1
00:00:09,400 --> 00:00:12,280
Speaker 1: Hello, and welcome to The Australian's Money Puzzitive podcast. I'm

2
00:00:12,360 --> 00:00:15,320
Speaker 1: James Kirby, the World's editor at The Australian. Welcome aboard

3
00:00:15,360 --> 00:00:19,919
Speaker 1: everybody you know. Occasionally I'm prompted to cover an issue,

4
00:00:20,239 --> 00:00:24,239
Speaker 1: what you might say, like by public demand. And I

5
00:00:24,239 --> 00:00:28,920
Speaker 1: can tell you that this fire movement FIRI fire movement,

6
00:00:29,960 --> 00:00:35,320
Speaker 1: Financial independence Retire Early, that's the acronym. It's been knocking

7
00:00:35,520 --> 00:00:39,199
Speaker 1: on my door for some time. Comes up regularly in correspondence,

8
00:00:39,280 --> 00:00:43,320
Speaker 1: comes up in conversation, and I find people love this

9
00:00:43,479 --> 00:00:49,920
Speaker 1: idea and it's, you know, a subject of videos and books, documentaries.

10
00:00:50,600 --> 00:00:52,120
Speaker 2: For what it's worth, it all goes back.

11
00:00:51,960 --> 00:00:54,640
Speaker 1: To a book that came out in nineteen ninety two

12
00:00:54,680 --> 00:00:57,960
Speaker 1: called Your Money or Your Life. I think sooner or

13
00:00:58,000 --> 00:01:00,600
Speaker 1: later we might have a fire advocate on the show.

14
00:01:01,080 --> 00:01:02,520
Speaker 1: But first of all, we're going to have a look

15
00:01:02,560 --> 00:01:06,399
Speaker 1: at it and examine it really and to see what

16
00:01:06,600 --> 00:01:09,319
Speaker 1: it is and what are its pros and cons. I

17
00:01:09,319 --> 00:01:11,119
Speaker 1: wanted to get someone who could really talk about it.

18
00:01:11,640 --> 00:01:13,720
Speaker 1: I've got the idea guest, of course, it's.

19
00:01:13,600 --> 00:01:16,200
Speaker 2: James Gerard of Financial advisor dot com.

20
00:01:16,200 --> 00:01:18,760
Speaker 3: How are you, James, I'm doing well. Thanks for having

21
00:01:18,800 --> 00:01:19,920
Speaker 3: me on James.

22
00:01:20,000 --> 00:01:22,920
Speaker 1: I imagine you've had people come up to you on

23
00:01:22,959 --> 00:01:25,600
Speaker 1: this one. And I've had people. I haven't actually asked

24
00:01:25,640 --> 00:01:27,200
Speaker 1: you that. Have you had people come up to you

25
00:01:27,280 --> 00:01:29,800
Speaker 1: and talk about it fire? The fire movement?

26
00:01:30,120 --> 00:01:32,440
Speaker 3: Yeah? I have, yes, So that said, can you help

27
00:01:32,480 --> 00:01:33,720
Speaker 3: me achieve fire?

28
00:01:34,400 --> 00:01:36,120
Speaker 2: Yeah? It's interesting, isn't it.

29
00:01:36,160 --> 00:01:39,640
Speaker 1: You get a concept that everyone you know. It's like

30
00:01:39,760 --> 00:01:43,279
Speaker 1: everyone already knows this, but you if you conceptualize something.

31
00:01:43,560 --> 00:01:45,400
Speaker 1: I was just thinking about this and I was thinking

32
00:01:45,400 --> 00:01:48,640
Speaker 1: about this thing in Ireland called the Wild Atlantic Way,

33
00:01:49,280 --> 00:01:52,160
Speaker 1: and so I grew up done around there and it's

34
00:01:52,200 --> 00:01:54,520
Speaker 1: it's a strip of coast and there was all these

35
00:01:54,520 --> 00:01:57,800
Speaker 1: towns on it and everyone they're always nice. It's fine.

36
00:01:57,840 --> 00:02:00,160
Speaker 1: It's all very interesting West coast of Ireland. Everyone of

37
00:02:00,200 --> 00:02:05,480
Speaker 1: the tourist level. But absolutely brilliant marketing ploy. Maybe a

38
00:02:05,520 --> 00:02:08,760
Speaker 1: decade ago or whatever, the Irish Tourism Board came up

39
00:02:08,760 --> 00:02:10,760
Speaker 1: with this thing, the Wild Atlantic Way.

40
00:02:10,840 --> 00:02:13,320
Speaker 2: It never existed, right, no, never heard of it. They

41
00:02:13,440 --> 00:02:15,160
Speaker 2: just let it up in a boardroom.

42
00:02:15,520 --> 00:02:18,200
Speaker 1: And it has been so successful and you meet people

43
00:02:18,240 --> 00:02:20,320
Speaker 1: and they say, I want to do that. The Wild

44
00:02:20,320 --> 00:02:24,120
Speaker 1: Atlantic Way. It captures people's imagination. It's the same towns,

45
00:02:24,120 --> 00:02:27,400
Speaker 1: it's the same roads, but it just managed to get

46
00:02:27,440 --> 00:02:31,160
Speaker 1: it in a way that people could have this particular

47
00:02:31,360 --> 00:02:34,920
Speaker 1: focused ambition, and I think Fire is very similar financial

48
00:02:34,960 --> 00:02:40,000
Speaker 1: independence retire early. Before we kick it around, we have

49
00:02:40,080 --> 00:02:43,640
Speaker 1: to explain to people what it is if they don't

50
00:02:43,680 --> 00:02:50,840
Speaker 1: already know, Like, could you explain the core proposal if

51
00:02:50,880 --> 00:02:52,840
Speaker 1: you like of what FIORI Fire is.

52
00:02:53,560 --> 00:02:57,080
Speaker 3: Sure, I'll try to explain it. In a nutshell. It's basically,

53
00:02:57,400 --> 00:03:01,560
Speaker 3: most people work from the start, working between eighteen to

54
00:03:01,639 --> 00:03:05,639
Speaker 3: twenty five. They'll work forty or fifty years, they'll retire,

55
00:03:06,200 --> 00:03:08,919
Speaker 3: usually in their sixties, and then they'll live thirty or

56
00:03:08,960 --> 00:03:13,880
Speaker 3: forty years into retirement. That's what happens traditionally. Under fire,

57
00:03:14,240 --> 00:03:18,760
Speaker 3: it's well, let's accelerate the wealth accumulation park, let's work

58
00:03:18,800 --> 00:03:22,840
Speaker 3: for less years and enjoy more years in retirement. So

59
00:03:22,919 --> 00:03:27,400
Speaker 3: to do that, they're basically sacrificing enjoyment today so that

60
00:03:27,480 --> 00:03:31,160
Speaker 3: they can retire early and enjoy themselves later. So what

61
00:03:31,200 --> 00:03:35,320
Speaker 3: that means practically is that they save a lot. They

62
00:03:35,680 --> 00:03:38,040
Speaker 3: aim to save between fifty to seventy percent of their

63
00:03:38,040 --> 00:03:40,920
Speaker 3: their incomes. They try and retire between the ages of

64
00:03:41,000 --> 00:03:43,960
Speaker 3: thirty and fifty and in terms of how much they

65
00:03:44,000 --> 00:03:46,880
Speaker 3: try and save up, they go, well, I probably need

66
00:03:46,960 --> 00:03:51,920
Speaker 3: about twenty five times my annual expenditure, because if I

67
00:03:52,120 --> 00:03:54,120
Speaker 3: assume that I'm going to make four percent return on

68
00:03:54,160 --> 00:03:58,640
Speaker 3: my capital, I need twenty five times of my annual expenditure.

69
00:03:58,680 --> 00:03:58,920
Speaker 2: There.

70
00:03:58,960 --> 00:04:02,400
Speaker 3: So basically, say up a lot of money by being frugal,

71
00:04:02,560 --> 00:04:04,920
Speaker 3: by working a lot, and then retire as early as

72
00:04:04,960 --> 00:04:07,360
Speaker 3: you can and then live the rest of your life happy.

73
00:04:07,480 --> 00:04:11,760
Speaker 3: So it sounds simple in practice, but in reality, less

74
00:04:11,760 --> 00:04:14,400
Speaker 3: than five percent of people who in back on a

75
00:04:14,440 --> 00:04:16,440
Speaker 3: fire strategy actually achieve it.

76
00:04:16,760 --> 00:04:18,760
Speaker 1: Where did you get those numbers from James Gerard?

77
00:04:21,120 --> 00:04:21,560
Speaker 2: The internet?

