Why Pat didn't lose sleep when his retirement savings fell $100k
Three years ago we first profiled seven Aussies who are working towards early retirement.
Money caught up with them again to find out how their plans and investments have fared during COVID-19.
NAME: Pat Seyrak, 32
AIM: Retire at 35
INCOME NEEDED: $40,000 a year
INVESTMENT STRATEGY: Sold out of four Australian listed investment companies, without triggering a capital gain, and put the money into international ETFs: Vanguard MSCI Index International Shares, Vanguard MSCI Index International Shares (Hedged) and Vanguard FTSE Emerging Markets Shares. He already held the Vanguard Australian Shares Index ETF.
It didn't bother engineer Pat Seyrak too much when his early retirement savings plunged by more than $100,000 in March last year.
He told readers on his blog lifelongshuffle.com: "As usual, I have no idea where it will go from here. Up or down, it does not matter. During these turbulent times I am continuing to invest as per my regular investment strategy and am excited about the prospect of buying plenty of index funds at reduced prices."
Pat was right not to lose any sleep. His investments bounced back. In fact, Pat has more than doubled his savings since Money interviewed him in 2018 - from $300,000 to $668,116.
At the same time he lifted his goal from $1 million to $1.24 million, largely because he has a partner, Steph, and they will need more money for retirement. But "the cost efficiencies of two people living together mean the goal is not twice as much".
Pat plans to retire in 2024 when he is 35. He has been following the FIRE advice since 2016 by keeping his accommodation, transport and food costs low (see table). This is where 80% of savings come from. He has saved any pay increases, rather than spend them. "I have always lived below my means and new money isn't seen as an opportunity to increase my spending but to increase my financial security."
But who knows what will happen in the years ahead.
"I am really considering the robustness of my plan and the need to prepare for some lifestyle inflation, especially if I want to start a family in the future, so I will start with more money than I absolutely need to begin with but am also open to the idea of casual work to cover any differences that may pop up," says Pat.
Pat's retirement plans include plenty of energetic activities: playing music, learning a language, joining the State Emergency Service (SES) and, as an engineer, he is interested in the practical side of building.
"Mostly, I just want the freedom to live each day as I see fit and dedicate as much time as I would like to my passions and hobbies. I would like to be able to balance productivity and free time and not be forced onto a schedule."
To buy or not to buy
In 2018, Pat told Money that spending 30 years slaving away to pay off a mortgage wasn't part of his plan. But in the past two years he has started to consider buying a home during his early retirement. But he doesn't want to sell down his share investments and lose the income they provide.
However, if he doesn't buy a home before he retires, he may have trouble getting a loan. "Banks generally do not know how to deal appropriately with customers that do not fit the typical mould, no matter how financially capable and secure the borrowers are," he says.
Pat and Steph plan to buy a reasonably priced house outside of Sydney.
"Somewhere we want to live while we are still working even if we do not want to move in immediately. This will allow lenders to assess us based on their typical metrics."
Getting the investment mix right has been a learning experience. He used to buy individual shares, but not anymore.
"There are thousands of analysts studying the same companies that we're casually glancing at," he says. "For me, buying companies was hit and miss. And I ended up resenting the time spent following and thinking about them." He now holds only diversified funds.
He says being financially mindful is key. The "next thing" will not necessarily make you happy or content. He knows plenty of people who put off saving because they need a bigger house or a new car. "To be mindful is to realise that there is always the next 'need' on your list, but that next thing won't actually bring contentment leading to you finally beginning to save. A balance can be found right now where savings can be made, and you can continue to do and buy what you want."
Extreme savings plans can be stressful. "No matter how you slice it, a decade or longer is a very long time to be working toward any goal, so extreme plans will probably lead to extreme failures."
He suggests focusing on making a realistic and achievable plan that can just melt into the background and become completely automatic.
He is a fan of passiveinvestingaustralia.com. "It is a priceless resource for investing Australians that was put together by a member of the FI Australia Reddit forum who wanted to share unbiased information and has spent considerable personal time and money to do so."