1 00:00:09,280 --> 00:00:12,560 Speaker 1: Hello, and welcome to the Australians Money Puzzle Podcast. I'm 2 00:00:12,640 --> 00:00:15,319 Speaker 1: James Kirkby, the Wealth editor at The Australian, and welcome 3 00:00:15,320 --> 00:00:19,400 Speaker 1: aboard everybody. I hope you're having a good break and 4 00:00:19,840 --> 00:00:23,640 Speaker 1: I wish you a good holiday season and a prosperous 5 00:00:23,800 --> 00:00:28,360 Speaker 1: new year. And speaking of prosperity, there's a show I've 6 00:00:28,400 --> 00:00:32,720 Speaker 1: wanted to do all year. It's about the Fire Movement 7 00:00:33,040 --> 00:00:37,680 Speaker 1: FIOR in this case that means financial independence, retire early. 8 00:00:38,880 --> 00:00:41,760 Speaker 1: We did some coverage of it during the year midyear 9 00:00:42,040 --> 00:00:48,200 Speaker 1: on the Money Puzzle Podcast and we were, I suppose 10 00:00:48,920 --> 00:00:54,480 Speaker 1: more skeptical and enthusiastic about the concept, and for a 11 00:00:54,560 --> 00:00:58,520 Speaker 1: variety of reasons, but the core reason was that we 12 00:00:58,520 --> 00:01:01,680 Speaker 1: were of the opinion that it's just not that easy 13 00:01:01,800 --> 00:01:05,399 Speaker 1: to do that. And some of the pitches, if you like, 14 00:01:05,560 --> 00:01:08,840 Speaker 1: on the Fire movement, though people are so interested in 15 00:01:08,880 --> 00:01:11,520 Speaker 1: it and so enthusiastic about it, but some of the 16 00:01:11,520 --> 00:01:14,400 Speaker 1: pitches that I had come across about it, the presentations 17 00:01:14,440 --> 00:01:17,040 Speaker 1: I just thought were a little bit making it sound 18 00:01:17,120 --> 00:01:20,280 Speaker 1: too easy and perhaps could to some extent exploit naivety. 19 00:01:20,680 --> 00:01:24,240 Speaker 1: Now I wanted to get someone to come on. Now. 20 00:01:24,280 --> 00:01:26,000 Speaker 1: The thing on the show we'll talk about it. The 21 00:01:26,040 --> 00:01:29,440 Speaker 1: thing about fire movement is it's a movement. It is 22 00:01:29,480 --> 00:01:33,480 Speaker 1: a set of principles. There is no fire. I can't 23 00:01:33,560 --> 00:01:36,320 Speaker 1: go downtown and take you to the local branch of 24 00:01:36,400 --> 00:01:40,399 Speaker 1: the local office. There's no headquarters in Geneva or Washington. 25 00:01:40,480 --> 00:01:42,920 Speaker 1: It's a concept, it's a set of principles. But I 26 00:01:42,920 --> 00:01:45,160 Speaker 1: did want to get someone to talk about it, who 27 00:01:45,800 --> 00:01:48,400 Speaker 1: to whom it had made a difference, someone who was 28 00:01:48,440 --> 00:01:52,160 Speaker 1: also to some extent and financial educator and could articulate 29 00:01:52,200 --> 00:01:54,880 Speaker 1: its main ideas. And I have found the very person 30 00:01:55,000 --> 00:01:58,960 Speaker 1: for the exercise. His name is Lyone Lee. He is 31 00:01:59,320 --> 00:02:03,240 Speaker 1: a intern national investment operator. He works with a group 32 00:02:03,240 --> 00:02:07,600 Speaker 1: called invest Unite and they are asset managers here and 33 00:02:07,680 --> 00:02:12,640 Speaker 1: across Asia. I'm speaking to him actually in Soul. He 34 00:02:12,720 --> 00:02:15,160 Speaker 1: lives part of the year in Melbourne and delighted to 35 00:02:15,160 --> 00:02:17,080 Speaker 1: have him on the show. Lion Lee, how are you? 36 00:02:17,560 --> 00:02:19,799 Speaker 2: I fine, Thank you, thanks for having me on the 37 00:02:19,919 --> 00:02:23,480 Speaker 2: Australian Money Puzzle, James. It's an honor to actually be 38 00:02:23,560 --> 00:02:24,120 Speaker 2: on your show. 39 00:02:25,240 --> 00:02:28,120 Speaker 1: You're very welcome, Delighted to have you. Delighted to find 40 00:02:28,160 --> 00:02:30,800 Speaker 1: you after some efforts to try and get what I 41 00:02:30,840 --> 00:02:35,320 Speaker 1: thought would be the ideal gift. So I explained there 42 00:02:35,400 --> 00:02:38,960 Speaker 1: about how our listeners were very interested in the Fire movement. 43 00:02:39,720 --> 00:02:42,720 Speaker 1: But when I was talking to you earlier, and I 44 00:02:42,760 --> 00:02:46,040 Speaker 1: was struggling even still to try and grab this because 45 00:02:46,080 --> 00:02:48,560 Speaker 1: I'm the sort of person who wants I want to 46 00:02:48,680 --> 00:02:52,520 Speaker 1: see this sort of tangible evidence that it exists. I 47 00:02:52,560 --> 00:02:55,120 Speaker 1: want to see its charter and its rules, and I 48 00:02:55,160 --> 00:02:58,959 Speaker 1: want to see a sort of hierarchy. But that doesn't 49 00:02:58,960 --> 00:03:00,880 Speaker 1: really exist. Does that's a concept? 50 00:03:01,280 --> 00:03:04,160 Speaker 2: Yes, I'm very similar to yourself, you know. I like 51 00:03:04,520 --> 00:03:08,600 Speaker 2: information that's practical and that's useful, you know, especially if 52 00:03:08,600 --> 00:03:13,680 Speaker 2: we're addressing listeners who are just to some extent depending 53 00:03:13,840 --> 00:03:18,079 Speaker 2: on your podcast to understand what's really happening in the 54 00:03:18,120 --> 00:03:22,040 Speaker 2: Australian economy, financial markets as well as in their personal 55 00:03:22,280 --> 00:03:26,800 Speaker 2: financial world. So to keep it simple for listeners, Fire 56 00:03:27,000 --> 00:03:32,640 Speaker 2: basically just focuses on extreme savings and investing, which a 57 00:03:32,720 --> 00:03:35,600 Speaker 2: goal to retire much earlier than usual. So I'm just 58 00:03:35,640 --> 00:03:40,280 Speaker 2: summarizing everything that's talked about Fire, you know, in the 59 00:03:40,320 --> 00:03:43,840 Speaker 2: World Wide Web and also in Australia. 60 00:03:44,000 --> 00:03:44,920 Speaker 3: Essentially it is. 61 00:03:44,880 --> 00:03:48,320 Speaker 2: A movement, has no headquarters, there's no branch, there's no chapter, 62 00:03:48,800 --> 00:03:53,600 Speaker 2: and it was popularized by a book that's called Your Money, 63 00:03:53,680 --> 00:03:56,240 Speaker 2: All Your Life back in nineteen ninety two. 64 00:03:56,960 --> 00:03:58,920 Speaker 3: The other thing to know is fire. 65 00:03:58,880 --> 00:04:02,600 Speaker 2: Doesn't originate from Australia, so it's not aussy concept. It 66 00:04:02,680 --> 00:04:06,320 Speaker 2: originated in the US. The book is an American book, 67 00:04:06,360 --> 00:04:10,520 Speaker 2: the authors are American and over there, I guess over 68 00:04:10,600 --> 00:04:13,840 Speaker 2: the years and also in some nation. Some traits of 69 00:04:14,200 --> 00:04:17,600 Speaker 2: fire that you might come across in your conversation with 70 00:04:17,720 --> 00:04:21,440 Speaker 2: our Australian listeners is that typically those who subscribe to 71 00:04:21,480 --> 00:04:25,560 Speaker 2: the Fire movement, they say between fifty to seventy five 72 00:04:25,560 --> 00:04:28,200 Speaker 2: percent of their income, that's what they're aiming to do. 73 00:04:28,640 --> 00:04:31,400 Speaker 3: They might tick up extra jobs. Some might talk about, you. 74 00:04:31,320 --> 00:04:35,239 Speaker 2: Know, delaying major spending events in order to be able 75 00:04:35,320 --> 00:04:40,000 Speaker 2: to save and invest with the goal of retiring earlier 76 00:04:40,080 --> 00:04:42,800 Speaker 2: than usual. So earlier than usual here to me, we 77 00:04:43,040 --> 00:04:45,960 Speaker 2: just mean before the statutory retirement age. 78 00:04:46,440 --> 00:04:49,400 Speaker 1: So you tuned into this pretty early, right, because Your Money, 79 00:04:49,440 --> 00:04:51,599 Speaker 1: Your Life, which is sit out there, of course needs 80 00:04:51,640 --> 00:04:54,760 Speaker 1: to say revised and updated dasy. It's by Vicki Robin 81 00:04:54,839 --> 00:04:57,960 Speaker 1: and Joe Denis, published in the UK, was a best 82 00:04:57,960 --> 00:05:01,720 Speaker 1: seller at the time and remains always available. Tell me 83 00:05:01,839 --> 00:05:03,839 Speaker 1: you tuned into this quite a long time ago. It 84 00:05:03,839 --> 00:05:06,280 Speaker 1: was pretty fresh idea at that time, in the nineteen nineties. 