78
00:04:21,640 --> 00:04:21,719
Speaker 1: Right?

79
00:04:21,760 --> 00:04:22,560
Speaker 3: You can trust you today?

80
00:04:23,080 --> 00:04:24,720
Speaker 1: As my teacher used to say, where did you get

81
00:04:24,720 --> 00:04:26,080
Speaker 1: those numbers from Kirby.

82
00:04:28,080 --> 00:04:33,240
Speaker 3: For various websites academic research papers into the fire movement?

83
00:04:34,440 --> 00:04:37,159
Speaker 2: I wonder we'll come back to that. At the moment.

84
00:04:37,279 --> 00:04:39,760
Speaker 2: It does sound low.

85
00:04:40,120 --> 00:04:44,440
Speaker 1: If it was half successful, then what's wrong with that?

86
00:04:44,560 --> 00:04:48,240
Speaker 1: If someone said I aspired to retire at fifty and

87
00:04:48,279 --> 00:04:51,760
Speaker 1: I didn't do it till I was fifty seven, Well,

88
00:04:52,000 --> 00:04:54,600
Speaker 1: you know that's not about achievement. Assuming you want to

89
00:04:54,640 --> 00:04:57,720
Speaker 1: we'll working one thing. We have to challenge you some assumptions.

90
00:04:57,720 --> 00:05:02,000
Speaker 1: We assume, folks, that the attraction of the fire movement

91
00:05:02,080 --> 00:05:04,719
Speaker 1: is this notion that you can retire early and you

92
00:05:04,839 --> 00:05:07,800
Speaker 1: want it. It would take that as a given, and

93
00:05:07,839 --> 00:05:11,520
Speaker 1: then it's about how you actually construct this and what

94
00:05:11,560 --> 00:05:15,279
Speaker 1: you must do, and I don't want to simplify it. Delayed

95
00:05:15,320 --> 00:05:19,000
Speaker 1: gratification is a major part of it. Saving, real saving

96
00:05:19,080 --> 00:05:22,080
Speaker 1: is a major part of it. I was just looking

97
00:05:22,120 --> 00:05:25,720
Speaker 1: at these sort of three core principles of fire, the

98
00:05:25,760 --> 00:05:30,560
Speaker 1: fire number, the fire lifestyle, and this idea of protecting

99
00:05:30,600 --> 00:05:33,040
Speaker 1: your savings, and I'd like to just go through them.

100
00:05:33,120 --> 00:05:36,640
Speaker 1: James with them in this segment. So they have this

101
00:05:36,760 --> 00:05:39,960
Speaker 1: key thing where you must figure out how much you'd

102
00:05:40,040 --> 00:05:43,159
Speaker 1: need as a retired person. And in a way, again

103
00:05:43,680 --> 00:05:45,599
Speaker 1: I do not want to be cynical here, but in

104
00:05:45,640 --> 00:05:48,160
Speaker 1: a way, you don't need anything, right that is, if

105
00:05:48,160 --> 00:05:50,440
Speaker 1: you've got to retirement days, there's a government pension.

106
00:05:50,120 --> 00:05:50,719
Speaker 2: That will pay you.

107
00:05:51,160 --> 00:05:54,000
Speaker 1: And maybe it's about how long is a piece of string.

108
00:05:54,320 --> 00:05:56,200
Speaker 1: But they say, what they say to people is if

109
00:05:56,240 --> 00:05:58,400
Speaker 1: you want to do this, you have to assume you

110
00:05:58,440 --> 00:06:00,800
Speaker 1: need it for twenty five years or more, and you.

111
00:06:00,800 --> 00:06:01,600
Speaker 2: Needed about four.

112
00:06:02,000 --> 00:06:05,080
Speaker 1: You need to take out four percent of your savings

113
00:06:05,120 --> 00:06:08,080
Speaker 1: each year. To these are American numbers, so they are

114
00:06:08,120 --> 00:06:10,440
Speaker 1: oblivious if you'd like to our social security system, which

115
00:06:10,480 --> 00:06:15,400
Speaker 1: would give you a core amount, assuming that you qualify

116
00:06:15,480 --> 00:06:17,960
Speaker 1: for it or partially qualify for it. But anyway, it

117
00:06:18,040 --> 00:06:20,239
Speaker 1: runs on this basis that you stack up an amount

118
00:06:20,279 --> 00:06:22,359
Speaker 1: of money and then you take out a certain amount

119
00:06:22,440 --> 00:06:24,000
Speaker 1: of that each year.

120
00:06:24,040 --> 00:06:26,600
Speaker 2: Their number is four percent. This is the famous fire.

121
00:06:26,440 --> 00:06:29,640
Speaker 1: Number, right, So I'll just read out what they have here.

122
00:06:30,080 --> 00:06:33,080
Speaker 1: If you had a one point seventy five million, if

123
00:06:33,080 --> 00:06:35,960
Speaker 1: that was your fire number, right, which is the amount

124
00:06:36,000 --> 00:06:38,599
Speaker 1: you haven't super basically in our world, you'd have to

125
00:06:38,600 --> 00:06:41,440
Speaker 1: have it in the supersystem, but saved up for your retirement.

126
00:06:41,760 --> 00:06:43,440
Speaker 1: If you have one point seventy five million was your

127
00:06:43,440 --> 00:06:48,040
Speaker 1: fire number, using their four percent guideline, this would allow

128
00:06:48,120 --> 00:06:52,279
Speaker 1: you to withdraw twenty eight annually. Okay, So that's what

129
00:06:52,320 --> 00:06:54,559
Speaker 1: it would be when I say, we'll put the pension

130
00:06:54,600 --> 00:06:57,320
Speaker 1: to one side, but you can probably no doubt you'd

131
00:06:57,360 --> 00:07:00,120
Speaker 1: be able to supplement this with what your pench and

132
00:07:00,240 --> 00:07:02,839
Speaker 1: access is. Part I want to make is that's principle

133
00:07:02,839 --> 00:07:04,840
Speaker 1: in the system already, isn't it, James? If you were

134
00:07:04,880 --> 00:07:08,479
Speaker 1: a self funded retiree. It just so happens that that

135
00:07:08,640 --> 00:07:10,280
Speaker 1: is what they demand. Is it by lower that you

136
00:07:10,320 --> 00:07:12,400
Speaker 1: take out? Isn't it four percent? So is that the

137
00:07:12,400 --> 00:07:18,200
Speaker 1: fire number? The fire number being what number you save

138
00:07:18,800 --> 00:07:23,480
Speaker 1: and then what number you must have from that to

139
00:07:23,520 --> 00:07:27,200
Speaker 1: live per year? Is that basically the first principle there?

140
00:07:27,280 --> 00:07:27,920
Speaker 2: Fire number?

141
00:07:28,040 --> 00:07:31,600
Speaker 3: Yeah, that's basically it. The thinking is that if you're

142
00:07:31,640 --> 00:07:35,000
Speaker 3: earning four percent on your capital, so if you've got

143
00:07:35,000 --> 00:07:38,680
Speaker 3: it in a term deposit or an ETF portfolio, in

144
00:07:38,720 --> 00:07:41,800
Speaker 3: the share market and bond and property markets, you're probably

145
00:07:41,800 --> 00:07:44,120
Speaker 3: going to earn about four percent income, which means that

146
00:07:44,480 --> 00:07:46,560
Speaker 3: once you've saved up that capital. So if we use

147
00:07:46,600 --> 00:07:49,400
Speaker 3: around number like a million dollars, you're expected to get

148
00:07:49,400 --> 00:07:51,800
Speaker 3: probably about forty thousand dollars per year. And if you

149
00:07:51,800 --> 00:07:54,520
Speaker 3: can live off that forty thousand dollars per year, you're

150
00:07:54,520 --> 00:07:56,720
Speaker 3: going to maintain a million dollars and you don't have

151
00:07:56,760 --> 00:07:59,600
Speaker 3: to work anymore. But as you've alluded to that, there

152
00:07:59,640 --> 00:08:01,840
Speaker 3: is the government age pension, but that comes in at

153
00:08:01,880 --> 00:08:04,360
Speaker 3: age sixty seven. You can access your super but that's

154
00:08:04,400 --> 00:08:07,240
Speaker 3: at age sixty. So for people who want to embark

155
00:08:07,280 --> 00:08:10,080
Speaker 3: on a fire strategy and retire in their twenties, thirties

156
00:08:10,080 --> 00:08:13,200
Speaker 3: and forties, they need to have personal money outside of

157
00:08:13,360 --> 00:08:16,680
Speaker 3: Super so that they can sustain themselves up until the

158
00:08:16,680 --> 00:08:18,720
Speaker 3: point where they can access their their super or the

159
00:08:18,720 --> 00:08:22,040
Speaker 3: government age pension. So one variation of the fire strategy

160
00:08:22,080 --> 00:08:26,160
Speaker 3: is called a lean fire, and that's where you minimize

161
00:08:26,200 --> 00:08:28,960
Speaker 3: your outgoing, do your living expenses when you decide to

162
00:08:28,960 --> 00:08:32,440
Speaker 3: stop working. So think about moving out into the bush,

163
00:08:32,480 --> 00:08:35,200
Speaker 3: going off the grid, getting a few chickens, having some

164
00:08:35,280 --> 00:08:38,240
Speaker 3: solar panels, and minimizing your costs so you know you

165
00:08:38,320 --> 00:08:41,360
Speaker 3: spending ten fifteen thousand dollars a year, which means that

166
00:08:41,400 --> 00:08:43,439
Speaker 3: the money that you need to save up isn't as

167
00:08:43,480 --> 00:08:46,520
Speaker 3: much as if you're living in to Rack, Melbourne for example.

