Retiring in your 20s: 'We didn't need as much as we thought'

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For many unsatisfied Australian workers, COVID-19 has been a wake-up call.

People have been changing jobs in droves in search for more meaningful endeavours or lifestyle shifts, with some ditching the daily grind altogether

We are shining the spotlight on six Aussies who are following the road to financial independence and early retirement.

Dave and his partner Alison stand together, with Dave retired at the age of 28.

Dave
RETIRED: At 28.
INCOME NEEDED: $45,000 a year for Dave and Alison.
INVESTMENT STRATEGY: Selling down investment properties and buying more index funds and REITs.

When you ask people about their saving and investing, often they will tell you that they don't earn enough to do either.

Dave Gow turns that excuse on its head. Dave and his partner Alison both earned around $75,000pa on average. Remarkably, Dave retired early at the age of only 28.

It took him 10 years to save enough and invest to generate an income to do the simple things in life that he loves. He never spends the capital, living on the income. "We just buy what we need and whatever we feel is worthwhile," he says.

How did Dave retire at 28?

After starting work at 18 and saving 20% of his salary, he quickly became disillusioned with his job and saw his fellow workers were unhappy and unsatisfied, living pay day to pay day. He realised he didn't want to be "a cog in the machine for the next 40 years".

At 19, Dave upped his saving rate to 35%. By 20, he raised it to 50% and started to learn about investing, particularly buying property. At 21, he met Alison, who loved the idea of financial independence too.

By 22, Dave, working as a forklift driver, bought an investment property and they lifted their savings rate to 60%. When Dave was 23 he bought another investment property and Alison bought one too. Dave worked overtime to rev up his savings rate to 65%.

At 24, Dave and Alison officially joined their finances and bought an investment property together. Their savings went up to 70%. At 25, they bought two more properties and rented out a room in their house. Their savings reached 75%.

When he was 26, after buying one more property, he started to learn about investing in shares and the stream of income that dividends generate. "Also we realised that we didn't need as much as we thought to retire," says Dave. They sold their first property to start investing in shares.

At 28, they reached financial independence, left their full-time jobs and, as Dave says, "got our lives back". They continued building their share portfolio, using dividends and cash from property sales to live on. They earn some income from part-time work they really enjoy.

Not surprisingly, people want to know how Dave managed to retire at 28, so he started a blog, Strong Money Australia, to explain his mindset and strategies that helped him reach financial independence. He found he really enjoys writing and answering readers' questions.

Two years ago, Dave teamed with Pat Seyrak, known in the FIRE community for his lifelong shuffle.com blog. Pat is 60% on the way to reaching his goal of $1.2 million. Their FIRE/Chill fortnightly podcasts about money and investing topics range from "Is insurance worth it?" and "Are young people screwed?" to "Buying property" and "50 low-cost enjoyable things to do".

Dave's experience with investment properties compared with index funds is illuminating. He reviewed a recent management statement for one of his investment properties and the $5000 he earned, after costs, resulted in $500 for him - not including the mortgage.

In comparison, a dividend payment of $4000 from his exchange traded funds and shares carried no bills and even some tax credits. All of it was income.

Both Dave and Pat have surprised the FIRE movement by buying a house to live in. They were renters for years. After living in a small apartment, Pat says he is looking forward to having extra space and a garden and being able to make adjustments to the house.

The property is outside the city, close to bike tracks and the beach. He has gone with Tic:Toc, an online bank with low rates, for his mortgage.

Dave has bought in the same street, on the same side, where he has rented for four and a half years. Long-necked turtles lay their eggs near his property. Every year he helps the baby turtles into the nearby lake.

Dave and Alison moved to the area, with a regional park and lake on their doorstep, when they no longer had to be close to work when they retired. They love the area, riding their bikes and walking Boss, their dog, and had always said they would buy a house if one ever came on the market.

They are selling an investment property to help fund the house, which is rundown. Dave says they will stretch out their home-works budget and aren't in a hurry to fix it up all at once. "People get so fascinated and obsessed with how they want their home. It never ends."

Dave's next book comes out later this year. It aims to teach people to think about financial independence so that they can adapt his philosophies and do it themselves.

Dave's top investment tip

"I use Pearler, a low-cost brokerage platform for long term investors. People like us in the FIRE community weren't being served well before, since brokers just want people to trade, trade, trade."

Dave says the features of traditional online brokers are typically a distraction and a hindrance to long-term investors.

Pearler's "auto invest" feature allows investors to set up a direct debit each week, month or whenever it suits to automatically buy shares, such as exchange traded funds and listed investment companies. Over time, the compounding effect builds a portfolio that can lead to financial independence, a home deposit or other financial goal.

The three most popular investments made by Pearler's 29,000 investors are three Vanguard ETFs: Vanguard Australian Shares Index (ASX: VAS), Vanguard Diversified High Growth Index (VDHG) and Vanguard MSCI Index International Shares (VGS).

Pearler charges $9.50 for a trade on the ASX. It has done a deal with some ETFs so that they are brokerage free if you hold them for a year.

Pearler has impressed Dave so much he has invested in the group.

Stay tuned for more insight from Aussies on the road to financial independence. Or, order the April issue of Money to read their stories and more.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.

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