85 00:05:06,320 --> 00:05:08,680 Speaker 1: When you first came upon the idea, what was it? 86 00:05:09,040 --> 00:05:13,360 Speaker 1: What tell us they talk about nine steps to transforming 87 00:05:13,560 --> 00:05:19,160 Speaker 1: your relationship with money? What were the key aspects of fire? 88 00:05:20,360 --> 00:05:22,000 Speaker 1: The principal is the fire that attracted you. 89 00:05:23,400 --> 00:05:28,600 Speaker 2: So I came across Fire actually many years after it 90 00:05:28,640 --> 00:05:32,240 Speaker 2: was published ninety two. So my engagement, I guess with 91 00:05:32,320 --> 00:05:35,760 Speaker 2: the principles was in the late nineteen nineties when I 92 00:05:35,880 --> 00:05:38,640 Speaker 2: was working with the US market. So that's actually where 93 00:05:38,760 --> 00:05:41,880 Speaker 2: I came across the whole concept of fire. The community 94 00:05:41,920 --> 00:05:44,880 Speaker 2: of the Fire Committee wasn't really there yet, but you know, 95 00:05:44,960 --> 00:05:49,480 Speaker 2: it was building up steam. So again for the benefit 96 00:05:49,520 --> 00:05:52,440 Speaker 2: of listeners who are new to fire, and without trying 97 00:05:52,480 --> 00:05:56,839 Speaker 2: to confuse them with the many permutations of fire that 98 00:05:56,920 --> 00:06:01,719 Speaker 2: have taken place over the years, that four basic principles 99 00:06:01,839 --> 00:06:06,599 Speaker 2: that I've extracted from all of that. So the number 100 00:06:06,640 --> 00:06:10,720 Speaker 2: one is what they call the fire number. Essentially, that 101 00:06:10,800 --> 00:06:13,800 Speaker 2: number is just an estimate of how much you'll need 102 00:06:13,839 --> 00:06:17,880 Speaker 2: to retire, and the way in which the fire community 103 00:06:18,000 --> 00:06:22,960 Speaker 2: derives that number is by multiplying your annual expense by 104 00:06:23,000 --> 00:06:27,080 Speaker 2: twenty five. So let's say if our annual expense is 105 00:06:27,160 --> 00:06:30,120 Speaker 2: eighty thousand dollars, you know, as a couple, then your 106 00:06:30,160 --> 00:06:33,320 Speaker 2: fire number is just simply two million. It's is eighty 107 00:06:33,400 --> 00:06:38,279 Speaker 2: thousand times twenty five. The second principle I took away 108 00:06:39,160 --> 00:06:43,919 Speaker 2: is the four percent role states simply how much you 109 00:06:44,000 --> 00:06:47,760 Speaker 2: can withdraw from your retirement fund in the first year, 110 00:06:48,400 --> 00:06:51,640 Speaker 2: and then every subsequent year that amount is. 111 00:06:51,640 --> 00:06:52,840 Speaker 3: Adjusted for inflation. 112 00:06:53,400 --> 00:06:56,440 Speaker 2: So if we use the couple that has two million 113 00:06:56,480 --> 00:06:59,960 Speaker 2: dollars again in the first year of retirement, that cup 114 00:07:00,200 --> 00:07:03,240 Speaker 2: or we'll be able to only withdraw a maximum of 115 00:07:03,360 --> 00:07:10,200 Speaker 2: edy K. That I extracted from the principles and the 116 00:07:10,240 --> 00:07:13,960 Speaker 2: concept and the movement that I felt was practical to 117 00:07:13,960 --> 00:07:17,920 Speaker 2: some extent is that the Fire movement and fire followers 118 00:07:18,160 --> 00:07:23,440 Speaker 2: prioritize setting up your emergency fund before focusing on investing, 119 00:07:23,840 --> 00:07:26,559 Speaker 2: and that fund should be three to six months worth 120 00:07:26,720 --> 00:07:27,680 Speaker 2: of savings. 121 00:07:27,800 --> 00:07:30,640 Speaker 1: You're going through the tape there is very useful, but 122 00:07:30,800 --> 00:07:33,680 Speaker 1: I think I have to say it seems to me 123 00:07:33,760 --> 00:07:36,679 Speaker 1: that's the hardest thing. Yes, where people have very little 124 00:07:36,760 --> 00:07:39,960 Speaker 1: money and they want to think about investing, the last 125 00:07:39,960 --> 00:07:41,360 Speaker 1: thing they're going to be able to do was put 126 00:07:41,360 --> 00:07:42,760 Speaker 1: away a few months worth of money. 127 00:07:42,840 --> 00:07:44,960 Speaker 3: Yes, and I agree as well. 128 00:07:45,000 --> 00:07:49,800 Speaker 2: It is challenging because you're trying to save and I 129 00:07:49,840 --> 00:07:52,000 Speaker 2: want to say invest, you're probably trying to save and 130 00:07:52,240 --> 00:07:53,840 Speaker 2: pay down some of. 131 00:07:53,640 --> 00:07:55,920 Speaker 3: Your big expenditure at the same time. 132 00:07:55,960 --> 00:07:59,400 Speaker 2: I think that's what a lot of listeners are probably 133 00:07:59,400 --> 00:08:03,920 Speaker 2: finding them, especially more so today with you know, higher 134 00:08:03,960 --> 00:08:06,880 Speaker 2: cost of living, inflation, all the variety of wolves that 135 00:08:06,920 --> 00:08:10,640 Speaker 2: are making it tough to be an Australian today. But 136 00:08:10,800 --> 00:08:16,040 Speaker 2: there are ways to actually, I guess, get around or 137 00:08:16,280 --> 00:08:17,720 Speaker 2: find a balance, and. 138 00:08:17,720 --> 00:08:20,400 Speaker 3: I guess before going to the fourth principle. 139 00:08:20,880 --> 00:08:25,960 Speaker 2: One recent example was a conversation I had with an 140 00:08:26,000 --> 00:08:30,920 Speaker 2: individual in Ballarat, Victoria, and he was trying to actually 141 00:08:31,520 --> 00:08:35,200 Speaker 2: build his emergency fund while trying to pay down his 142 00:08:35,400 --> 00:08:38,240 Speaker 2: mortgage at the same time. Like that's a really tough 143 00:08:38,280 --> 00:08:41,200 Speaker 2: thing to do, right, but that is the reality. 144 00:08:41,880 --> 00:08:43,400 Speaker 3: So what we came up. 145 00:08:43,320 --> 00:08:47,080 Speaker 2: With as a solution was, look, if we combine the 146 00:08:47,160 --> 00:08:52,960 Speaker 2: emergency fund together with an account that actually allowed him 147 00:08:53,000 --> 00:08:55,840 Speaker 2: to pay down his mortgage, he would get the best 148 00:08:55,840 --> 00:08:59,600 Speaker 2: of both wolves combined into one. So we found that 149 00:08:59,640 --> 00:09:03,920 Speaker 2: solution and using a offset account and a redraw facility, 150 00:09:04,400 --> 00:09:08,600 Speaker 2: so she's emergency fund would still be intact. He would 151 00:09:08,640 --> 00:09:11,440 Speaker 2: still be built that fund, but as he is adding 152 00:09:11,480 --> 00:09:14,400 Speaker 2: more money to that emergency fund, he said, it is 153 00:09:14,559 --> 00:09:19,000 Speaker 2: actually actively being down his principal on his mortgage. 154 00:09:19,679 --> 00:09:22,480 Speaker 1: Okay, so now what we will do. We'll go let 155 00:09:22,520 --> 00:09:24,880 Speaker 1: you to continue those principles. We'll take a short break 156 00:09:24,920 --> 00:09:27,440 Speaker 1: and I'll let you roll on where you were getting to. There. 157 00:09:27,520 --> 00:09:29,559 Speaker 1: You had four. I think us You've given us four 158 00:09:29,600 --> 00:09:31,280 Speaker 1: and you can give us the rest after the break. 