168
00:08:47,240 --> 00:08:50,760
Speaker 1: Okay, assuming that majority of our audience are not on

169
00:08:52,559 --> 00:08:54,880
Speaker 1: have their chickens in a hot in the woods somewhere,

170
00:08:55,400 --> 00:08:59,600
Speaker 1: they're probably in town. But assume that right doesn't safe assumption,

171
00:09:00,240 --> 00:09:04,880
Speaker 1: then a point that immediately hits me is our entire

172
00:09:05,080 --> 00:09:07,720
Speaker 1: saving system is turns on.

173
00:09:07,880 --> 00:09:08,280
Speaker 2: Super.

174
00:09:08,600 --> 00:09:12,320
Speaker 1: Super is a tax protected vehicle and the catches you

175
00:09:12,400 --> 00:09:15,200
Speaker 1: must keep the money in there till the day you retire.

176
00:09:15,280 --> 00:09:17,560
Speaker 1: Sixty is the earliest you can get that tax protected

177
00:09:17,600 --> 00:09:22,040
Speaker 1: money out and so ironically the super system works against

178
00:09:22,240 --> 00:09:25,120
Speaker 1: the notion of fire, or certainly against the notion the

179
00:09:25,160 --> 00:09:28,960
Speaker 1: fire concept of retiring really early forties or fifties.

180
00:09:29,040 --> 00:09:29,880
Speaker 2: Is that fair to say?

181
00:09:30,679 --> 00:09:33,960
Speaker 3: It is fair to say, yeah, yeah, you accumulate assets

182
00:09:33,960 --> 00:09:36,600
Speaker 3: in your personal name, you're subject to capital gains tax.

183
00:09:36,640 --> 00:09:40,199
Speaker 3: You generate that income from the dividends, the interest and

184
00:09:40,240 --> 00:09:44,120
Speaker 3: distributions on the investments. Again, you're taxed on that as well.

185
00:09:44,200 --> 00:09:48,320
Speaker 3: So it is harder to retire before the normal retirement

186
00:09:48,360 --> 00:09:51,280
Speaker 3: age's just due to your money being in your personal

187
00:09:51,360 --> 00:09:53,840
Speaker 3: name and being taxed at our marginal tax rates, which

188
00:09:53,840 --> 00:09:55,120
Speaker 3: can be up to forty seven percent.

189
00:09:55,559 --> 00:09:59,119
Speaker 1: Yes, exactly, So that's what I'm saying that ironically, folks,

190
00:10:00,040 --> 00:10:03,080
Speaker 1: system actually wants you to keep working longer than the

191
00:10:03,080 --> 00:10:07,000
Speaker 1: fire concept suggests. But okay, let's take the second thing now,

192
00:10:07,000 --> 00:10:09,800
Speaker 1: on fire, the three big principles, right, one was the

193
00:10:09,960 --> 00:10:13,120
Speaker 1: calculator fire number, another one was commit to the lifestyle,

194
00:10:13,240 --> 00:10:15,559
Speaker 1: the fire lifestyle, and the third one was to grow

195
00:10:15,600 --> 00:10:17,880
Speaker 1: and protect your savings. Now this is where I do

196
00:10:17,920 --> 00:10:21,200
Speaker 1: get cynical. Okay, So there's this idea spending little as

197
00:10:21,200 --> 00:10:22,880
Speaker 1: little as you can, saving as much as you can

198
00:10:22,960 --> 00:10:25,560
Speaker 1: find fine by me. But then there's like they have

199
00:10:25,600 --> 00:10:29,800
Speaker 1: these sort of like sub notions. They have fire movement

200
00:10:29,880 --> 00:10:33,800
Speaker 1: approaches that two ways coast and barrista right coast, save

201
00:10:33,880 --> 00:10:38,600
Speaker 1: and invest much of their money decades before retirement, and

202
00:10:38,600 --> 00:10:40,480
Speaker 1: then when they hit their fire number, they can coast

203
00:10:40,480 --> 00:10:43,800
Speaker 1: through retirement because they've fired enough, because they've saved enough.

204
00:10:44,400 --> 00:10:47,000
Speaker 1: The second type is the barista. This refers to having

205
00:10:47,040 --> 00:10:50,280
Speaker 1: a low stress, part time job with flexible hours, and

206
00:10:50,360 --> 00:10:53,840
Speaker 1: the barista fire advocate typically set a lower retirement front

207
00:10:53,880 --> 00:10:56,880
Speaker 1: target for themselves and choose to work part time jobs

208
00:10:56,920 --> 00:11:00,480
Speaker 1: to supplement their income once they hit retirement. Come on,

209
00:11:01,360 --> 00:11:04,360
Speaker 1: part time barrista, I think you know it's a tough job.

210
00:11:04,400 --> 00:11:06,920
Speaker 1: That's a hard job, standing there, making coffees for people

211
00:11:07,440 --> 00:11:12,000
Speaker 1: and being socially gregarious. But what I'm saying is it's

212
00:11:12,040 --> 00:11:14,160
Speaker 1: harder than that line suggests to me.

213
00:11:14,440 --> 00:11:15,080
Speaker 2: That's not on.

214
00:11:15,160 --> 00:11:16,840
Speaker 1: I don't think you could be a part time barrister

215
00:11:17,640 --> 00:11:22,360
Speaker 1: and finance anything close to a comfortable retirement. I'm under

216
00:11:22,400 --> 00:11:24,600
Speaker 1: cutting it here, but I have to feel a responsibility

217
00:11:24,640 --> 00:11:26,600
Speaker 1: to tell people it's not that easy. What do you

218
00:11:26,600 --> 00:11:28,520
Speaker 1: think about that? As a qualified advisor?

219
00:11:29,320 --> 00:11:32,640
Speaker 3: I agree yeah, so that the barista fire is like,

220
00:11:32,760 --> 00:11:35,560
Speaker 3: save really hard and then stop working full time and

221
00:11:35,600 --> 00:11:38,360
Speaker 3: then work part time and be a barrista or something

222
00:11:38,480 --> 00:11:40,960
Speaker 3: like that to cover part of your cost. So you

223
00:11:41,040 --> 00:11:43,839
Speaker 3: partly live off your savings, partly still work part time.

224
00:11:43,920 --> 00:11:46,800
Speaker 3: But as you say, that might not be easier, may

225
00:11:46,840 --> 00:11:49,320
Speaker 3: be stressful, and you may have been better just to

226
00:11:49,640 --> 00:11:52,960
Speaker 3: stay working part time and pace yourself out a little

227
00:11:53,000 --> 00:11:55,680
Speaker 3: bit more. Now, with regards to the fire lifestyle in general,

228
00:11:56,120 --> 00:11:58,920
Speaker 3: I've gone through the depths of the internet looking at

229
00:11:58,920 --> 00:12:02,080
Speaker 3: different forums on fire so that your listeners don't have

230
00:12:02,160 --> 00:12:05,080
Speaker 3: to and I've actually found a few different examples of

231
00:12:05,120 --> 00:12:08,400
Speaker 3: what people have actually done extreme fire measures with regards

232
00:12:08,440 --> 00:12:10,880
Speaker 3: to their lifestyle. So if you're like, I'll read out

233
00:12:10,880 --> 00:12:13,679
Speaker 3: some of them that I had noted. Okay, So some

234
00:12:13,720 --> 00:12:16,760
Speaker 3: people they live with their parents into their forties because

235
00:12:16,800 --> 00:12:18,280
Speaker 3: they don't want to pay rent, they don't want to

236
00:12:18,320 --> 00:12:20,800
Speaker 3: have a mortgage. Some of them were living in vans,

237
00:12:20,840 --> 00:12:24,600
Speaker 3: some bought tiny homes. I saw another person who posted

238
00:12:24,640 --> 00:12:28,160
Speaker 3: that they don't have friends as part of their fire strategy,

239
00:12:28,400 --> 00:12:31,040
Speaker 3: because friends are expensive. If you don't have friends, you

240
00:12:31,040 --> 00:12:33,160
Speaker 3: don't have to buy anyone birthday gifts no wedding gifts,

241
00:12:33,240 --> 00:12:34,840
Speaker 3: you don't have to go out for drinks.

