Three Aussie women have revealed how a financial method known as FIRE has helped them save thousands, reduce debt fast and and stay on track for early retirement.
The Financial Independence, Retire Early (FIRE) movement has grown dramatically over the past two years and is seeing a rising number of millennials saving or investing up to 70 per cent of their income in order to retire early.
Two young women who are involved with FIRE are Queenie Tan, from Sydney, and Natasha Etschmann, from Perth.
Natasha, 24, who has been saving since the age of 14 and investing since 18, currently has a net worth of $215,000. Queenie, 25, bought her first apartment with her partner in 2019 and has a combined net worth of $474,000 – both well about the average amount.
Sydney money expert and author Nicole Pedersen-McKinnon told Daily Mail Australia the FIRE mindset also helped her pay off her mortgage in just seven years.
Queenie Tan, 25, (pictured left) bought her first apartment with her partner and has a combined net worth of $474,000
At the young age of 23, Natasha Etschmann (pictured) is already financially ahead as she has an astronomical net worth of $215,000
Sydney money expert Nicole Pedersen-McKinnon (pictured) told Daily Mail Australia the FIRE mindset also helped her pay off her mortgage over a shorter period of time
FIRE is ultimately a lifestyle change used to boost savings or investments and has worked for Nicole, Natasha and Queenie in the past.
‘I practised extreme frugality when I was racing to pay off my mortgage, which I did in seven years. By doing so, I saved more than $200,000,’ Nicole said.
Both Queenie and Natasha told Daily Mail Australia they have used aspects of the FIRE method to grow their net worth and purchase their first homes.
A net worth is calculated by deducting your debts from your assets.
Queenie and her partner Pablo, 30, used FIRE to start ‘reassessing’ their finances in order to save for a home deposit, while Natasha used aspects of the frugal principles to build her net worth and save to purchase her first apartment worth $300,000.
‘I often get asked why I like to save and invest and why I care so much about money, but I’m not obsessed with money; I’m obsessed with the freedom that comes with being financially secure,’ Natasha previously told FEMAIL.
‘I invest as much of my income as possible and reduce expenses where it doesn’t impact on my quality of life.’
Financial Independence, Retire Early (FIRE) is a financial movement defined by frugality and extreme savings and investment.
While evaluating every expense if often stressful and tedious, it can help you reach living a high-quality life faster.
Nicole said FIRE is often thought of as ‘frugality for freedom’.
‘It’s when people are willing to go super consumer light in a bid to free up their life. With COVID seeing many people conserving anyway, living the FIRE way doesn’t seem such a stretch anymore,’ she said.
Those wanting to retire before the age of 65 should save up to 70 per cent of their annual income, the FIRE movement suggests.
Saving and investing early also suggests you are able to quit your job early and live financially free.
What are the FIRE techniques?
Nicole said the general FIRE principles are eat at home, recreate expensive experiences yourself, opt for free activities and don’t shop for anything other than essentials.
‘You can save a small fortune, which if you’re clever you can turn into options and opportunities for the future,’ she said.
‘What’s key is to be smart with the money you free up – so pay down debt and you earn an effective interest rate higher than you can get in any bank and this is tax-free.’
Living like this while you’re young ultimately gives you the opportunity in the future to live and work where you want without financial hardship.
Queenie said she is always mindful of how she spends her money and tracks her expenses each month
Natasha said when she was working full-time and living by herself in her apartment, she was investing between 50 to 70 per cent of her income
Natasha said when she was working full-time and living by herself in her apartment, she was investing between 50 to 70 per cent of her income.
‘I focus on investing, not saving, because saving alone will not result in achieving FIRE,’ she said.
Queenie said she is always mindful of how she spends her money and tracks her expenses each month.
‘We’ve been doing it for years now and our monthly expenses don’t shock us anymore because we spend our money mindfully on the things that bring us joy,’ she said.
It has taken Queenie and her partner six years to grow their combined net worth to $470,000 – which includes their stock portfolio, apartment, cryptocurrency portfolio, cash savings and superannuation.
Tash is an advocate for investing a proportion of your savings into the share market in order to create a source of passive income, while Queenie always tracks her monthly spendings
POPULAR INVESTING PLATFORMS
Spaceship Voyager app
CommSec pocket app
* When choosing a platform, it’s best to compare what each platform offers and the fees included
Should you pay off debt before saving or investing?
Nicole suggested attributing half of your savings to your debt in order to pay it off quicker.
For instance, it’s best to pay off your mortgage or student debt faster so you don’t pay more interest.
‘To retire, which the FIRE movement is all about, you need both a house to live IN and money to live ON,’ she said.
‘The interest savings from being debt-free early can slash the total outlay for your home, but equally, money invested early has more time to grow.’
Why is FIRE a useful concept?
Queenie said ‘money is empowering’ and can be used as a tool to live the life you want to live.
‘I used to think “what’s the point in having money saved, why not spend it all now?” but I’ve realised that having savings and investments gives you choices in life,’ she said.
‘We want to take a three months break and travel, and because we have savings and investments, we know that we will be able to recover financially from that break.’
TASH’S TIPS FOR INVESTING
* Research as much as you can before starting
* Consider what your values are and set goals
* Consider whether index funds or property are suited to your goals
* Invest a certain amount each week or month rather than simply saving your money – cash in a bank account won’t increase in value
* Pay off any debt
* Work hard to reach financial goals
* Consider using investing platforms such as Raiz and Spaceship
* Speak to a financial advisor for assistance and feedback if needed
QUEENIE’S TIPS TO SAVE MORE MONEY
* Live below your means and spend less than you earn per week
* Track your finances each week/month
* Consider your priorities and what you need to spend money on
* Consider what you can remove from your weekly spendings – such as buying coffee or lunch every day
* Avoid buying the latest products or technology
* Buy on sale
* Only buy what you need, not what you want