159 00:09:31,280 --> 00:09:32,880 Speaker 1: I'm sure people will be very keen to hear what 160 00:09:32,920 --> 00:09:45,440 Speaker 1: they are one moment. Hello, Welcome back to The Australian's 161 00:09:45,480 --> 00:09:50,760 Speaker 1: Money Puzzle podcast, our special podcast on the fire movement 162 00:09:51,000 --> 00:09:55,559 Speaker 1: fior E Financial Independence, Retire Early. It's a concept, it's 163 00:09:55,600 --> 00:09:59,240 Speaker 1: a movement around the world. It captures the imagination of 164 00:09:59,320 --> 00:10:02,319 Speaker 1: many people there are. One of the reasons I wanted 165 00:10:02,360 --> 00:10:05,520 Speaker 1: to do this show, especially at during the Christmas break, 166 00:10:05,640 --> 00:10:08,440 Speaker 1: was because it's something that you kind of stand back 167 00:10:08,440 --> 00:10:10,280 Speaker 1: from the day to day and think about and I 168 00:10:10,360 --> 00:10:14,040 Speaker 1: think it captures, as I say, the imagination of many Australians. 169 00:10:14,679 --> 00:10:17,200 Speaker 1: It's a little bit hard to grasp. It's even harder 170 00:10:17,240 --> 00:10:19,520 Speaker 1: to get a handle on who and who's in it 171 00:10:19,559 --> 00:10:22,839 Speaker 1: and how it works. There are meetings around the country 172 00:10:23,080 --> 00:10:26,920 Speaker 1: from Cooler roy to Melbourne, CBD. I've come upon on 173 00:10:26,960 --> 00:10:29,959 Speaker 1: the internet. There are many different organizations. No one owns 174 00:10:30,000 --> 00:10:34,400 Speaker 1: it and there is no one person who can say 175 00:10:34,440 --> 00:10:37,760 Speaker 1: they are in charge of it or the chief spokesman 176 00:10:37,840 --> 00:10:41,400 Speaker 1: for it. But today's guest on the show is Lionel Lee. 177 00:10:41,760 --> 00:10:44,160 Speaker 1: In the first segment, he was just starting to outline 178 00:10:44,160 --> 00:10:47,360 Speaker 1: some of the key principles. You might just tell us 179 00:10:47,360 --> 00:10:50,079 Speaker 1: the rest of the key principles of the Fire movement. 180 00:10:50,640 --> 00:10:54,480 Speaker 2: No problem, Yeah, I'll just leave our listeners with the fourth. 181 00:10:54,640 --> 00:10:59,520 Speaker 2: And essentially the fourth principle is just that you're considered 182 00:10:59,600 --> 00:11:03,760 Speaker 2: finding independent and you can retire early if you wish, 183 00:11:04,160 --> 00:11:08,160 Speaker 2: once your passive income generates enough to cover your basic 184 00:11:08,280 --> 00:11:11,160 Speaker 2: living expenses. So that's the fourth principle that I took 185 00:11:11,160 --> 00:11:15,040 Speaker 2: away from the Fire Movement that I felt was useful 186 00:11:15,040 --> 00:11:18,200 Speaker 2: and practical for my personal financial needs. 187 00:11:19,200 --> 00:11:23,880 Speaker 1: Now, the other thing, the last one, which sounds you know, 188 00:11:23,960 --> 00:11:26,439 Speaker 1: sounds so sensible, where you know you get to the 189 00:11:26,480 --> 00:11:31,280 Speaker 1: point where your passive income covers your expenses. Yes, that 190 00:11:31,480 --> 00:11:33,840 Speaker 1: is a lot harder than it sounds. 191 00:11:34,080 --> 00:11:35,600 Speaker 3: Yes, and I totally agree with you. 192 00:11:36,120 --> 00:11:41,560 Speaker 1: What do people in the Australian market generally use for 193 00:11:42,360 --> 00:11:46,040 Speaker 1: passive income to cover their expenses. Is it property? Is 194 00:11:46,080 --> 00:11:49,600 Speaker 1: it share market investing? What is it ETFs? What do 195 00:11:49,640 --> 00:11:50,000 Speaker 1: they use? 196 00:11:50,240 --> 00:11:54,720 Speaker 3: The Australian market is fairly narrow. 197 00:11:54,640 --> 00:11:58,199 Speaker 2: In its use of a variety of financial instruments to 198 00:11:58,240 --> 00:12:01,120 Speaker 2: create passive income. So I would have to say that 199 00:12:01,240 --> 00:12:04,640 Speaker 2: majority of moms and pubs, you know, even the young 200 00:12:04,920 --> 00:12:09,720 Speaker 2: adults who are listening in generally head towards roastate, So 201 00:12:09,800 --> 00:12:15,240 Speaker 2: roal state becomes the common passive income tall instrument or generator. 202 00:12:16,080 --> 00:12:19,800 Speaker 2: That then, of course there are those that are invested 203 00:12:19,840 --> 00:12:22,920 Speaker 2: in the ESSEX so those drum stock, exchange and market, 204 00:12:23,360 --> 00:12:26,160 Speaker 2: and folks of course having fixed income as well that 205 00:12:26,200 --> 00:12:30,680 Speaker 2: would include you know, some cash, maybe bonds, term deposits. 206 00:12:31,000 --> 00:12:33,320 Speaker 3: Generally those are the treaming asset classes. 207 00:12:33,559 --> 00:12:35,520 Speaker 2: I'm not going to show in things like you know, 208 00:12:35,640 --> 00:12:39,199 Speaker 2: digital assets like crypto and stuff like that, but traditionally 209 00:12:39,800 --> 00:12:43,440 Speaker 2: those are the three asset classes that majority of our 210 00:12:43,480 --> 00:12:47,400 Speaker 2: Austrian listeners have ther moneies in and are using to 211 00:12:47,440 --> 00:12:48,440 Speaker 2: generate passive income. 212 00:12:49,400 --> 00:12:51,760 Speaker 1: Okay, now, can I just say to you the challenge 213 00:12:51,800 --> 00:12:55,600 Speaker 1: to me is that this goes really slowly. If I 214 00:12:55,640 --> 00:12:58,800 Speaker 1: have it in cash, it's three or four percent. If 215 00:12:58,840 --> 00:13:01,360 Speaker 1: I have it in property, the yields are two or 216 00:13:01,400 --> 00:13:04,120 Speaker 1: three percent net. If I have it on the share market, 217 00:13:04,160 --> 00:13:06,640 Speaker 1: the Australian share market, the dividend y is about four 218 00:13:06,640 --> 00:13:08,560 Speaker 1: and a half. It's going to be a long time 219 00:13:08,600 --> 00:13:12,679 Speaker 1: before that passive income. This is why I'm so skeptical. 220 00:13:13,240 --> 00:13:18,880 Speaker 1: Not that I completely admire the individual listeners aspiration to 221 00:13:18,960 --> 00:13:22,160 Speaker 1: achieve this, but I need to be I feel we 222 00:13:22,280 --> 00:13:24,720 Speaker 1: need to sober up on how long and how hard 223 00:13:24,760 --> 00:13:26,840 Speaker 1: it is to achieve this. Is there anything you know 224 00:13:27,360 --> 00:13:30,280 Speaker 1: that I don't know that makes it easier than it sounds. 225 00:13:30,480 --> 00:13:32,960 Speaker 2: I agree with you, James, it's not easier than it sounds, 226 00:13:33,040 --> 00:13:37,600 Speaker 2: given I wouldn't even as a it's not finance educator, 227 00:13:37,679 --> 00:13:40,480 Speaker 2: you know, and I teaching USDs not just in Australia 228 00:13:40,480 --> 00:13:43,320 Speaker 2: but also also in Australia. I've been a guest speaker 229 00:13:43,440 --> 00:13:47,760 Speaker 2: at private client events you know that are organized by banks, 230 00:13:47,840 --> 00:13:49,680 Speaker 2: financial institutions, wealth managers. 231 00:13:49,880 --> 00:13:54,800 Speaker 3: I always tell the audience it is not easy, even 232 00:13:54,840 --> 00:13:56,679 Speaker 3: though I'm being used at a reference. 233 00:13:56,800 --> 00:14:00,680 Speaker 2: So I'm sure that in your Google search background search 234 00:14:00,720 --> 00:14:03,160 Speaker 2: of myself, it probably pops up that I'm one of 235 00:14:03,240 --> 00:14:07,640 Speaker 2: those individuals who went from being an employee to an 236 00:14:07,920 --> 00:14:13,440 Speaker 2: ultra high network and therefore managed to fire by age fourt. 