Why Michelle Ives believes in the power of 'FU money'
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.
AIM: Retire in a few years by having saved 80% of earnings for the past seven years.
INCOME NEEDED: $80,000-$100,000 a year in passive income.
INVESTMENT STRATEGY: An investment property and super plus a share portfolio of ETFs and LICs that holds 40% in global (ex-Australia), 20% ethical, 20% US, 10% Australian and 10% emerging markets.
What prompted Michelle Ives to take the journey to financial independence is clear to her: "It was the notion of sitting at a desk five days a week, being barked at by a boss until I am in my 70s.
"I saw an opportunity to buy back my life, and I'm taking it," says Michelle, who started the That Girl on Fire blog three years ago. On it she writes about her family's journey of saving, minimalism, money management, investing in property and superannuation.
Michelle, with her husband, whom she affectionately calls Captain Babestick, have been on the FIRE journey for seven years.
They typically save and invest 80% of what they earn. A couple of years ago they had a son and Michelle is determined that financial independence can still happen with a child.
But their life changed when the pandemic began two years ago. Their small inner-city home didn't fit with working from home and a colicky baby. They bought a bigger house out of the city when the real estate market was weak and experts predicted home prices would fall. Since then, their bigger home has more than doubled in value.
Michelle runs her own business. But even loving her own business and the flexibility that gives her, she still wants to be financially independent. "I still feel this way, even as a fully self-employed person of five years who loves what they do and how they work," she says. "It's a very, very powerful feeling to have financial control over your life.
"Stress and anxiety around money affects self-worth and has a knock-on to almost every core relationship, so particularly as a woman, it's important for me to create and have financial independence."
Michelle loves the term "FU money".
She says: "Without sounding crass, it's a very important thing as a woman in this world to have the power to leave a job, a place or a bad situation without needing help or depending on someone.
"Money doesn't define me, but it certainly makes me feel more secure in the world and in myself."
It is worth all the scrimping and saving, she says. How did they do it?
"We're big proponents of printing out and analysing your spending with a fine-tooth comb," says Michelle.
"Take a bank statement from any given month and highlight every purchase that you either don't remember making, don't know what is, or can see did not bring you sustained happiness beyond the initial dopamine hit."
They pared back their spending and made a habit to spend mindfully. They found that they had larger amounts to work with.
"The next step was automating how we saved. So, as soon as a wage or invoice was paid, it was spit-balled into different accounts straightaway: 25% to mortgages, 10% to emergency fund, 30% to share trading account, 5% to pet fund, 5% to the bills account, where the debits were set up.
"As a self-employed person, I also keep some aside for tax and pay a lump sum into my superannuation fund. Any left over is for fun and frivolity." This takes away the mental load and gives them a clear amount to play with. Some people find it helpful to have this in a separate play account or withdraw it as cash. When the cash is gone, it's gone.
"This engagement with money has led to me learning about all sorts of different structures of wealth - like trusts and tax, for example," says Michelle. "I was able to jump headfirst into starting my own business because I wasn't afraid of any of the unknowns of setting it up and running it."
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