242
00:12:34,840 --> 00:12:39,079
Speaker 2: Makes sense, right, exire are extreme examples, get logitic, can't

243
00:12:39,160 --> 00:12:40,160
Speaker 2: knock them. Yeah.

244
00:12:40,440 --> 00:12:42,800
Speaker 3: Another one was this a little bit more contentious. Don't

245
00:12:42,800 --> 00:12:45,240
Speaker 3: have children because you know, we know how expensive children.

246
00:12:45,400 --> 00:12:48,839
Speaker 3: And then there's more practical ones. Don't have a car, walk,

247
00:12:49,000 --> 00:12:51,800
Speaker 3: use a bike, public transport. And then there was a

248
00:12:51,840 --> 00:12:55,079
Speaker 3: whole section on food, a whole sub fire category on food.

249
00:12:55,160 --> 00:12:58,319
Speaker 3: So people just living off rice and eggs and pasta,

250
00:12:58,360 --> 00:13:00,760
Speaker 3: the low cost staples and all the different recipes they

251
00:13:00,760 --> 00:13:01,360
Speaker 3: could make on that.

252
00:13:01,520 --> 00:13:03,720
Speaker 1: Is it all about saving gyms? Is it all about

253
00:13:03,840 --> 00:13:07,040
Speaker 1: saving Is it no emphasis on building your income?

254
00:13:07,720 --> 00:13:10,840
Speaker 3: Well, there's two parts to it. There's the what you

255
00:13:10,880 --> 00:13:13,520
Speaker 3: can control, and you can really control what you spend.

256
00:13:13,760 --> 00:13:15,800
Speaker 3: So a lot of people spend a lot of effort

257
00:13:15,840 --> 00:13:18,400
Speaker 3: on the fire movement on reducing their expenditure so that

258
00:13:18,440 --> 00:13:22,319
Speaker 3: they can save sixty seventy, sometimes eighty percent of their income.

259
00:13:22,640 --> 00:13:25,880
Speaker 3: And then the other part is generating your income. Which

260
00:13:26,280 --> 00:13:29,679
Speaker 3: it was interesting that it's very much an economic decision,

261
00:13:29,800 --> 00:13:32,360
Speaker 3: a cost benefit analysis when it comes to almost everything

262
00:13:32,360 --> 00:13:35,280
Speaker 3: with fire. So, for example, when it comes to your

263
00:13:35,360 --> 00:13:37,920
Speaker 3: job and your income, the decision around do you go

264
00:13:38,000 --> 00:13:40,920
Speaker 3: to university if you're pursuing the fire strategy really comes

265
00:13:40,960 --> 00:13:42,959
Speaker 3: down to how many years is it going to take

266
00:13:43,000 --> 00:13:45,960
Speaker 3: you to get your university degree. How many years are

267
00:13:45,960 --> 00:13:48,040
Speaker 3: you not earning income that you could have been earning

268
00:13:48,040 --> 00:13:50,160
Speaker 3: while you're study in what's the cost of that degree.

269
00:13:50,200 --> 00:13:52,600
Speaker 3: But on the other side of the equation, how much

270
00:13:52,640 --> 00:13:54,600
Speaker 3: extra income per hour are you going to make if

271
00:13:54,600 --> 00:13:58,240
Speaker 3: you do have that degree qualification. So everything is very

272
00:13:58,280 --> 00:14:00,040
Speaker 3: thought out with that the fire strategy. And then the

273
00:14:00,080 --> 00:14:02,600
Speaker 3: last part which will come to is that the investing part.

274
00:14:02,679 --> 00:14:04,720
Speaker 3: So there is some focus on that as well. But

275
00:14:04,760 --> 00:14:07,360
Speaker 3: I did see a lot of emphasis around ways to

276
00:14:07,400 --> 00:14:09,600
Speaker 3: cut down on spending so you can save more.

277
00:14:09,880 --> 00:14:14,080
Speaker 1: Okay, I suppose that is reasonable, and so there are

278
00:14:14,120 --> 00:14:16,520
Speaker 1: certain things to be greatly admired in this far strategy.

279
00:14:17,360 --> 00:14:21,880
Speaker 1: Not everyone can increase their income, particularly people on salary arrangements,

280
00:14:22,240 --> 00:14:26,120
Speaker 1: but you can always save that as a lever we

281
00:14:26,120 --> 00:14:27,880
Speaker 1: can all pull. We can all save more. Every single

282
00:14:27,880 --> 00:14:29,840
Speaker 1: person listening to this show, including me and you, James,

283
00:14:29,840 --> 00:14:33,000
Speaker 1: we could save more. I could not have lunch downstairs today,

284
00:14:33,360 --> 00:14:35,040
Speaker 1: or I can have a smaller one, and I would say,

285
00:14:35,160 --> 00:14:37,400
Speaker 1: so I have that we all have that power.

286
00:14:38,160 --> 00:14:40,520
Speaker 2: We'll be back in a moment. It is very interesting.

287
00:14:40,560 --> 00:14:44,080
Speaker 1: It really is the fire concept and we're going to

288
00:14:44,080 --> 00:14:46,240
Speaker 1: take a look at the most important part, I would

289
00:14:46,240 --> 00:14:47,960
Speaker 1: think from our listeners point of view, which is that

290
00:14:48,120 --> 00:14:52,000
Speaker 1: this aspect of growing your income and protecting protecting your income,

291
00:14:52,040 --> 00:14:55,160
Speaker 1: which they put up very high as a priority. Back

292
00:14:55,160 --> 00:15:07,520
Speaker 1: in the moment, Hello and welcome back to The Australian's

293
00:15:07,560 --> 00:15:11,080
Speaker 1: Money Puzzle podcast. I'm James Kirby Well at The Australian

294
00:15:11,080 --> 00:15:13,280
Speaker 1: and I'm talking to regular guests of the show and

295
00:15:13,360 --> 00:15:17,360
Speaker 1: contributor to the Worst Section, James Gerard, who will also

296
00:15:17,400 --> 00:15:21,720
Speaker 1: be hosting some shows Folks with Stuart Weems in September.

297
00:15:21,920 --> 00:15:25,440
Speaker 1: When I am taking a holiday, Are you allowed to

298
00:15:25,440 --> 00:15:27,440
Speaker 1: take a holiday? I bet You're not allowed to take holidays

299
00:15:27,440 --> 00:15:29,840
Speaker 1: at all. On the fire and movements just plow away

300
00:15:30,560 --> 00:15:32,440
Speaker 1: week after week, half starved.

301
00:15:33,200 --> 00:15:33,440
Speaker 2: See.

302
00:15:33,680 --> 00:15:35,680
Speaker 1: I have to stop myself. I have to stop myself

303
00:15:35,760 --> 00:15:41,600
Speaker 1: under cutting this. It's not fair, okay, and it depends.

304
00:15:41,920 --> 00:15:45,800
Speaker 1: But as I say, I completely like, I completely admire

305
00:15:46,840 --> 00:15:53,160
Speaker 1: concepts within this. All I'm actually skeptical about, James, is

306
00:15:53,680 --> 00:15:58,520
Speaker 1: that they mislead people into thinking that you could retire,

307
00:15:59,120 --> 00:16:01,240
Speaker 1: that it's easier, that it might that you might be

308
00:16:01,280 --> 00:16:05,080
Speaker 1: make a terrible mistake, and assume that it is easier

309
00:16:05,240 --> 00:16:08,560
Speaker 1: to do so. I have often been asked, you know, well,

310
00:16:08,560 --> 00:16:10,560
Speaker 1: why are you still working? You don't have to keep working,

311
00:16:10,560 --> 00:16:14,240
Speaker 1: do you? And it's true, I don't have to. Maybe

312
00:16:14,240 --> 00:16:16,000
Speaker 1: you don't have to change. Certainly I don't have to.