237 00:14:14,000 --> 00:14:15,800 Speaker 1: You never had a fixed salary. You didn't do it 238 00:14:15,840 --> 00:14:16,200 Speaker 1: on a fix. 239 00:14:16,240 --> 00:14:17,560 Speaker 3: I did it partly on a fix. 240 00:14:17,600 --> 00:14:21,160 Speaker 2: I I was an employee, and when I started, like 241 00:14:21,400 --> 00:14:23,800 Speaker 2: most of the other folks, I didn't come from a 242 00:14:23,800 --> 00:14:27,800 Speaker 2: wealthy family. I didn't have any inheritance, so it's purely 243 00:14:27,840 --> 00:14:30,840 Speaker 2: hard work. So I totally agree and I support you, 244 00:14:30,960 --> 00:14:34,160 Speaker 2: James in your statement to listeners that it is not 245 00:14:34,840 --> 00:14:38,000 Speaker 2: a quick fix. Is not that an easy thing to do. 246 00:14:38,360 --> 00:14:41,080 Speaker 3: It requires time and commitment. 247 00:14:41,680 --> 00:14:43,920 Speaker 1: So that's and lifetime commitment. 248 00:14:44,040 --> 00:14:46,200 Speaker 2: Yes, that's right, and that's something that I had to 249 00:14:46,200 --> 00:14:48,920 Speaker 2: do for myself. So you know, there's a couple of 250 00:14:48,960 --> 00:14:51,600 Speaker 2: things that even though I encountered the fire movements, I 251 00:14:51,600 --> 00:14:55,040 Speaker 2: said early so in the late nineteen nineties, I didn't 252 00:14:55,040 --> 00:14:59,040 Speaker 2: think that everything that I picked up was useful, practical 253 00:14:59,120 --> 00:15:03,120 Speaker 2: and I could actually implement because there were things that 254 00:15:03,160 --> 00:15:07,400 Speaker 2: were missing. So what was missing was what I actually 255 00:15:07,440 --> 00:15:09,320 Speaker 2: picked up in my course of work. So I worked 256 00:15:09,320 --> 00:15:12,800 Speaker 2: in an investment holdings company. I actually have to travel 257 00:15:12,800 --> 00:15:15,840 Speaker 2: the international market, so I worked in twenty class markets. 258 00:15:16,280 --> 00:15:16,800 Speaker 3: I worked with. 259 00:15:17,040 --> 00:15:21,040 Speaker 2: Ten more than ten industries, and what I've learned in 260 00:15:21,160 --> 00:15:26,640 Speaker 2: engaging with those corporations, family enterprises, family officers, as well 261 00:15:26,680 --> 00:15:30,480 Speaker 2: as the ultra high network individuals is how they manage 262 00:15:30,560 --> 00:15:33,920 Speaker 2: and drew their wealth. So for them, it wasn't about 263 00:15:33,960 --> 00:15:36,000 Speaker 2: fire because they didn't need to talk about fire. 264 00:15:36,520 --> 00:15:41,600 Speaker 3: It was more of how they were actively getting wealthy. 265 00:15:41,640 --> 00:15:43,760 Speaker 2: So I combined what I learned with fire and what 266 00:15:43,920 --> 00:15:49,120 Speaker 2: I learned from interacting with the individuals that had a 267 00:15:49,280 --> 00:15:54,000 Speaker 2: much larger wealth base what the journey need to look like. 268 00:15:54,080 --> 00:15:56,760 Speaker 2: So I realized and number one, I had to up 269 00:15:56,760 --> 00:15:59,760 Speaker 2: my earnings. So if I had if my earnies didn't 270 00:15:59,760 --> 00:16:03,080 Speaker 2: go out and I was just looking to save more 271 00:16:03,120 --> 00:16:07,080 Speaker 2: and invest more, I wouldn't have a compounding effect. So 272 00:16:07,120 --> 00:16:10,360 Speaker 2: I need to up my savings after my earning. So 273 00:16:10,440 --> 00:16:12,600 Speaker 2: the more I earned, the more I could see. So 274 00:16:12,680 --> 00:16:15,720 Speaker 2: when I started working, you know, I only had one 275 00:16:15,760 --> 00:16:19,320 Speaker 2: thousand eight dollars a month. That was my salary where 276 00:16:19,360 --> 00:16:23,120 Speaker 2: I started working back in the late nineteen ninety So 277 00:16:23,120 --> 00:16:26,160 Speaker 2: I started working nineteen ninety five one thousand and eight. 278 00:16:26,800 --> 00:16:30,479 Speaker 2: I was a bit more fortunate because I was traveling extensively. 279 00:16:30,640 --> 00:16:33,320 Speaker 2: I could save a lot of my income. So I 280 00:16:33,360 --> 00:16:38,240 Speaker 2: maysed a safe at best seventy percent of that monthly 281 00:16:38,280 --> 00:16:39,760 Speaker 2: income and I. 282 00:16:39,760 --> 00:16:43,000 Speaker 1: Would sorry, sorry, seventeen. 283 00:16:43,120 --> 00:16:45,400 Speaker 3: So I managed to save seventeen seven zero. 284 00:16:45,440 --> 00:16:48,600 Speaker 1: You were able to save seven zero of your income, Okay, But. 285 00:16:48,640 --> 00:16:51,040 Speaker 2: I need to disclaim to our listeners that I was 286 00:16:51,080 --> 00:16:54,440 Speaker 2: fortunate because I was traveling extensively, so I didn't have 287 00:16:54,480 --> 00:16:57,720 Speaker 2: a lot of expenses, right, And also I was working 288 00:16:57,800 --> 00:17:00,880 Speaker 2: seventeen hours a day, seven days of week, so I 289 00:17:00,880 --> 00:17:02,960 Speaker 2: had no time to go, you know, to the pub 290 00:17:03,400 --> 00:17:06,600 Speaker 2: yeah at night, for example, So I had very little 291 00:17:06,640 --> 00:17:09,160 Speaker 2: social life as well. So that allowed me to save 292 00:17:09,400 --> 00:17:12,280 Speaker 2: seventy percent. But what I did with the seventy percent, 293 00:17:12,440 --> 00:17:17,560 Speaker 2: The first thing I did was to actually find any 294 00:17:17,680 --> 00:17:21,440 Speaker 2: kind of savings instrument that would give me the highest 295 00:17:21,800 --> 00:17:24,560 Speaker 2: interest rate and I would actually put it in. So 296 00:17:24,680 --> 00:17:28,040 Speaker 2: I just went for therm deposits. I went firm deposit hunting, 297 00:17:28,119 --> 00:17:30,640 Speaker 2: you know, every time I had three time between well, 298 00:17:30,800 --> 00:17:34,040 Speaker 2: I would go look for therm deposits and I would 299 00:17:34,080 --> 00:17:36,520 Speaker 2: just keep kept I just kept putting money in there 300 00:17:36,680 --> 00:17:40,000 Speaker 2: because at that stage of life, I was not in 301 00:17:40,040 --> 00:17:42,920 Speaker 2: a present doingvest I couldn't afford to lose the small 302 00:17:43,040 --> 00:17:44,080 Speaker 2: meager amounts ahead. 303 00:17:44,680 --> 00:17:47,199 Speaker 1: Okay, and is that a fire principle that you start. 304 00:17:48,240 --> 00:17:50,600 Speaker 1: I suppose in terms of getting that emergency money at 305 00:17:50,600 --> 00:17:52,679 Speaker 1: the start, you have to say you can't gamble that 306 00:17:52,720 --> 00:17:56,680 Speaker 1: you have to save it. Yeah, okay, that's right. 307 00:17:56,960 --> 00:17:58,760 Speaker 3: Yeah. So I applied Prince one on a tree. 308 00:17:58,840 --> 00:18:02,280 Speaker 2: Right, I applied princes one of the three without just 309 00:18:02,320 --> 00:18:03,879 Speaker 2: look at it as a mergency fund. I looked at 310 00:18:03,920 --> 00:18:07,320 Speaker 2: it also as a fund that would grow that savings. 311 00:18:07,400 --> 00:18:07,560 Speaker 3: Right. 312 00:18:07,640 --> 00:18:10,280 Speaker 2: So many of the times when you did my emergency fund, 313 00:18:10,359 --> 00:18:12,400 Speaker 2: we just opened a bank account and just kept keep 314 00:18:12,440 --> 00:18:15,080 Speaker 2: putting money in there. But it doesn't grow at a 315 00:18:15,160 --> 00:18:17,080 Speaker 2: high interest rate. So I had to look for the 316 00:18:17,200 --> 00:18:20,280 Speaker 2: high interest rate accounts. In this case, when I was 317 00:18:20,280 --> 00:18:23,639 Speaker 2: doing it, there weren't high yel savings accounts. So the 318 00:18:23,680 --> 00:18:26,639 Speaker 2: best thing I could find was turn deposits. So I 319 00:18:26,720 --> 00:18:29,359 Speaker 2: just went from M deposit the TM deposit every time 320 00:18:29,840 --> 00:18:35,400 Speaker 2: interests read increased from the issue. So I did that 321 00:18:35,440 --> 00:18:39,399 Speaker 2: for a while and then that actually up my savings. 