Dear Family On Fire – Cam & Trish,

Letter Date – circa mid 2000s

Congratulations on starting your FIRE journey. The early steps in the right direction can earn you literally millions of dollars without any extra effort. Your first million dollars will take a long time to achieve and will feel very slow, but the next million will only take half that time and the next a 1/3 of that. We would suggest you model out your strategy and seek advise only from people who are where you want to be. Our letter to you is a one time only event and after this we will leave it with you.

Congratulations on your recent marriage and buying your new home too! This will give you security for the next 19 years and a place to bring up the 3 beautiful children you will have.

To reach FIRE it is really simple –

1. Spend less than you earn, borrow less than you can afford.

2. Consistently put your savings into diversified high yielding assets (such as low fee LICs and a global ETF).

The FIRE movement is yet to happen, but below is a chart from Mr Money Mustache from 2012, showing that with a saving rate of 50% of your income, you will reach FIRE by 40! If you want to hit Fat FIRE, and you are enjoying working, you can just add a few extra working years as you will have done the heavy lifting early and will reap the rewards. You could even choose to reduce to part time work as I know you will both love your jobs.

You would be wise to create a financial model using your PPOR (primary place of residence – i.e your home) and take out a seperate loan (@ home loan rates) to mildly leverage into LICs/ETFs through a family trust, right from the beginning. This will save you switching over later and incurring CGT (capital gains tax).

Keep it simple – only buy 4-5 Australian LICs (the old low fee type) and a global ETF for international exposure. Target to have no more than 25% in any of these to reduce organisation exposure and increase diversification. Every time you save about $1-5k, put it straight in your investments regardless. However, you will also need a safety fund (6 months expenses) as Trish will discover she has a brain tumour that will require brain surgery and Cam works in an industry that is quickly disappearing.

As you are wise with your money, you will pay off your PPOR in 5-7 years and then look at adding more into your super. Consolidate your super now into a high performing industry fund, but don’t have the same one each (increased diversification). As Trish will stay home to look after the children, use the governments co-contribution schemes to help build her super balance.

Although you like the leverage returns on IPs, be ware of the hidden costs. The exception to this is both your dream to have an ocean front holiday home. This is a lifestyle choice and will bring lots of work. Your family will love taking short breaks down there with family and friends, but you will also need to upkeep the home. You will love yourself for doing it once you sell your PPOR and move into it as you reach FIRE!

Be sure to enjoy your journey and take lots of surfing and camping holidays. Wishing your well on your FIRE journey – I know you will love it.

Lots of love, your future selves (written 2021).