313
00:16:16,080 --> 00:16:20,080
Speaker 1: My my family are older than yours. So but it's

314
00:16:20,080 --> 00:16:23,440
Speaker 1: a question of the lifestyle I want. I could stop tomorrow,

315
00:16:24,400 --> 00:16:26,840
Speaker 1: but I couldn't live the way I live now tomorrow

316
00:16:27,200 --> 00:16:29,280
Speaker 1: if I was to be realistic about it. And you

317
00:16:29,320 --> 00:16:31,920
Speaker 1: can apply that to anyone's life. I think in terms

318
00:16:31,960 --> 00:16:36,200
Speaker 1: of what's the reality of this, retire early? Assuming you

319
00:16:36,240 --> 00:16:37,920
Speaker 1: want to write I don't even want to, but I'm

320
00:16:37,920 --> 00:16:41,360
Speaker 1: assuming that people want to. Okay, now here's getting down

321
00:16:41,400 --> 00:16:43,960
Speaker 1: the brass tax Here about what I think is a

322
00:16:44,040 --> 00:16:46,440
Speaker 1: very important part of it is they talk about how

323
00:16:46,440 --> 00:16:50,760
Speaker 1: to build income. They begin to passive income. Again, A

324
00:16:50,800 --> 00:16:53,440
Speaker 1: part of me is going to say passive income. Yeah,

325
00:16:53,520 --> 00:16:55,960
Speaker 1: but it's never going to have the returns of active income.

326
00:16:56,480 --> 00:16:59,680
Speaker 1: It just isn't. It certainly doesn't offer the same possibilities,

327
00:17:00,240 --> 00:17:02,800
Speaker 1: it offers the same return as the market, but it

328
00:17:02,840 --> 00:17:05,439
Speaker 1: doesn't offer to beat the market, which you can do

329
00:17:05,520 --> 00:17:07,520
Speaker 1: if you're active. We'll put that to one side for

330
00:17:07,560 --> 00:17:10,720
Speaker 1: a moment. So James, before we talk about how they

331
00:17:10,840 --> 00:17:13,680
Speaker 1: talk about making money, they've got a really big emphasis

332
00:17:13,760 --> 00:17:19,840
Speaker 1: on protecting yourself, enforcing circumstances, building up three to six

333
00:17:19,920 --> 00:17:23,200
Speaker 1: months worth of savings. Gee, honestly, that's a very slow

334
00:17:23,280 --> 00:17:26,760
Speaker 1: way to start building money, rainy day funds and ensuring

335
00:17:26,800 --> 00:17:28,840
Speaker 1: everything you can think of. What do you think of

336
00:17:28,880 --> 00:17:30,920
Speaker 1: that central concept?

337
00:17:33,160 --> 00:17:36,800
Speaker 3: Yeah, it makes sense. It's prudent. It's good to have

338
00:17:36,840 --> 00:17:41,920
Speaker 3: that cash buffer there for unforeseen circumstances. It is very sensible.

339
00:17:42,000 --> 00:17:46,000
Speaker 3: For a large part what the fire philosophy is, it's

340
00:17:46,080 --> 00:17:49,240
Speaker 3: really just been more frugal in these earlier years and

341
00:17:49,280 --> 00:17:52,119
Speaker 3: then enjoying yourself later. So even though I said earlier

342
00:17:52,119 --> 00:17:55,120
Speaker 3: that only five percent of people is successful in achieving that,

343
00:17:55,960 --> 00:17:59,400
Speaker 3: the majority of people do get closer to their financial

344
00:17:59,400 --> 00:18:02,679
Speaker 3: goals because they have saved more, they have worked harder,

345
00:18:02,720 --> 00:18:07,200
Speaker 3: they have invested better, they have implemented good solid financial

346
00:18:07,240 --> 00:18:11,240
Speaker 3: Fundacians like having a cash reserve. So overall it's a

347
00:18:11,240 --> 00:18:14,320
Speaker 3: good thing, But it's really that degree of how far

348
00:18:14,440 --> 00:18:16,760
Speaker 3: do you push it do you not have friends, do

349
00:18:16,840 --> 00:18:19,200
Speaker 3: you know, dive into dumpsters and get out expired food

350
00:18:19,240 --> 00:18:21,080
Speaker 3: so they don't have to buy a loaf of bread

351
00:18:21,680 --> 00:18:23,080
Speaker 3: at the local shops. Yeah.

352
00:18:23,359 --> 00:18:26,560
Speaker 1: The point is which frugal becomes being mean or miserly

353
00:18:26,720 --> 00:18:29,880
Speaker 1: from one of a better word, and miserly has connotations,

354
00:18:30,160 --> 00:18:33,840
Speaker 1: all sorts of connotations, and rarely linked with happiness, which

355
00:18:33,880 --> 00:18:38,040
Speaker 1: is something you can't really measure. Maybe you do it

356
00:18:38,119 --> 00:18:39,879
Speaker 1: and you retire at fifty and you look back and

357
00:18:39,920 --> 00:18:42,720
Speaker 1: you say, gosh, you know, I can't really go to

358
00:18:42,800 --> 00:18:45,920
Speaker 1: nightclubs now till four in the morning. And I could

359
00:18:45,960 --> 00:18:47,960
Speaker 1: have in those days, or you know, I could have

360
00:18:48,119 --> 00:18:50,320
Speaker 1: sailed around the world, or I could have whatever, played

361
00:18:50,359 --> 00:18:52,320
Speaker 1: soccer at a high level or whatever, but I didn't

362
00:18:52,320 --> 00:18:54,080
Speaker 1: because I didn't want to buy expensive boots.

363
00:18:54,160 --> 00:18:54,520
Speaker 2: Whatever.

364
00:18:54,640 --> 00:18:57,560
Speaker 1: I'm just again playing Devil's advocate here. Okay, So they're

365
00:18:57,600 --> 00:19:00,199
Speaker 1: big into insurance, and I am not that I'm not

366
00:19:00,359 --> 00:19:02,639
Speaker 1: big into insurance. I think you should ensure yourself.

367
00:19:03,119 --> 00:19:04,720
Speaker 2: WHOA, I would be.

368
00:19:04,720 --> 00:19:07,720
Speaker 1: Extremely careful in spending a penny more than you actually

369
00:19:07,720 --> 00:19:09,400
Speaker 1: need to from an actual point.

370
00:19:09,160 --> 00:19:12,800
Speaker 2: Of view passive income. They think that this is the

371
00:19:12,840 --> 00:19:13,600
Speaker 2: big secret.

372
00:19:13,800 --> 00:19:15,840
Speaker 1: I don't think it's a secret. But maybe here's a

373
00:19:15,840 --> 00:19:18,400
Speaker 1: secret to many people. They still don't realize what ETFs

374
00:19:18,440 --> 00:19:22,399
Speaker 1: are and index funds. What do you think of this

375
00:19:22,960 --> 00:19:27,679
Speaker 1: building passive income concept for the average person and the

376
00:19:27,680 --> 00:19:30,280
Speaker 1: average situation who doesn't have much money, and it only

377
00:19:30,320 --> 00:19:33,520
Speaker 1: has a very limited amount to apply to wealth building.

378
00:19:34,760 --> 00:19:37,960
Speaker 3: So the building the passive income under the fire strategy

379
00:19:38,240 --> 00:19:41,320
Speaker 3: isn't really any different to how most people build their wealth.

380
00:19:41,440 --> 00:19:44,520
Speaker 3: They have a bit of cash at buffer, they start

381
00:19:44,560 --> 00:19:48,399
Speaker 3: to have a surplus every month that they identify, they

382
00:19:48,440 --> 00:19:51,160
Speaker 3: put that aside, and then they invest that into something,

383
00:19:51,280 --> 00:19:53,800
Speaker 3: whether that's to save a deposit and then purchase an

384
00:19:53,840 --> 00:19:56,800
Speaker 3: investment property or a home and pay down the mortgage,

385
00:19:56,840 --> 00:20:00,760
Speaker 3: or whether that's into an ETF portfolio. The goal is

386
00:20:00,800 --> 00:20:03,800
Speaker 3: to grow the asset. So what I observed is that

387
00:20:03,840 --> 00:20:07,080
Speaker 3: the fire strategies to have more growth based assets in

388
00:20:07,160 --> 00:20:10,480
Speaker 3: those earlier years to try and get dearly double digit returns.