322 00:18:39,600 --> 00:18:42,080 Speaker 2: So that also gave me a buffer to start thinking 323 00:18:42,119 --> 00:18:42,880 Speaker 2: about investing. 324 00:18:43,560 --> 00:18:46,240 Speaker 1: I know you're just a sample of one, but when 325 00:18:46,280 --> 00:18:50,439 Speaker 1: you did begin investing, as someone to which the adherence 326 00:18:50,520 --> 00:18:53,240 Speaker 1: to the Fire movement and its principles has really worked. 327 00:18:54,080 --> 00:18:57,320 Speaker 1: And beyond the term deposits, then what was your first 328 00:18:57,400 --> 00:19:01,440 Speaker 1: sort of foray into an investment meant beyond saving? 329 00:19:02,560 --> 00:19:06,000 Speaker 2: Yep, So I did actually what every other I guess 330 00:19:06,119 --> 00:19:08,520 Speaker 2: the average Aussie would do, which is go buy home. 331 00:19:09,280 --> 00:19:14,240 Speaker 2: So my first investment was actually using the term deposits 332 00:19:14,560 --> 00:19:18,080 Speaker 2: to save enough to actually put a down payment on 333 00:19:18,359 --> 00:19:20,919 Speaker 2: a property. So that's what I did. So it's not 334 00:19:21,119 --> 00:19:23,680 Speaker 2: you know, sexy stuff, it's not rocket science. Everyone else 335 00:19:24,160 --> 00:19:27,320 Speaker 2: does the same thing. So I did that, and so 336 00:19:27,359 --> 00:19:32,240 Speaker 2: that actually started my investing I guess journey. And also 337 00:19:32,320 --> 00:19:36,000 Speaker 2: I started looking at the stock market as well, so 338 00:19:36,720 --> 00:19:40,680 Speaker 2: public equities being another asset class that I encountered during 339 00:19:40,760 --> 00:19:43,280 Speaker 2: my work, so I get the chance to learn more 340 00:19:43,280 --> 00:19:45,960 Speaker 2: about it, and also then added some of that money 341 00:19:46,240 --> 00:19:49,200 Speaker 2: to buying stops as well. But I'm not a trader, 342 00:19:49,800 --> 00:19:54,879 Speaker 2: so essentially I'm looking to build my investment returns over time, 343 00:19:55,560 --> 00:19:57,880 Speaker 2: and I want to make sure that those investment returns 344 00:19:58,320 --> 00:20:01,720 Speaker 2: do not get half along the way so it builds 345 00:20:01,800 --> 00:20:04,359 Speaker 2: up steady. So I don't go after the high risk, 346 00:20:04,800 --> 00:20:07,880 Speaker 2: high return stuff. I look for stocks and shares that 347 00:20:08,040 --> 00:20:11,360 Speaker 2: allowed me to get a certain level of dividend at 348 00:20:11,359 --> 00:20:14,560 Speaker 2: the same time, it also has capital gains over a 349 00:20:14,560 --> 00:20:17,920 Speaker 2: long period of time, so unforced stables or staples with 350 00:20:17,960 --> 00:20:21,800 Speaker 2: my stocks and shares, and of course with the travel, 351 00:20:22,000 --> 00:20:25,320 Speaker 2: I engage with different markets, so that also allowed me 352 00:20:25,400 --> 00:20:29,560 Speaker 2: to think about diversifying my stocks. 353 00:20:28,800 --> 00:20:32,280 Speaker 3: Into different exchanges versus just one stock market. 354 00:20:32,720 --> 00:20:38,000 Speaker 1: Do you did any individuals in exchange not not exchange 355 00:20:38,040 --> 00:20:43,320 Speaker 1: traded funds? No, I mean ETFs? Is that part of your. 356 00:20:44,160 --> 00:20:46,879 Speaker 3: Yeah, we're talking about the Yeah, so I wasn't. I 357 00:20:46,920 --> 00:20:47,840 Speaker 3: wasn't using ETFs. 358 00:20:47,880 --> 00:20:52,080 Speaker 2: I still don't personally have ETFs because I based on 359 00:20:52,119 --> 00:20:56,560 Speaker 2: the stock portfolio that I've worked on myself over time. 360 00:20:56,960 --> 00:20:59,160 Speaker 2: It's behavior like an ETFs. So I created my own 361 00:20:59,640 --> 00:21:03,359 Speaker 2: et before ETFs were available. I'm not saying that I'm smart. 362 00:21:03,960 --> 00:21:05,879 Speaker 1: You know, I understand the concept and it's a very 363 00:21:05,880 --> 00:21:09,040 Speaker 1: strong concept, but I imagine that it was very much a 364 00:21:09,040 --> 00:21:10,200 Speaker 1: blue chip portfolio. 365 00:21:10,400 --> 00:21:11,520 Speaker 3: Yes, if you're looking. 366 00:21:11,320 --> 00:21:15,800 Speaker 1: For dividends as well as each time. Okay, very good, 367 00:21:16,160 --> 00:21:21,560 Speaker 1: So interesting. First of all, the emergency fund, then the savings, 368 00:21:21,960 --> 00:21:26,600 Speaker 1: then the home then this sort of slow but gradual 369 00:21:27,280 --> 00:21:31,440 Speaker 1: opening out of your investment. For the trio into investment markets, 370 00:21:31,480 --> 00:21:34,440 Speaker 1: including the share market. Very interesting. Okay, now I'll take 371 00:21:34,440 --> 00:21:36,200 Speaker 1: a break and I want to sort of stress test 372 00:21:37,040 --> 00:21:39,880 Speaker 1: the whole concept with you in the final segment. Back 373 00:21:39,920 --> 00:21:53,600 Speaker 1: in a moment, folks, Hello and welcome back to The 374 00:21:53,600 --> 00:21:56,840 Speaker 1: Australian's Money Puzzle podcast. I'm James Kirby and I'm talking 375 00:21:56,880 --> 00:21:59,560 Speaker 1: to Lyon Lee and we're talking about the fire movement. 376 00:21:59,880 --> 00:22:04,160 Speaker 1: I already financial independence retire early something that really captured 377 00:22:04,200 --> 00:22:07,439 Speaker 1: our listeners imaginations during the year and I wanted to 378 00:22:07,480 --> 00:22:11,600 Speaker 1: do a special episode on it. Lionel Is is in 379 00:22:11,600 --> 00:22:15,680 Speaker 1: the investment markets. He's also a financial educator. He's done. 380 00:22:15,800 --> 00:22:19,840 Speaker 1: He also does some work in education, financial education in 381 00:22:19,960 --> 00:22:23,280 Speaker 1: universities and schools. As you can have heard from the 382 00:22:23,320 --> 00:22:28,879 Speaker 1: first segments, it's a very articulate advocate. And look, Lionel 383 00:22:28,920 --> 00:22:32,000 Speaker 1: I just wanted to throw one or two things at you. 384 00:22:32,119 --> 00:22:33,680 Speaker 1: I'm sure you're gonna I'm sure you're gonna have good 385 00:22:33,680 --> 00:22:35,600 Speaker 1: answers for all this. But there's two or three things 386 00:22:35,600 --> 00:22:38,880 Speaker 1: I want to ask about. First of all, in our 387 00:22:38,880 --> 00:22:43,560 Speaker 1: own market in Australia, everybody has to put eleven and 388 00:22:43,600 --> 00:22:48,800 Speaker 1: a half percent of their savings into super by law mandatory, 389 00:22:48,960 --> 00:22:52,399 Speaker 1: which is good, but it's also a problem in some 390 00:22:52,560 --> 00:22:55,440 Speaker 1: fashion of those One of those ways is that if 391 00:22:55,480 --> 00:22:58,199 Speaker 1: money is tight, as it is for many people, and 392 00:22:58,240 --> 00:23:00,399 Speaker 1: you already have to put eleven and a half percent 393 00:23:00,440 --> 00:23:04,000 Speaker 1: into your retirement, whether you like it or not, right 394 00:23:04,119 --> 00:23:08,080 Speaker 1: by law you must do. It's mandatory. Superinnovation guarantee charge. 395 00:23:08,760 --> 00:23:14,200 Speaker 1: Does that dieluse or in some way side step the 396 00:23:14,320 --> 00:23:16,640 Speaker 1: needs to follow the fire movement. 