'We avoided the FIFO life by travelling together as a family'

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Six Aussies were tirelessly working towards financial independence when COVID-19 struck.

Far from weakening the resolve, the experience of living through a global pandemic has reinforced the value of being able to ditch the 9-5.

Over the next few weeks, we're sharing the stories of half a dozen Aussies who are determined to break free.

fire leo alisha dom ellie early retirement financial independence kids

Leo, Alisha, Dom, 4, and toddler Ellie*
AIM: Explore and enjoy early retirement
INCOME NEEDED: $80,000 a year
INVESTMENT STRATEGY: Regular contributions to managed funds that align with their principles; maximum concessional contributions to superannuation

Leo, 35, Alisha, 32, with their two kids, Dom and toddler Ellie*, are on day five of early retirement. After working flat-out for 13 years, Leo sighs and says: "I have just finished my last work engagement."

They have accumulated $2.9 million by leading a nomadic, minimalist life, working around Australia and overseas in the resources industry with four suitcases, 
a backpack and a super-pram.

They are entering a new phase, spending more time together as a family and enjoying the simple things in life like cooking meals from scratch, playing in the park, gardening and propagating plants as well as going for family walks.

The family travelled together, living in over 10 different cities and towns in four countries, instead of Leo flying in and out. This strategy made Leo valuable because companies had full access to his time, resulting in higher pay and the company paying costs such as accommodation and relocation.

"Our running costs were low, around $30,000 per year," says Leo.

Not only was nomadic life a huge boost to their savings, but it also enabled Alisha to be a full-time mother, which she treasured. But now that Dom has reached school age, they have decided to put down roots so they could build a life and make connections in a community.

Whether to keep renting for the rest of their lives or buy a home was a big decision for them. "I believed I would rent forever," says Leo. "I had always been debt free."

Flexibility is critical on the FIRE journey and theirs has evolved with the family's changing needs. Their retirement date, for example, has shifted around a lot as they better understood their young family's living costs.

The decision to buy a home and stop renting was based on wanting to settle in their local community. Moving to a new house is not only costly but disruptive when the family has to be in the area to go to the local school.

"It is not necessarily the best financial decision, with costs such as stamp duty, but buying a home is a lifestyle decision," says Leo. "It is definitely more expensive than renting," says Leo. "There are rates, maintenance and utilities bills."

The clincher to buy a home was realising it would be hard to borrow money once Leo retired. Who would lend to early retirees aged 35 and 32? So, they bought an old duplex a few years ago while Leo had an impressive salary. They rent out half to help pay off the mortgage and it provides room to grow when the kids are older and get tired of sharing a bunk bed.

While they could pay off the mortgage with their savings, they decided to keep it open and offset most of the loan balance. "We want personal comfort and have a big buffer," says Leo. The well-funded offset account helps them to minimise what Leo calls the sequence of returns risk in the early years of retirement. If the sharemarket crashes, they would use the offset account to temporarily cover their living expenses to avoid having to sell shares at rock-bottom prices.
Without travel allowances from Leo's job, life is more expensive, and they are budgeting for annual living costs to double to around $60,000 this year, then up to $80,000 as the kids get older.

Leo is looking forward to a life without the stress of full-time work where there were constant problems to solve. "There was always a low-level baseline of anxiety about what I needed to do with work. It was there all the time. When I woke up it stayed with me all day,"

He says his job was infinite and could always involve more. In the first few years he was always working, but as he established a reputation he knew when to pull back to ensure it was sustainable. Leo estimates that being able to walk that fine line enabled them to save an extra $500,000 by extending his high-paying career and not burning out within two to three years like many people do.

As their savings grew, Leo says the effect of knowing he didn't have to work as his saving grew was imperceptible at first, but then it allowed him to be bolder with his employer about what he wanted. He asked to work from home two days a week and bought extra annual leave to help him recharge. "There was a lot of leaving the laptop in the office, too."

It is too early to speak about what is going to happen in retirement. Leo says he will miss the camaraderie and friendships with his work colleagues and will need to become involved in the community.

There is plenty of work in fixing up their old house over the next few months, sticking to a tight budget. They allocate $12,000 a year to a sinking fund for maintenance, furniture and appliances. This covers everything from repairing a fridge to replacing the roof.

Leo says they could spend a spectacular amount of money on home improvements, but a budget of $500 a month will limit the impulse to do it all at once.

"It will force us to be mindful about our spending: will it be a roller-door on the carport or a picket fence or a water tank? We could easily plonk down $200,000 on the house. There's no limit on what you could do if money is no object."

Leo enjoys problem solving and analysis. He is interested in a financial counselling course and helping people who genuinely want to turn their finances around.

He wants to work or volunteer one day a week, as does Alisha. "We want to keep our minds active outside the kids," he explains.

Alisha has many interests, from designing kitchens to creating green "living" roofs. Leo's employer is offering him an occasional contract, so he can always go back to some work if he misses the action.

The FIRE community was important for Leo and Alisha in the early years as they were learning how to save and invest. But as their savings grew in the "boring middle period", as Leo calls it, they managed their own investments.

"We do tune in occasionally," says Leo. They were thrilled to see there was a local FIRE Facebook group, which they recently met up with.

*Not their real names

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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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