389
00:20:10,960 --> 00:20:13,800
Speaker 1: Okay, interesting, Okay, and then they have the I think

390
00:20:13,840 --> 00:20:16,080
Speaker 1: the third prong of this is to basically work more

391
00:20:16,480 --> 00:20:19,760
Speaker 1: side gigs, side hustles, again, which I would completely agree

392
00:20:19,760 --> 00:20:21,959
Speaker 1: with and I think we probably all of us did

393
00:20:22,000 --> 00:20:24,400
Speaker 1: at various times in our lives when we wanted, when

394
00:20:24,440 --> 00:20:27,000
Speaker 1: you're in that early accumulation phase and you just had

395
00:20:27,040 --> 00:20:29,960
Speaker 1: to get going, that would seem to make a perfect

396
00:20:30,040 --> 00:20:34,320
Speaker 1: sense towards financial independence. So having had a look at

397
00:20:34,320 --> 00:20:36,720
Speaker 1: it all, James and I've had a good look at

398
00:20:36,720 --> 00:20:39,720
Speaker 1: it all, but haven't met anyone who's a disciple as such.

399
00:20:40,400 --> 00:20:42,520
Speaker 1: Maybe we have some listenings to the show. I'm really

400
00:20:42,600 --> 00:20:44,919
Speaker 1: keen to hear from you, folks if you are have

401
00:20:45,080 --> 00:20:47,639
Speaker 1: tried it, or you've experimented with it, or you've met

402
00:20:48,080 --> 00:20:51,480
Speaker 1: people who live by it, havn't taken the deep dive, James.

403
00:20:51,880 --> 00:20:56,240
Speaker 1: If I came to you in earnest and said, I'm

404
00:20:56,280 --> 00:20:59,720
Speaker 1: applying myself to the fire concept, I love it. It's

405
00:20:59,760 --> 00:21:01,760
Speaker 1: going to It's changed my life so far, and I'm

406
00:21:01,800 --> 00:21:05,080
Speaker 1: really starting to save. What would you say a broad

407
00:21:05,119 --> 00:21:08,040
Speaker 1: advice to someone like that? What would your instinct be

408
00:21:08,200 --> 00:21:09,120
Speaker 1: to tell them.

409
00:21:09,520 --> 00:21:13,240
Speaker 3: It's really just having balance in your life? What makes

410
00:21:13,280 --> 00:21:17,400
Speaker 3: you happy? You know, I'll sound a little bit philosophical here,

411
00:21:17,440 --> 00:21:20,159
Speaker 3: but any of us can drop dead tomorrow. And if

412
00:21:20,200 --> 00:21:23,439
Speaker 3: you've spent your twenties and your thirties being frugal and

413
00:21:23,520 --> 00:21:27,040
Speaker 3: almost misily, and then you pass away, unexpectedly. You know,

414
00:21:27,080 --> 00:21:29,520
Speaker 3: what is your life been. You've been working towards this

415
00:21:29,640 --> 00:21:31,840
Speaker 3: future that you haven't had. So there's something to say

416
00:21:31,840 --> 00:21:34,199
Speaker 3: about enjoying every day as much as you can. But

417
00:21:34,240 --> 00:21:36,119
Speaker 3: then on the other hand, there's that you need to

418
00:21:36,119 --> 00:21:38,800
Speaker 3: think about the future as well. So if people are

419
00:21:38,840 --> 00:21:42,560
Speaker 3: comfortable with their lifestyle while pursuing a fire strategy, So

420
00:21:42,560 --> 00:21:46,600
Speaker 3: if they're comfortable to work, do extra side gigs, do

421
00:21:46,680 --> 00:21:49,520
Speaker 3: lots of hours, save more than the average person, be

422
00:21:49,560 --> 00:21:51,280
Speaker 3: a little bit more aggressive than the average person in

423
00:21:51,320 --> 00:21:54,560
Speaker 3: their investing activities, and they're comfortable with that, fantastic. You're

424
00:21:54,560 --> 00:21:57,480
Speaker 3: probably going to retire earlier than most people and have

425
00:21:57,600 --> 00:21:59,960
Speaker 3: more passive income than the average person would in retirement.

426
00:22:00,240 --> 00:22:02,840
Speaker 3: But if you're finding you're not enjoying it and it's

427
00:22:02,920 --> 00:22:06,800
Speaker 3: really grinding on your lifestyle, well then it's not for you.

428
00:22:07,400 --> 00:22:07,720
Speaker 2: Very good.

429
00:22:07,800 --> 00:22:10,720
Speaker 1: It's really interesting, isn't it. It's look hats off to

430
00:22:10,760 --> 00:22:14,400
Speaker 1: whoever came up with the concept. People love the concept.

431
00:22:13,760 --> 00:22:18,480
Speaker 1: I like the five part financial independence. I reckon that's great.

432
00:22:18,680 --> 00:22:22,159
Speaker 1: Retirely that's your recall. I imagine it does instill for

433
00:22:22,240 --> 00:22:24,879
Speaker 1: people who have never really thought about it or review

434
00:22:24,920 --> 00:22:27,080
Speaker 1: their own situation. I think it's got a lot going

435
00:22:27,160 --> 00:22:29,840
Speaker 1: for it. I would just be careful, as James says

436
00:22:29,920 --> 00:22:34,879
Speaker 1: about overdoing it, because you only live once, or you're

437
00:22:34,880 --> 00:22:38,520
Speaker 1: certainly only twenty or thirty once, and you don't get

438
00:22:38,520 --> 00:22:41,320
Speaker 1: those years back, as everyone will tell you when they're older.

439
00:22:41,440 --> 00:22:43,080
Speaker 1: All right, we'll take short break. We have some great

440
00:22:43,119 --> 00:22:54,040
Speaker 1: questions back in a moment. Hello and welcome back to

441
00:22:54,119 --> 00:22:58,159
Speaker 1: the Australians Money Puzzle podcast. James Kirkby here with James

442
00:22:58,160 --> 00:23:01,080
Speaker 1: Gerard from a Financial Advice Dot. One thing we should

443
00:23:01,080 --> 00:23:03,880
Speaker 1: have covered there because Tuesday is very much as an emphasis

444
00:23:03,880 --> 00:23:06,439
Speaker 1: on property and I see much in the way a

445
00:23:06,440 --> 00:23:08,960
Speaker 1: property investment mentioned in that in as fire coverage. A

446
00:23:09,000 --> 00:23:11,360
Speaker 1: lot of it is the US, of course, and property

447
00:23:11,400 --> 00:23:14,639
Speaker 1: is so much more central to our building than there is,

448
00:23:14,680 --> 00:23:19,120
Speaker 1: particularly residential property. Did you come across anything on property

449
00:23:19,160 --> 00:23:20,280
Speaker 1: as such as an asset?

450
00:23:22,400 --> 00:23:25,040
Speaker 3: I did. They were. The people were very rational when

451
00:23:25,080 --> 00:23:27,600
Speaker 3: they spoke about it. It was basically what works out

452
00:23:28,040 --> 00:23:30,119
Speaker 3: better and when I say better, what means that they

453
00:23:30,160 --> 00:23:33,119
Speaker 3: can retire sooner under the fire movement. So if they

454
00:23:33,160 --> 00:23:36,640
Speaker 3: can buy a property in a cheap location, pay off

455
00:23:36,680 --> 00:23:39,119
Speaker 3: that mortgage over a ten year period. Fantastic they're not

456
00:23:39,160 --> 00:23:42,680
Speaker 3: having to pay rent, whereas others have figured that, Okay,

457
00:23:42,720 --> 00:23:45,359
Speaker 3: I'm happy to build a tiny home for fifty thousand

458
00:23:45,440 --> 00:23:48,879
Speaker 3: dollars and plant that somewhere in a friend's backyard, and

459
00:23:49,000 --> 00:23:50,960
Speaker 3: that's fine. That means that I can retire early. I

460
00:23:50,960 --> 00:23:53,720
Speaker 3: don't need to buy the land and have a proper house.

461
00:23:53,760 --> 00:23:56,320
Speaker 3: So it really came down to how much they were

462
00:23:56,320 --> 00:23:58,960
Speaker 3: willing to compromise where they wanted to live as to

463
00:23:59,080 --> 00:24:01,679
Speaker 3: decide in between a property and then or otherwise just

464
00:24:01,680 --> 00:24:04,440
Speaker 3: renting under the fire movement. And maybe just one other

465
00:24:04,440 --> 00:24:06,879
Speaker 3: thing which I wanted to mention about the fire movement

466
00:24:07,000 --> 00:24:09,280
Speaker 3: is that I actually have a client who pursued it.