397 00:23:18,760 --> 00:23:21,560 Speaker 2: I don't think there's actually it doesn't really side step 398 00:23:22,160 --> 00:23:24,720 Speaker 2: the need to follow the fire movement. I think one 399 00:23:24,840 --> 00:23:29,440 Speaker 2: point of clarification is we are not encouraging listeners to 400 00:23:29,480 --> 00:23:33,439 Speaker 2: follow the fire movement. I think my opinion is you 401 00:23:33,480 --> 00:23:38,760 Speaker 2: should use what you understand about the fire movement as 402 00:23:38,800 --> 00:23:42,760 Speaker 2: a guiding light and then apply what you feel works 403 00:23:42,840 --> 00:23:47,360 Speaker 2: for you to actually achieve your personal financial goals, whatever 404 00:23:47,480 --> 00:23:49,639 Speaker 2: those goals might be. Some people are not looking to 405 00:23:49,640 --> 00:23:53,520 Speaker 2: retire early. They just want to financial independence. They just 406 00:23:53,520 --> 00:23:56,400 Speaker 2: want the fire side, but not the resuide, right, So 407 00:23:56,720 --> 00:23:59,280 Speaker 2: it's really up to the individual. But coming back to 408 00:23:59,359 --> 00:24:03,760 Speaker 2: super anyway, I am a fan of superannuation because there 409 00:24:03,760 --> 00:24:07,359 Speaker 2: are many fellow of students out there who are not 410 00:24:07,560 --> 00:24:11,440 Speaker 2: in a habit of saving superneration to me, is a 411 00:24:11,480 --> 00:24:14,760 Speaker 2: form of forced savings. And I know that eleven percent 412 00:24:15,040 --> 00:24:18,360 Speaker 2: is you know, it's a tough fee, but it is 413 00:24:19,040 --> 00:24:22,040 Speaker 2: still a benefit for those who are not in a 414 00:24:22,080 --> 00:24:25,840 Speaker 2: habit of doing so, and that helps with not so 415 00:24:25,880 --> 00:24:28,679 Speaker 2: much definement, but that helps with their retirement because at 416 00:24:28,840 --> 00:24:32,600 Speaker 2: least we know that at some point in time, what 417 00:24:32,840 --> 00:24:36,159 Speaker 2: whenever they decide to retire, whether it's before after the 418 00:24:36,200 --> 00:24:42,000 Speaker 2: statutory retirement age, they do have some funds they're. 419 00:24:41,840 --> 00:24:44,679 Speaker 3: Waiting for them to live off and to enjoy life with. 420 00:24:45,440 --> 00:24:47,639 Speaker 2: I think that the issue I have with the super 421 00:24:47,680 --> 00:24:52,760 Speaker 2: annuation is more of the fact because it is seen 422 00:24:52,840 --> 00:24:55,639 Speaker 2: as passive. You know, every you know, my eleven percent 423 00:24:55,720 --> 00:24:58,720 Speaker 2: goes there, it takes care of itself. The answer is 424 00:24:58,760 --> 00:25:01,600 Speaker 2: it doesn't, so you have have to. And again I 425 00:25:01,760 --> 00:25:04,760 Speaker 2: just repeat myself to listeners. You have to because it's 426 00:25:04,800 --> 00:25:08,399 Speaker 2: your money. Pay attention to a super and look for 427 00:25:08,720 --> 00:25:11,320 Speaker 2: just like I've done with you know, my meager salaries 428 00:25:11,359 --> 00:25:15,520 Speaker 2: when I started looking for hi yo returns from savings 429 00:25:15,520 --> 00:25:19,119 Speaker 2: and term deposits, you should approach the super returns in 430 00:25:19,119 --> 00:25:22,119 Speaker 2: the same way. Look for ways to actually up your 431 00:25:22,160 --> 00:25:29,479 Speaker 2: super returns because every percentage counts due to compounding, and 432 00:25:29,640 --> 00:25:34,240 Speaker 2: over time, that small percentage increase compounds to a large 433 00:25:34,280 --> 00:25:37,720 Speaker 2: dollar number at the end of twenty twenty five or 434 00:25:37,760 --> 00:25:41,520 Speaker 2: thirty years or even thirty five years for many young 435 00:25:41,640 --> 00:25:43,560 Speaker 2: and middle age Australian. 436 00:25:43,480 --> 00:25:46,240 Speaker 1: We shouldn't underestimate the power compoundings. And it's a key 437 00:25:46,280 --> 00:25:48,320 Speaker 1: thing obviously in the Fire movement, that whole thing that 438 00:25:48,720 --> 00:25:51,760 Speaker 1: basically time in the market, rather than timing the market, 439 00:25:51,920 --> 00:25:54,359 Speaker 1: which is so important. Can I ask you about that? 440 00:25:54,440 --> 00:25:56,920 Speaker 1: Of course, more part of fire is, as you say, 441 00:25:56,960 --> 00:25:59,320 Speaker 1: the second part of it. The first part is financial independence. 442 00:25:59,400 --> 00:26:02,560 Speaker 1: The second artists retire early. Super doesn't allow you to 443 00:26:02,600 --> 00:26:04,680 Speaker 1: retire early. You can't get your hands on your super 444 00:26:04,800 --> 00:26:07,360 Speaker 1: until you retire, So to that extent, it's not very 445 00:26:07,400 --> 00:26:13,440 Speaker 1: good from that perspective. What about borrowing? What's the approach 446 00:26:13,640 --> 00:26:18,720 Speaker 1: in relation to borrowing, because borrowing at its best obviously 447 00:26:18,840 --> 00:26:21,320 Speaker 1: can magnify and accelerate wealth building. 448 00:26:21,440 --> 00:26:25,480 Speaker 3: Yes, so I think the word borrowing and the other word. 449 00:26:25,280 --> 00:26:28,520 Speaker 2: That comes to mind would be leverage. So boring and 450 00:26:28,600 --> 00:26:32,600 Speaker 2: leverage they are. They might sound similar, but they're not 451 00:26:32,640 --> 00:26:35,359 Speaker 2: the same. So I think when we use the word borrowing, 452 00:26:36,240 --> 00:26:41,280 Speaker 2: most people are actually boring to get into debt. 453 00:26:41,960 --> 00:26:42,840 Speaker 3: So boring and. 454 00:26:42,800 --> 00:26:47,520 Speaker 2: Debt I mean like good buddies, which is not good 455 00:26:47,560 --> 00:26:52,359 Speaker 2: for the individual. So I cannot use the word borrowing 456 00:26:52,480 --> 00:26:55,520 Speaker 2: because it paints the picture of you know, you borrow 457 00:26:55,560 --> 00:26:58,399 Speaker 2: our consequences. It's like buy now, pay later, right, so 458 00:26:58,440 --> 00:27:01,920 Speaker 2: it's a car borrowing. Prefer to use the word leverage. 459 00:27:02,200 --> 00:27:05,480 Speaker 2: I prefer listeners that think about leverage because liverage means 460 00:27:05,480 --> 00:27:09,639 Speaker 2: that there's an active, positive approach that you're taking to 461 00:27:09,760 --> 00:27:15,399 Speaker 2: the borrowing. So if you are liveraging assets, you know 462 00:27:15,520 --> 00:27:21,360 Speaker 2: you're liveraging your cash to actually then acquire more income, 463 00:27:21,400 --> 00:27:26,159 Speaker 2: generating gains generating assets, then yes, I would say, you 464 00:27:26,200 --> 00:27:28,960 Speaker 2: know there's something you should do, which is what I did. 465 00:27:29,600 --> 00:27:34,560 Speaker 1: So for example, you're talking about active tax deductible investment 466 00:27:34,680 --> 00:27:40,560 Speaker 1: only investment focused if borrowing, I e. Leverage. Is there 467 00:27:39,840 --> 00:27:43,040 Speaker 1: any guidelines as to how much or how little someone 468 00:27:43,119 --> 00:27:44,240 Speaker 1: should engage in that? 469 00:27:45,359 --> 00:27:48,920 Speaker 2: I don't really have a prescription. I would say that 470 00:27:49,000 --> 00:27:53,760 Speaker 2: really depends on your circumstances. So the way I want 471 00:27:53,760 --> 00:27:56,199 Speaker 2: to look at it just to provide some kind of 472 00:27:56,200 --> 00:27:58,560 Speaker 2: guide to listeners who are thinking about this, and I 473 00:27:58,560 --> 00:28:01,320 Speaker 2: don't want them to