIRE number?
A few years ago, I attended my brother-in-law’s wedding in Denmark. The bride’s sister was running us through the events for the big day:
I must admit we were struggling with the accent, and a 30hr+ flight but I was sure we heard right.
She seemed to see our confusion and after a brief conversation in Danish, the bride confirmed she had used the right word.
It turns out in Denmark when you want your guests to leave you to serve ‘F- off food’, usually in the form of a hotdog. Well, you have to love the Danes.
It made me think the typical situations that people would consider telling someone to do this. I think you would agree that at some time or the other you may have dreamed of telling your boss that you were out of here.
In the 1986 movie, “Heat” Burt Reynolds declared he needed $20,000 as ‘F- you money’. Now almost 32 years on I doubt $20,000 will buy as much as it once did. But it poses a question of how much would be enough?
A politer acronym for this is FIRE.
FIRE: Financial independence, retire early.
So, if you had to declare what your FIRE amount was – what would it be?
I recently broke this figure for a training session I ran for my students.
I imagined what would I need to have an absolutely lavish lifestyle – way more opulent than I currently do, I might add. But hey let’s have fun.
So, assuming you have paid off your home here are my estimates:
$300pw groceries plus let’s enjoy ourselves and add $275pw for a couple of dinners out and brunch.
$500pm for a car loan Subaru Outback or we could bump it up a notch to $600pm for a Mercedes A-class. Blimey, let’s just have a car each so let’s make it $1100pm.
Do we have to enjoy ourselves so how about an annual overseas trip? Allowing flights at $1500pp, $7,000 spending money and accommodation, that is $10,000 and we already have the food bill covered.
However, we want to enjoy a few domestic trips too so let’s add $10,000.
Now with all that time to spare it is time to concentrate on ourselves, so why not add in a few extras for yoga/a gym membership/a massage let’s add $200pw.
Utilities $500pm – boring but necessary.
Just to be on the safe side let’s add in a few gifts, toys, some money to spoil the family so let’s add another $10,000.
I think you would agree this seems ridiculously extravagant and it would feel like you might need to work forever to achieve such a huge figure but the truth is you don’t. This all adds up to $89,500pa – surprising isn’t it?
So, what if you only went overseas every 3rd year and you were a bit more budget minded when it came to the groceries and eating out, and let’s face it you probably only need one car, and a massage once a month. We now we are down to about $67,000pa. Does that sound more realistic?
In my book “Your Property Success with Renovation, 2 properties, 1 renovation, $1million dollars in the bank” (Wiley’s & Sons) I showed how in 5 short years you could buy just 2 investment properties on the typical income. With the properties in the right location and the right properties for the area then it is set and forget and time to just get on with life. 10 years later sell down, pay all the costs, taxes and loans and put enough in the bank earning you $50,000pa. Add to that your income from your accumulated Superannuation, which is currently on average $355,000 per household, that adds another $17,000pa and that brings us to $67,000pa.
So, as you can see it just comes down to how you break it down and then how you decide to build up to the figure you want.
So, it is time to take stock work out what you need to do and take the first step. What is your FIRE number? You might be even closer than you think to be financially independent and retire early.
Jane Slack-Smith is a property market commentator, educator, author, podcaster, mortgage broker, and co-creator of The Ultimate Guide to Renovation. She is the Director of Investors Choice Mortgages and Founder of Your Property Success online education. Author of Your Property Success with Renovation: 2 properties, 1 renovation $1million in the bank and co-host of the podcast Your Property Success. For more information www.yourpropertysuccess.com.au