There is no doubt that the past 15 months have caused many people to take a serious look at not only their health, but also their financial situation. The increase in the number of research and research on life insurance and health insurance, investments and other financial programs on the Internet, and the growth recorded by the local life insurance industry has been evidence of this growing public interest and appreciation.
When given the opportunity, who wouldn’t want to live financially independent and not wait 60 or 65 to take advantage of retirement? Unfortunately, not everyone who wants to realize it. The challenge is always to define and act on the “how” to get there and stay on track.
After the 2008 global financial crisis, when my own job and my financial credentials were put at risk, I really thought about how we prepare for the risks and uncertainties of life. Soon after, I came across the FIRE (Financial Independence and Retire Early) movement, a lifestyle movement that promotes extreme savings and investment programs to allow retirement much earlier. It was very popular among millennials at that time (I was not part of that generation). While I didn’t buy into all of the “hows” he was promoting, I still gave it some serious thought as it aligns with my personal goals… to become financially independent and be able to retire early.
In this issue, I’ll be sharing how this girl is now on FIRE, in the hope that my own personal stories on this important topic can help make yours come true.
Set and act on long-term and short-term financial goals. Setting your financial goals is the easiest part. But having a clear idea of what you’re going to do to achieve it, act on it, and stick with it, are totally different stories. In our case, we made sure that regardless of the size of our income, a percentage was set aside and allocated to our savings, emergency funds, education plans, and retirement plans. The right percentage for each depends on your personal needs and wants. In the early years, a larger percentage was spent on savings, emergency funds and education. Later, it’s heavier on investing and retirement (although as we get older it’s more on lower risk portfolios). We only did big projects like house building and travel when we were already convinced that we had enough funds for our above priorities and that we could finance the projects without needing to take out a loan. .
Always pay full credit cards. Like most of you, the first time I got my credit card (cc), I was paying it off in installments as well. But when I calculated the interest I was paying, I realized how much credit card companies were making on me. From then on, I only charge my credit card the amount that I know I can pay in full when due. Knowing your own spending habits is essential to owning a credit card. I like to shop especially when I travel abroad. I also tend to be an impulse shopper. Knowing this, allowed me to control myself. How? ‘Or’ What? I rarely charge for my purchases abroad on my credit card. Since there is no money in cc, sometimes we have this false belief that we haven’t spent that much. Horror and shock will come once you get the bills. For others, bringing cash is inconvenient. But it worked for me. I have a specific cash budget when traveling. That way I would know if we are on budget or if we are spending. Plus, I don’t have to worry about currency conversion when checking out (which is usually much higher than normal conversion). It saved me a few dollars. I always bring my credit card for emergencies. But as I am becoming a mature spender, I am using my cc more often now than before. But still, I always pay my bills in full.
Have a long-term perspective and investment plans. Coming from my bad experience during the Asian financial crisis in 1997, when as a newbie investor I panicked and pulled out some of our investments, I learned to view my investments for the long term. Being clear with my investment goals and deadlines has helped me make more objective and rational decisions and actions in the face of market volatility. Instead of panicking and being moved by the performance of our investment every time the market goes down, we take this as an opportunity to enter the market at a discount.
Our biggest investment gain came when the market rallied 2-3 years after the 2008 global financial crisis. When most people got scared and pulled out of the market in 2008, we invested. This decision gave us a very good return. We all had a similar opportunity last year. Just ask anyone who entered the market at the start of the pandemic in March 2020 and you will be amazed at how much their investment has grown since even that time when the market did not fully recover. In addition to creating and growing our funds, our investments provided us with great deals that we used to finance our major travel and purchases. This is what we call making our money work for us.
Create regular automatic savings through payroll deduction. Sometimes, although our intention is there, we always forget to save our regular savings. Either you got busy or you spent the money on something else. To avoid falling into this trap, I asked our HR to automatically take a specific amount from my monthly payroll and deposit it into my mutual fund account. It went on for years without my realizing it anymore. When I took my early retirement in 2017, I was surprised to have a substantial supplementary retirement fund from this automatic retirement savings plan that I created years ago. I know that some have created a separate bank account where they have also asked their human resources department to credit a certain amount of their payroll. Until we have developed the discipline, it is normal to seek out our facilitators. Again, the amount is not important. It’s consistency that matters.
Living within and even below our means. It’s a daily temptation to splurge and indulge in things beyond your means. After all, we all work very hard to have comfort and convenience in life. We work hard to reward ourselves with simple luxury and indulgence. But these are the same reasons why some people are still not able to save properly, even though their income level has improved. For these people, a 20% increase in income equates to a 20% increase in their expenses as well (for some even more).
Remember, it’s not how much you earn that matters, it’s how much you can save. My husband and I have made sure we have just enough… we live comfortably, our children get the best education, we take our annual family trips, etc… all within what we can afford. This mindset allowed us to have the additional funds to save and invest. Always find a way to reduce your expenses. Being clear with what you really need versus what you want is a big help. It is not a mortal sin to give in to your desires from time to time. But always make sure you don’t do it at the expense of what you really need. We can actually live fully with less. It is something that we have discovered and experienced.
The above has helped me achieve the FIRE that I am experiencing now. It may not fully guarantee yours, but they can help you develop healthy habits that may lead you to make your own FIRE.
I proudly say that I was able to retire at the age of 55 and enjoy my financial independence! This girl is on FIRE… and I love it! Guess what? You can also!