actually start doing it and get 474 00:28:01,320 --> 00:28:05,199 Speaker 2: into you know, a fix I become debt ridden is 475 00:28:05,240 --> 00:28:09,080 Speaker 2: that firstly, look at how much cash base you has. 476 00:28:09,440 --> 00:28:14,680 Speaker 2: The cash base is essentially your protection against leveraging too much. 477 00:28:14,720 --> 00:28:17,199 Speaker 2: That means that you are able to repay down some 478 00:28:17,320 --> 00:28:20,760 Speaker 2: of that liverage to be in a position whereby you 479 00:28:20,840 --> 00:28:26,960 Speaker 2: are actually not bleeding your financially. Then also look at 480 00:28:27,000 --> 00:28:31,760 Speaker 2: the cost of liverage. For example, if I were to borrow, 481 00:28:32,160 --> 00:28:34,000 Speaker 2: you know, let's sorry, let me let's go back to 482 00:28:34,240 --> 00:28:36,280 Speaker 2: I own it properly, right, So I properly has a 483 00:28:36,280 --> 00:28:39,320 Speaker 2: lot of equity over maybe the ten, fifteen, twenty years, 484 00:28:39,600 --> 00:28:42,640 Speaker 2: I'm looking to borrow on that equity. That boring is 485 00:28:42,680 --> 00:28:45,600 Speaker 2: not free. It is leverage, but it's not free. 486 00:28:45,640 --> 00:28:46,720 Speaker 3: So if you. 487 00:28:46,680 --> 00:28:51,200 Speaker 2: Are actually taking equity out at a high interest, then 488 00:28:51,440 --> 00:28:54,360 Speaker 2: your liverage becomes really costly. So the cost of liverage 489 00:28:54,440 --> 00:28:58,040 Speaker 2: is important because if you are safe, for example, taking 490 00:28:58,080 --> 00:29:02,880 Speaker 2: equity out and lost you six percent, but you're putting 491 00:29:02,880 --> 00:29:06,120 Speaker 2: it into something else that only gets you five percent, 492 00:29:06,240 --> 00:29:09,640 Speaker 2: you're losing one percent, So you have to be rich. 493 00:29:10,720 --> 00:29:12,000 Speaker 2: So the other thing you think about is. 494 00:29:12,320 --> 00:29:15,760 Speaker 1: The cost working. Okay, yeah, so do your numbers carefully, 495 00:29:15,800 --> 00:29:16,880 Speaker 1: and the numbers. 496 00:29:16,520 --> 00:29:20,040 Speaker 2: Move exactly exactly that's right, and so you have to 497 00:29:20,080 --> 00:29:22,400 Speaker 2: pay attention. Right, You can't just sit back and think, Okay, 498 00:29:22,480 --> 00:29:25,959 Speaker 2: the banks, you know, the financial institutions, my my grocal 499 00:29:26,040 --> 00:29:27,440 Speaker 2: will take care of everything. 500 00:29:27,480 --> 00:29:28,120 Speaker 3: They don't. 501 00:29:28,440 --> 00:29:32,320 Speaker 2: So if you've got money, and you know any kind 502 00:29:32,360 --> 00:29:33,360 Speaker 2: of assets, well. 503 00:29:33,280 --> 00:29:34,920 Speaker 3: So you've got money. You need to take care of 504 00:29:34,960 --> 00:29:35,280 Speaker 3: your money. 505 00:29:35,280 --> 00:29:37,040 Speaker 2: You need to pay attention. You need to find ways 506 00:29:37,080 --> 00:29:40,120 Speaker 2: to get that money. However little or much you have 507 00:29:40,600 --> 00:29:42,000 Speaker 2: to work better for you. 508 00:29:43,880 --> 00:29:46,400 Speaker 1: It sounds like the idea of set and for guests 509 00:29:46,720 --> 00:29:47,800 Speaker 1: is not your idea. 510 00:29:47,920 --> 00:29:52,080 Speaker 3: No, do not ever set and for Yeah, yeah, I 511 00:29:52,160 --> 00:29:52,440 Speaker 3: like that. 512 00:29:52,480 --> 00:29:54,640 Speaker 1: I like that don't set and forget. I completely agree 513 00:29:54,680 --> 00:29:58,320 Speaker 1: with you. Okay, it's very interesting. I really like how 514 00:29:58,320 --> 00:30:01,640 Speaker 1: you've presented all this. Just one last thing about fire 515 00:30:01,800 --> 00:30:04,640 Speaker 1: and the fire movement, and I wanted to ask, what 516 00:30:04,760 --> 00:30:09,440 Speaker 1: if things go wrong? So somebody has a plan and 517 00:30:09,560 --> 00:30:12,920 Speaker 1: they really are serious and they start and they say, Okay, 518 00:30:12,920 --> 00:30:15,160 Speaker 1: I'm going to do this. I'm going to really do this. 519 00:30:15,320 --> 00:30:18,760 Speaker 1: I'm going to adhere to this and it's not my 520 00:30:18,800 --> 00:30:21,160 Speaker 1: New Year's resolution. I'm going to do this for years. 521 00:30:21,400 --> 00:30:22,840 Speaker 1: I'm going to follow the basically, I'm going to get 522 00:30:22,840 --> 00:30:27,000 Speaker 1: my emergency funds started so that I can cover emergencies 523 00:30:27,080 --> 00:30:29,800 Speaker 1: of whatever they may be. It might be a surprise 524 00:30:29,880 --> 00:30:33,520 Speaker 1: health bill, it might be that the interest rates went 525 00:30:33,600 --> 00:30:35,120 Speaker 1: up and I have to pay more per month. But 526 00:30:35,120 --> 00:30:39,200 Speaker 1: they've covered that and they've got there, They've got their plans, 527 00:30:39,280 --> 00:30:41,800 Speaker 1: and they have their age in mind that they'd like 528 00:30:41,880 --> 00:30:47,640 Speaker 1: to achieve financial independence. What do you say to people 529 00:30:47,640 --> 00:30:50,600 Speaker 1: when things really go wrong? They buy a bomb property 530 00:30:51,000 --> 00:30:53,640 Speaker 1: it was asbestos in the building, or they were in 531 00:30:53,640 --> 00:30:55,800 Speaker 1: the share market. They'd never been in the share market, 532 00:30:55,920 --> 00:30:58,520 Speaker 1: and guess what, there was a crash, you know, six 533 00:30:58,560 --> 00:31:03,120 Speaker 1: months after they start. How do people get through those hurdles. 534 00:31:03,440 --> 00:31:06,560 Speaker 2: To answer that question, I guess to our satisfaction and 535 00:31:06,640 --> 00:31:10,400 Speaker 2: making it practical for listeners, I would say, first see, 536 00:31:10,800 --> 00:31:14,080 Speaker 2: we need to think about two things. Number one, it 537 00:31:14,120 --> 00:31:17,560 Speaker 2: is possible to fire. I'm like I said, I'm not 538 00:31:17,600 --> 00:31:20,320 Speaker 2: advocated for fire. The way I approach it is I 539 00:31:20,320 --> 00:31:25,280 Speaker 2: look at fire and wealth management as a combination. So 540 00:31:25,800 --> 00:31:27,800 Speaker 2: I like to use with fire wealthy. That's what I 541 00:31:27,840 --> 00:31:33,160 Speaker 2: share with my students. And I know it's possible because 542 00:31:33,480 --> 00:31:36,160 Speaker 2: I've done it, and there many other people who have 543 00:31:36,280 --> 00:31:38,240 Speaker 2: done it. That's why we've got so many high network 544 00:31:38,280 --> 00:31:42,640 Speaker 2: individuals and ultra high networth individuals in Australian. The other 545 00:31:42,680 --> 00:31:47,560 Speaker 2: thing that's important to think about fire is networth. So 546 00:31:47,880 --> 00:31:51,240 Speaker 2: that's how I approach fire. I approach file from building 547 00:31:51,280 --> 00:31:54,000 Speaker 2: my networth. And the reason why I use that word 548 00:31:54,040 --> 00:31:57,440 Speaker 2: and I repeat the word networth is because building networth, 549 00:31:57,520 --> 00:32:00,000 Speaker 2: or getting our listeners to be in the mindset of 550 00:32:00,040 --> 00:32:05,240 Speaker 2: building networth, means that they are looking at actively taking 551 00:32:05,360 --> 00:32:10,480 Speaker 2: steps and those steps are positive to actually save to invest, 552 00:32:10,640 --> 00:32:13,200 Speaker 2: you know. And also it's not just saving an investing, 553 00:32:13,240 --> 00:32:16,600 Speaker 2: which is what fire talks about, but it forgets that 554 00:32:17,040 --> 00:32:19,680 Speaker 2: you have to work better, you have to earn better, 555 00:32:20,040 --> 00:32:23,040 Speaker 2: you also have to spend better in order to meet 556 00:32:23,080 --> 00:32:27,880 Speaker 2: your savings and investment grow because it all what's hand 557 00:32:27,880 --> 00:32:30,120 Speaker 2: in hand. They're all good friends, right, it's having It's 558 00:32:30,120 --> 00:32:32,640 Speaker 2: like having a platter, a beer platter, right, So instead 559 00:32:32,640 --> 00:32:35,680 Speaker 2: of just enjoying an ale or it's out, you've got 560 00:32:35,680 --> 00:32:38,760 Speaker 2: the you've got the best alos. And at the same time, 561 00:32:38,840 --> 00:32:41,120 Speaker 2: you need to understand how the world money works. So 562 00:32:41,120 --> 00:32:45,760 Speaker 2: what I term the money verse because procular fire independent 563 00:32:45,800 --> 00:32:49,880 Speaker 2: of the money verse is actually something that that doesn't work. 564 00:32:50,080 --> 00:32:53,680 Speaker 2: It has to be together. So that's what our listeners 565 00:32:54,280 --> 00:32:58,120 Speaker 2: they lack. And that's a comprehensive understanding. So why did 566 00:32:58,160 --> 00:33:00,840 Speaker 2: I Why am I saying this is because when they 567 00:33:00,960 --> 00:33:05,280 Speaker 2: do this, the chances of them actually failing will be 568 00:33:05,400 --> 00:33:08,640 Speaker 2: much lesser. So that's the first So that's the first seconds. 569 00:33:08,800 --> 00:33:11,160 Speaker 2: What happens when you know we've done everything right and 570 00:33:11,360 --> 00:33:14,040 Speaker 2: the universe is against us, and it happens. I've livedal 571 00:33:15,080 --> 00:33:18,120 Speaker 2: the Asian financial crisis, so you know, I'm not that young. 572 00:33:18,480 --> 00:33:23,880 Speaker 2: I've experienced sas before I experienced the financial crisis. You know, 573 00:33:23,920 --> 00:33:29,560 Speaker 2: all these were major slaschhammers on my portfolio. 574 00:33:31,320 --> 00:33:32,960 Speaker 3: What I did. 575 00:33:32,840 --> 00:33:36,040 Speaker 2: When I was thinking about my journey, my own personal 576 00:33:36,040 --> 00:33:39,480 Speaker 2: finance journey and building my network, was that what if 577 00:33:39,520 --> 00:33:43,400 Speaker 2: these things happened and I predd the markets going down? 578 00:33:43,440 --> 00:33:46,200 Speaker 2: So when I looked at the fourth suppose that I shared, 579 00:33:46,320 --> 00:33:52,000 Speaker 2: what I did practically was to actually change the principles 580 00:33:52,280 --> 00:33:58,440 Speaker 2: to to adjust for these unfortunate circumstances. So when I 581 00:33:58,480 --> 00:34:02,960 Speaker 2: mentioned about the retirement amount, you know your annual expertsis 582 00:34:03,000 --> 00:34:06,680 Speaker 2: time twenty five, I actually used a much higher number. 583 00:34:06,680 --> 00:34:09,319 Speaker 2: I used more than twenty five. I actually applied more 584 00:34:09,360 --> 00:34:12,440 Speaker 2: than four percent in my calculation and not only that, 585 00:34:12,520 --> 00:34:16,320 Speaker 2: I actually added in inflation, and I added in hyperinflation 586 00:34:16,400 --> 00:34:19,600 Speaker 2: in my own calculations as well, So the final number 587 00:34:19,640 --> 00:34:23,120 Speaker 2: that I adjusted for myself a day was much higher. 588 00:34:23,280 --> 00:34:25,440 Speaker 2: Source meant I had to work harder, I had to 589 00:34:25,560 --> 00:34:27,759 Speaker 2: work better, I had to earn better, you know, up 590 00:34:27,760 --> 00:34:30,920 Speaker 2: my earnings. So all of that provided me with the 591 00:34:30,960 --> 00:34:34,799 Speaker 2: ability to buffer all the different I just pecups in 592 00:34:34,840 --> 00:34:36,880 Speaker 2: the financial markets. But also the other thing I remember 593 00:34:37,000 --> 00:34:41,560 Speaker 2: is everything in the universe is psychical, meaning that when 594 00:34:41,600 --> 00:34:45,879 Speaker 2: the financial markets go down, they will rebound as wells 595 00:34:45,920 --> 00:34:48,239 Speaker 2: just like the elevators. Right, what goes up comes down, 596 00:34:48,280 --> 00:34:51,040 Speaker 2: what goes down goes up. So the important thing is 597 00:34:51,080 --> 00:34:55,040 Speaker 2: to be able to be in a position. I'll make 598 00:34:55,040 --> 00:34:58,680 Speaker 2: sure that you're in a financial position to actually sit tight, 599 00:34:59,080 --> 00:35:02,680 Speaker 2: right and they're trying to sit out, and. 600 00:35:03,440 --> 00:35:06,200 Speaker 3: Don't go jumping around doing crazy things. What is it 601 00:35:06,200 --> 00:35:06,680 Speaker 3: crazy things? 602 00:35:06,719 --> 00:35:08,799 Speaker 2: I mean, you know, start you know, liquid eating there, 603 00:35:08,920 --> 00:35:14,720 Speaker 2: selling there, and put yourself in a more challenged financial position. 604 00:35:15,360 --> 00:35:18,799 Speaker 2: When the markets recover, then you are actually even more 605 00:35:18,840 --> 00:35:20,120 Speaker 2: backward than you were. 606 00:35:22,160 --> 00:35:25,800 Speaker 1: Okay, all right, I like your approach. You've you've certainly 607 00:35:26,160 --> 00:35:29,200 Speaker 1: convinced me much more than I had been like. 608 00:35:29,960 --> 00:35:33,120 Speaker 2: My obtele doctor to convince you, but it was just 609 00:35:33,160 --> 00:35:34,560 Speaker 2: a Michelle listeners. 610 00:35:34,560 --> 00:35:38,040 Speaker 1: Well you have, you have, you have, And I think 611 00:35:38,080 --> 00:35:39,759 Speaker 1: what we needed to do we needed to get a 612 00:35:39,760 --> 00:35:42,120 Speaker 1: show where we spelled it out and we've stress tested 613 00:35:42,120 --> 00:35:44,440 Speaker 1: it and we really laid it out and I think 614 00:35:44,480 --> 00:35:46,600 Speaker 1: you've done that very well. So thank you very much 615 00:35:46,640 --> 00:35:48,839 Speaker 1: for coming on the show. Line Lee. Great to hear 616 00:35:48,880 --> 00:35:49,160 Speaker 1: from you. 617 00:35:49,200 --> 00:35:51,160 Speaker 3: It's my pleasure. James, Yeah, thanks for having me. 618 00:35:51,239 --> 00:35:52,960 Speaker 2: You know, it's great to be able to chat with 619 00:35:53,040 --> 00:35:56,840 Speaker 2: one of Australia's most experienced financial journalists. You know, I 620 00:35:57,200 --> 00:36:00,960 Speaker 2: also contribute to articles to various news media you know, 621 00:36:01,080 --> 00:36:03,319 Speaker 2: in around the world, but I must see that I 622 00:36:03,360 --> 00:36:05,759 Speaker 2: do not have the wealth of journalism that you have. 623 00:36:05,840 --> 00:36:07,759 Speaker 3: So you're definitely a role model for me. 624 00:36:09,640 --> 00:36:11,840 Speaker 1: There you go, Well, there's a career. There's a career 625 00:36:11,880 --> 00:36:13,880 Speaker 1: for you. There's a career for you journalism should you 626 00:36:13,920 --> 00:36:16,200 Speaker 1: ever wish to do so. Okay, folks, that was not 627 00:36:16,320 --> 00:36:19,040 Speaker 1: only great to hear from him, great to hear from you. 628 00:36:19,080 --> 00:36:21,480 Speaker 1: I hope you're enjoying your break to be ready for 629 00:36:21,520 --> 00:36:24,320 Speaker 1: our season coming up, our special season of the Outlook 630 00:36:24,360 --> 00:36:28,560 Speaker 1: for twenty twenty five coming up, soon keep the emails 631 00:36:28,600 --> 00:36:31,560 Speaker 1: coming in the money puzzle at the Australian dot com 632 00:36:31,600 --> 00:36:33,200 Speaker 1: dot au Talk to you soon.