467
00:24:09,560 --> 00:24:12,000
Speaker 3: He worked really hard in his twenties and thirties, and

468
00:24:12,040 --> 00:24:15,240
Speaker 3: he retired in his early forties. And he said to

469
00:24:15,280 --> 00:24:18,680
Speaker 3: me the other day that, look, it's great on paper

470
00:24:18,760 --> 00:24:21,040
Speaker 3: to retire in your forties, but the thing is that

471
00:24:21,440 --> 00:24:24,679
Speaker 3: your friends aren't retired. They're working Monday to Friday. So

472
00:24:24,880 --> 00:24:26,679
Speaker 3: you know, I can go play golf every day, but

473
00:24:26,720 --> 00:24:28,200
Speaker 3: I've got no one to go play golf with. I

474
00:24:28,359 --> 00:24:29,879
Speaker 3: can go to lunch every day, I've got no one

475
00:24:29,880 --> 00:24:31,679
Speaker 3: to go to lunch with. Everyone else is busy and.

476
00:24:31,920 --> 00:24:35,159
Speaker 1: He really can live in Sydney and he's retired and

477
00:24:35,160 --> 00:24:36,120
Speaker 1: he's in his forties.

478
00:24:36,359 --> 00:24:38,640
Speaker 2: Yeah, that's right. Yeah, what does he do then?

479
00:24:39,200 --> 00:24:42,479
Speaker 3: He's a doctor, so he worked tirelessly, but not just

480
00:24:42,520 --> 00:24:46,480
Speaker 3: as a GP. He started to buy and grow medical practices,

481
00:24:46,520 --> 00:24:49,400
Speaker 3: so he built up a very good empire of businesses

482
00:24:49,440 --> 00:24:52,120
Speaker 3: there and has been able to retire in his foresting.

483
00:24:52,359 --> 00:24:55,040
Speaker 1: Interesting, my dad retired when he was sixty, which was

484
00:24:55,080 --> 00:24:57,760
Speaker 1: early at the time or at this wasnt common at

485
00:24:57,800 --> 00:25:02,520
Speaker 1: the time, and he lukely loved it and he took

486
00:25:02,600 --> 00:25:05,439
Speaker 1: to it straight away, and like literally was a model

487
00:25:05,480 --> 00:25:07,800
Speaker 1: of how to retire. He had a lot of interests

488
00:25:07,800 --> 00:25:11,560
Speaker 1: outside of work, and he found work very hard in

489
00:25:11,600 --> 00:25:13,639
Speaker 1: the end because he was in building, which is a

490
00:25:13,680 --> 00:25:17,280
Speaker 1: tough game, as anyone knows. Okay, now some questions, we'll

491
00:25:17,280 --> 00:25:20,000
Speaker 1: only get through a few, just James, I might just

492
00:25:20,080 --> 00:25:21,679
Speaker 1: zone in on one or two.

493
00:25:21,720 --> 00:25:23,720
Speaker 2: I really want to get covered. Sally says.

494
00:25:23,760 --> 00:25:26,680
Speaker 1: I found your interview with Eliza Owen of Core Logic interesting,

495
00:25:26,720 --> 00:25:29,960
Speaker 1: but I disagree with her conclusion of oversupply in Victoria

496
00:25:30,000 --> 00:25:33,679
Speaker 1: based on the number of supply over sold. The supply

497
00:25:33,760 --> 00:25:36,479
Speaker 1: problem is a chronic problem. I'm very surprised that all

498
00:25:36,480 --> 00:25:41,600
Speaker 1: of a sudden we have oversupply problem based on auction rates. Okay, Sally, well,

499
00:25:41,720 --> 00:25:44,639
Speaker 1: Eliza was fairly convincing on that. I think there's a

500
00:25:44,640 --> 00:25:48,600
Speaker 1: couple of things there. Melbourne is in relative oversupply and

501
00:25:48,800 --> 00:25:52,679
Speaker 1: the other states are undersupplied. Melbourne had one hundred thousand

502
00:25:52,920 --> 00:25:55,760
Speaker 1: more houses built than Sydney, for instance, which is a

503
00:25:55,840 --> 00:25:59,760
Speaker 1: larger city. So in that, to that extent, it is

504
00:25:59,800 --> 00:26:04,560
Speaker 1: the stet with relative ulversupply. We probably could examine that

505
00:26:04,760 --> 00:26:06,840
Speaker 1: harder and have a long debate about it, but that

506
00:26:06,920 --> 00:26:10,960
Speaker 1: I think would hopefully cover the bases there. Carl asks

507
00:26:11,119 --> 00:26:15,320
Speaker 1: very simple question Car, at Car, are you generally better

508
00:26:15,359 --> 00:26:18,240
Speaker 1: off borrowing a million to negatively gear an invest in

509
00:26:18,280 --> 00:26:24,879
Speaker 1: a property? Are salary sacrificing salary sacrificing into super? I

510
00:26:24,960 --> 00:26:27,240
Speaker 1: presume he means jams, we do you reckon?

511
00:26:28,640 --> 00:26:31,679
Speaker 3: Yeah, salary sacrifice it into super? You get a tax break.

512
00:26:32,240 --> 00:26:34,560
Speaker 3: So rather than pay tax at your marginal tax rate

513
00:26:34,560 --> 00:26:36,440
Speaker 3: of up to forty seven percent, the money that goes

514
00:26:36,480 --> 00:26:39,680
Speaker 3: into Super gets tax at fifteen percent, or if you

515
00:26:39,760 --> 00:26:41,480
Speaker 3: eard more than two hundred and fifty thousand dollars, it

516
00:26:41,480 --> 00:26:44,919
Speaker 3: gets taxed at thirty percent. So there's this benefit, this

517
00:26:45,080 --> 00:26:48,360
Speaker 3: tax benefit of putting money into super So that's great.

518
00:26:49,160 --> 00:26:51,400
Speaker 3: The downside is that you have to wait until you're

519
00:26:51,440 --> 00:26:54,800
Speaker 3: sixty and retire to access that money. The alternative, which

520
00:26:54,840 --> 00:26:58,280
Speaker 3: Cayl mentioned is borrowing a million dollars and negatively gearing

521
00:26:58,280 --> 00:27:02,640
Speaker 3: that so buying an investment property fine, but the risk

522
00:27:02,720 --> 00:27:05,560
Speaker 3: there is that your gain or loss is magnified because

523
00:27:05,600 --> 00:27:07,920
Speaker 3: you've borrowed a heap of money. You've put in minimal

524
00:27:08,160 --> 00:27:11,040
Speaker 3: of your own capital there, and so there's a really

525
00:27:11,080 --> 00:27:13,080
Speaker 3: big risk that if you get it wrong, you really

526
00:27:13,119 --> 00:27:15,600
Speaker 3: get it wrong, and it can. It's ruined some people

527
00:27:15,640 --> 00:27:18,399
Speaker 3: financially where they've borrowed a lot, bought property and it

528
00:27:18,440 --> 00:27:21,760
Speaker 3: hasn't gone to plan. So we think about mining towns

529
00:27:21,800 --> 00:27:24,880
Speaker 3: in Western Australia or Queensland in the past where they

530
00:27:24,920 --> 00:27:27,080
Speaker 3: want to ride the wave the market's been going up.

531
00:27:27,359 --> 00:27:29,439
Speaker 3: They buy, unfortunately at the top of the market, and

532
00:27:29,480 --> 00:27:31,840
Speaker 3: then they see the property drop by fifty percent in

533
00:27:31,880 --> 00:27:34,199
Speaker 3: a few years. That follows they're left with debt that

534
00:27:34,200 --> 00:27:36,520
Speaker 3: they need to pay off over a twenty year period

535
00:27:36,840 --> 00:27:38,120
Speaker 3: and they've had to sell the property.

536
00:27:38,640 --> 00:27:42,320
Speaker 1: So Carl History would suggests you could be better off.

537
00:27:43,080 --> 00:27:45,880
Speaker 1: What you're really asking is if I gear up on property,

538
00:27:46,920 --> 00:27:51,400
Speaker 1: well I do better than on geared diversified investments and superannuation.

539
00:27:51,840 --> 00:27:53,600
Speaker 1: And no one can really tell you that to be fair,

540
00:27:53,640 --> 00:27:57,040
Speaker 1: you should gear your superannuation to gear against to match

541
00:27:57,080 --> 00:28:00,400
Speaker 1: dollar for dollar the geared dollars in property. I think

542
00:28:00,440 --> 00:28:02,879
Speaker 1: the essential point of which James is making, and by

543
00:28:02,920 --> 00:28:06,240
Speaker 1: the way, this has never advised its information only is

544
00:28:06,280 --> 00:28:08,840
Speaker 1: that if all your eggs in one basket, it's not complicated.

