FIRE – Retire early in 3 easy steps!

The BORING way to FIRE!

Warning – this is not a popular choice! We see people ask on FIRE groups and have friends and collegues ask about how to get ahead financially? We sometimes explain in high level terms how we reached FI. This is often returned with incredulous looks and we are often told, “Things were different back then”. We were told that too when we first started. We hit FI on pretty much a single income which has never been in the top tax bracket, so it is possible.

So, how did we do it? We mapped out our 2 buckets of investments required – Before and after 60 (Super access age), then took the following steps:

1. Smash that mortgage

Pay off your PPOR (home) ASAP. However make sure you enjoy your journey along the way – we did lots of caravaning and had some of the best trips ever! It doesn’t have to be expensive. We only did minimal lifestyle PPOR improvements such as DIY painting, minor changes, gardening, etc. until we smashed out our mortgage – crazy talk! We were 32yo and mortgage free – it took 7 years. After that we had a lot more cash flow to fully renovate our home with saved cash, while maxing out our Super. We used excess cash flow to borrow for more investments and added cash to a growing equity portfolio.

First caravan trip in 2008
Grom alert 2018! Now upgraded our beach trips to our holiday house.

2. Add to Super

The savings on non-deductable interest can be used to max out concessional Super contributions each year (and or catch up contributions). You should now get additional tax refunds each year from the additional Super contributions.The timing and pace of this maxing out should be balanced between the two investment buckets (before and after 60).

3. Use equity to invest

Even before we paid off the PPOR we used equity in the house to buy investments in a family trust (we split on PPOR loan to obtain IPs and equities (LICs/ETFs). We got the same interest rate with equities as with IPs and both debts are tax deductible. Our LVR (loan value ratio) was never too high, but as equity in our IPs grew we borrowed more.

Our target was the 1/3 rule. But due to limitations on Super contributions and a blow out in some other categories, it’s not exactly 1/3 any more. 

This has worked so well for us and we’d love to hear your own thoughts and ideas on reaching FIRE – please share in the comments!

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