My background and the FIRE concept

The FIRE concept was one I followed on completing my first day of full-time work, (sometime in September 1988 if my memory’s correct) – I realised that I simply wanted to minimise my time having to work for a living! Yes, I admit it, I can be quite lazy at times, especially when it comes to doing things I would rather not be doing – like studying subjects that don’t interest me. Sadly the career I embarked on was one that required a lot of studying, although it was suited to my academic strength and interest in mathematics and statistics. In case you’re wondering, I started training to become an actuary!  For those of you who don’t know what this is (and most people don’t!) – an actuary is someone who found accountancy too exciting!  There are several years of professional examinations to endure, but if and when you qualify, you should be set up for life.

So, although I consider myself to be reasonably bright (although not bright enough to think of the snappy FIRE acronym!), I gave the actuarial exams a go.  To cut a long story short, I passed a few of them but ultimately my laziness proved the stronger characteristic and I never qualified as an actuary.  However, I did continue to work in the actuarial field, and moved from working in a pensions consultancy to a general insurance company (which proved marginally less boring!).

The area that I did want to work in (or at least thought I wanted to work in), was investment.  I had always been interested in the stock market and had made a few pounds from the privatisations of the 1980s. Back then, working in finance in the City seemed to be a THE place to work and make a fortune and fortunately there was a role for actuaries (and failed actuaries). Over the years that I was working for the insurance company I did apply for a number of investment jobs without success.  I think the final straw came when, after attending something like 6 or 7 interviews with one particular institution, I failed to get the job (despite apparently being the only candidate the company was interviewing) – I think I must have blown it at the pub in the post-interview drinks session with my potential future work colleagues!  But I’m not bitter (honest) – that role did involve being in the office at 7am each day and working through to the evening (as many City jobs do …)

So I pressed on with the insurance company, but all the while continuing to plan my escape.

I “retired” in 2005 at the ripe old age of 38. Now 53, I continue to enjoy a modest (probably too modest) lifestyle and have no regrets about my life choices. I am a great believer in people shaping their own futures and decided to develop this website as a resource for helping people to achieve this.

One final point. Although I spent most of my working life working in London, I never earned a mega-salary or received big bonuses. I think there was only one year when I paid more than the basic rate of tax.  Furthermore, I have never received a big cash sum apart from one which represented the conversion of a small defined benefit pension into a lump sum. 

I believe that with self-discipline, patience, some basic knowledge and a plan many people who might think early retirement is an impossibility could achieve it if they really desire.

How much do I need?

Proponents of the FIRE concept suggest you need to acquire a sum equal to 40 times your annual outgoings.  I never calculated whether I had this amount when I stopped working but it sounds like a reasonable “rule of thumb”.

This “retirement pot” ignores any defined-benefit or state pensions you may receive, so your target pot only needs to be large enough to cover the excess of outgoings over such pensions.

If you are handy with Excel and want to build your own financial planning spreadsheet, I can thoroughly recommend a series of YouTube videos put together by Lars Kroijer, an ex-hedge fund manager. What I find particularly revealing about Lars is his “poacher turned gamekeeper” conversion. Hedge funds are notorious for operating a “2+20 charging model”, in which charges can be 2% plus 20% of any outperformance each year. Lars now advocates a simple 2 stock portfolio consisting solely of a low cost world equity index tracker and a low risk asset.

The videos can be found here.

My route to early retirement

Other than winning it, marrying it or inheriting it, there is no quick, legal way of amassing a sum sufficient to retire early.  You are going to have to work for it and/or take some risk. In my simple mind, I believe there are 3 such ways – 1) build up a business, 2) invest in property or 3) invest in the stock market. Of course, you can do some combination of these.

My route was to do a combination of (2) and (3), although my investments in property were relatively modest (I’ve never been a “buy-to-let” landlord or a property developer!).  The approach detailed in this website will therefore follow a similar path. 

Getting into the FIRE mindset

There are a number of attributes that will make it easier to reach your retirement goal:

  1. Patience – depending on your current circumstances, it could take many years to become financially independent. However, the sooner you start, the easier it will be.
  2. Knowledge – learn as much as you can about personal finance. Familiarise yourself with interest rates, inflation, saving and investment products (including pensions) and the risks involved.
  3. Discipline – make a plan and stick to it. If you have trouble meeting targets, understand why you’re not meeting them.  Is it because of something that you are in control of or not? Are your targets realistic?
  4. Resilience – you are going to have to take some risks to achieve a better return on your money. This will inevitably involve setbacks and periods where you will lose money.  Accept this as unavoidable and perhaps an opportunity to add to your investments at a good price
  5. Modesty – live modestly. This is perhaps the most important determinant of achieving your goal. Minimise your spending and maximise the amount you put aside for your retirement. Naturally the lower your spending aspirations in retirement, the smaller your retirement pot needs to be and the earlier you can retire!
  6. Realistic- be realistic. While you may make double-digit returns on your investments in some years, it’s not going to happen year in, year out.

Key steps:

Minimise spending – prepare a realistic budget and stick to it. The budget planner spreadsheet available on the MoneySavingExpert (MSE) website is a very useful tool. Not only does it set out all of the categories you’ll need to consider, but it also has links back to the relevant section on the MSE website where you can find out more information and tips for saving money or boosting your income. Click here for details.

Maximise your income – are they ways to boost your earnings/savings?

Maximise the return on your savings and investments while understanding and accepting the risks involved

Monitor your progress – review your spending, savings and investments regularly to check your progress. This should help motivate you to stick with the plan and achieve your goals

Remember:

“You don’t have to earn what you don’t spend”

“There are two types of people on earth: those who understand compound interest and earn it, and those who don’t and pay it”

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