545
00:28:08,920 --> 00:28:11,600
Speaker 1: If all your eggs in one basket Australian residential property,

546
00:28:11,720 --> 00:28:14,280
Speaker 1: and there's nothing to say that Australian residential property will

547
00:28:14,320 --> 00:28:18,080
Speaker 1: be a knockout investment forever. It's been pretty good for

548
00:28:18,119 --> 00:28:20,560
Speaker 1: a long time and will probably continue to be. But

549
00:28:21,200 --> 00:28:24,359
Speaker 1: you will go against the basic core principles of diverse

550
00:28:24,400 --> 00:28:27,439
Speaker 1: lofication which we all sincerely believe in around here at

551
00:28:27,480 --> 00:28:32,080
Speaker 1: the Money Puzzle. Okay, final question if I can, James,

552
00:28:32,080 --> 00:28:35,280
Speaker 1: sorry to bounced through this, but it's interesting. I'm going

553
00:28:35,320 --> 00:28:38,480
Speaker 1: to read out what the reader Kate says, and then

554
00:28:38,520 --> 00:28:40,800
Speaker 1: I'm going to read out the response from a previous guest,

555
00:28:40,920 --> 00:28:43,240
Speaker 1: because previous guests have the writer reply just like you

556
00:28:43,280 --> 00:28:45,880
Speaker 1: have James. Should anyone come marching in on what you

557
00:28:45,960 --> 00:28:49,520
Speaker 1: said today so fire people might okay? Kate says, I

558
00:28:49,600 --> 00:28:53,120
Speaker 1: enjoyed this seems the podcast here in New Zealand. I

559
00:28:53,160 --> 00:28:55,480
Speaker 1: was listening to some back episodes and I listened to

560
00:28:55,600 --> 00:28:59,640
Speaker 1: why rental growth is going to weaken? This was from April.

561
00:29:00,480 --> 00:29:05,000
Speaker 1: It was near the connesty from Rewhit, she says. Kate says,

562
00:29:05,040 --> 00:29:08,160
Speaker 1: from New Zealand, I was interested to hear Nerida's comment

563
00:29:08,200 --> 00:29:11,080
Speaker 1: on New Zealand rental market and the anecdote provided that

564
00:29:11,200 --> 00:29:13,160
Speaker 1: was the opposite of what the data shows.

565
00:29:13,640 --> 00:29:14,160
Speaker 2: She said.

566
00:29:14,200 --> 00:29:17,120
Speaker 1: The changes met by the government here in stopping negative

567
00:29:17,160 --> 00:29:21,320
Speaker 1: gearing has seen landlords leave the market. This was what

568
00:29:21,400 --> 00:29:26,680
Speaker 1: was expected to happen, but data says differently. In New Zealand,

569
00:29:27,720 --> 00:29:30,600
Speaker 1: it is the law that bonds collected are lodged with

570
00:29:30,680 --> 00:29:34,440
Speaker 1: Tenancy Servances, a government agency, and they also report on

571
00:29:34,560 --> 00:29:37,160
Speaker 1: bond data. This is the best record of tenancies in

572
00:29:37,200 --> 00:29:40,840
Speaker 1: the country and it shows in June twenty twenty one,

573
00:29:40,880 --> 00:29:43,200
Speaker 1: before the law changed, the number of bonds lodge Worth

574
00:29:43,240 --> 00:29:46,360
Speaker 1: three hundred and eighty five thousand. A year later it

575
00:29:46,560 --> 00:29:49,560
Speaker 1: was three hundred and eighty eight thousand. That is the

576
00:29:49,600 --> 00:29:53,280
Speaker 1: opposite of landlords leaving the market. So Kate is making

577
00:29:53,280 --> 00:29:57,479
Speaker 1: the point, Hey, if you remove negative gearing, it doesn't

578
00:29:57,760 --> 00:30:01,560
Speaker 1: hit the market as badly as men and he say, Nereada,

579
00:30:01,640 --> 00:30:04,560
Speaker 1: I had to go back, obviously to Newada and say

580
00:30:04,560 --> 00:30:07,040
Speaker 1: this is what Kate has said. I've sent her your

581
00:30:07,040 --> 00:30:11,880
Speaker 1: correspondence Kate, and Nereada says, okay, she says it's interesting.

582
00:30:11,920 --> 00:30:14,680
Speaker 1: I double checked what Kate is saying is correct about

583
00:30:14,720 --> 00:30:22,040
Speaker 1: rental bonds. However, investor lending has plummeted, it basically cut

584
00:30:22,120 --> 00:30:26,240
Speaker 1: in half. So investors are certainly not entering the market

585
00:30:26,240 --> 00:30:29,400
Speaker 1: in New Zealand like they were. It's also extremely challenging

586
00:30:29,440 --> 00:30:31,240
Speaker 1: to sell a house in New Zealand at the moment

587
00:30:31,280 --> 00:30:32,080
Speaker 1: with interest rates.

588
00:30:32,080 --> 00:30:32,760
Speaker 2: So HI.

589
00:30:34,720 --> 00:30:38,480
Speaker 1: On rental demand New Zealand's extremely low population growth in

590
00:30:38,520 --> 00:30:40,840
Speaker 1: twenty twenty one and twenty two as a result, there

591
00:30:40,880 --> 00:30:43,640
Speaker 1: is no additional demand for rental accommodation. The main challenge

592
00:30:43,720 --> 00:30:46,760
Speaker 1: right now is that it is the least affordable country

593
00:30:46,800 --> 00:30:50,480
Speaker 1: in the world to be a renter. So and Or

594
00:30:50,600 --> 00:30:55,160
Speaker 1: doesn't deny what you've said, Kate, as she challenges your

595
00:30:55,160 --> 00:30:58,760
Speaker 1: interpretation of the data. And we will leave those that

596
00:30:58,760 --> 00:31:02,000
Speaker 1: that amazing question hanging out there. If we scrap negative gearing,

597
00:31:02,800 --> 00:31:05,840
Speaker 1: would it make the market better or worse for investors?

598
00:31:06,520 --> 00:31:10,160
Speaker 1: Many say it would, and Vida implies that, and Kate

599
00:31:10,440 --> 00:31:13,560
Speaker 1: implies that the experience in New Zealand hasn't suggested that,

600
00:31:14,400 --> 00:31:19,840
Speaker 1: using the one criteria being the registration of bonds in

601
00:31:19,880 --> 00:31:23,840
Speaker 1: the market. Interesting though we'll never know. Part Keating tried it,

602
00:31:24,680 --> 00:31:26,320
Speaker 1: he only lasted about a year and a half and

603
00:31:26,320 --> 00:31:28,600
Speaker 1: then he backtracked and put it back in.

604
00:31:28,800 --> 00:31:31,040
Speaker 2: And Partkating didn't backtrack on much.

605
00:31:32,480 --> 00:31:34,480
Speaker 1: And I don't think anyone We always say we don't

606
00:31:34,520 --> 00:31:36,240
Speaker 1: know if anybody will go near it here, but perhaps

607
00:31:36,280 --> 00:31:38,520
Speaker 1: somebody will be clever enough to find a way to

608
00:31:38,640 --> 00:31:41,880
Speaker 1: look at all tax reform without having themselves voted out

609
00:31:41,880 --> 00:31:42,440
Speaker 1: of office.

610
00:31:42,840 --> 00:31:43,880
Speaker 2: That remains to be seen.

611
00:31:44,000 --> 00:31:48,960
Speaker 1: James Gerard, financial advisor dot com and regular contributor, weekly

612
00:31:49,000 --> 00:31:50,600
Speaker 1: contributor to the Australian Web Section.

613
00:31:50,680 --> 00:31:51,720
Speaker 2: Lovely to have you on again.

614
00:31:52,200 --> 00:31:54,920
Speaker 3: Thank you my pleasure as always, great.

615
00:31:54,680 --> 00:31:58,240
Speaker 1: To talk to you, great to have the questions rolling in. Everybody,

616
00:31:58,440 --> 00:32:01,720
Speaker 1: do mention us to someone you know mentioned the show.

617
00:32:01,760 --> 00:32:03,240
Speaker 1: It would be lovely if you did that. I really

618
00:32:03,240 --> 00:32:07,320
Speaker 1: appreciate that. The email is the money puzzle at the

619
00:32:07,360 --> 00:32:10,480
Speaker 1: Australian dot com dot Au and the producer today was

620
00:32:10,560 --> 00:32:11,200
Speaker 1: Liah Samando.

621
00:32:11,480 --> 00:32:12,080
Speaker 3: Hope you soon