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Speaker 1: Hello, James Kirby. Here, just a quick note before we begin.

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Speaker 1: We're taking a short break over the holiday period and

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Speaker 1: we'll be back with the first new episode of The

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Speaker 1: Money Puzzle for the new year on Wednesday, January fourtheenth

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Speaker 1: in the meantime here was one of the shows that

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Speaker 1: you absolutely loved last year. It's Lionel Lee and he's

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Speaker 1: talking about fire movement. That's the financial Independence retire Early movement.

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Speaker 1: It's an enduring and appealing concept for so many investors.

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Speaker 1: I'm sure you'll enjoy it on behalf of the Money

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Speaker 1: Puzzle team, especially my producer Leah Sammaglu, who's been so.

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Speaker 2: Good this year.

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Speaker 1: I'd like to wish you all and merry Christmas and

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Speaker 1: a happy new Year. Hello and welcome to the Australians

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Speaker 1: Money Puzzle podcast. I'm James Kirby, the Worth Editor the Australian,

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Speaker 1: and welcome aboard everybody. I hope you're having a good

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Speaker 1: break and I wish you a good holiday season and

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Speaker 1: a prosperous new year. And speaking of prosperity, there's a

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Speaker 1: show I've wanted to do all year. It's about the

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Speaker 1: Fire movement FIOR in this case that means financial independence

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Speaker 1: retire early. We did some coverage of it during the

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Speaker 1: year midyear on the Money Puzzle podcast, and we were,

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Speaker 1: I suppose, more skeptical and enthusiastic about the concept, and

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Speaker 1: for a variety of reasons, but the core reason was

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Speaker 1: that we were of the opinion that it's just not

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Speaker 1: that easy to do that. And some of the pitches,

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Speaker 1: if you like, on the Fire movement, though, people are

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Speaker 1: so interested in it and so enthusiastic about it, But

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Speaker 1: some of the pitches that I had come across about

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Speaker 1: the presentation I just thought were a little bit making

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Speaker 1: it sound too easy and perhaps could to some extent

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Speaker 1: exploit naivety. Now I wanted to get someone to come on.

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Speaker 1: Now the thing on the show, we'll talk about it.

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Speaker 1: The thing about Fire movement is, it's a movement. It

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Speaker 1: is a set of principles. There is no fire I

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Speaker 1: can't go downtown and take you to the local branch

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Speaker 1: of the local office. There's no headquarters in Geneva or Washington.

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Speaker 1: It's a concept, it's a set of principles. But I

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Speaker 1: did want to get someone to talk about it who

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Speaker 1: to whom it had made a difference to someone who

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Speaker 1: was also to some extent and financial educator and could

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Speaker 1: articulate its main ideas. And I have found the very

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Speaker 1: person for the exercise. His name is Lionel Lee. He

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Speaker 1: is a international investment operator. He works with a group

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Speaker 1: called invest Unite and they are asset managers here and

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Speaker 1: across Asia. I'm speaking to him actually in Seoul. He

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Speaker 1: lives part of the year in Melbourne, and delighted to

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Speaker 1: have him on the show. Lion Lee, how are you.

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Speaker 2: I find thank you thanks for having me on the

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Speaker 2: Australian Money Puzzle, James. It's an honor to actually be

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Speaker 2: on your show.

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Speaker 1: You're very welcome, delighted to have you, Delighted to find

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Speaker 1: you after some efforts to try and get what I

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Speaker 1: thought would be the ideal gift. So so I explained

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Speaker 1: there about how our listeners were very interested in the

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Speaker 1: fire movement. But when I was talking to you earlier,

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Speaker 1: and I was struggling even still to try and grab

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Speaker 1: this because I'm the sort of person who wants I

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Speaker 1: want to see this sort of tangible evidence that it exists.

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Speaker 1: I want to see its charter and its rules, and

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Speaker 1: I want to see a sort of hierarchy. But that

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Speaker 1: doesn't really exist, does it. It's a concept.

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Speaker 2: Yes, I'm very similar to yourself, you know. I like

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Speaker 2: information that's practical and that's useful, you know, especially if

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Speaker 2: we're addressing listeners who are just to some extent depending

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Speaker 2: on your podcast to understand what's really happening in the

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Speaker 2: Australian economy, financial markets as well as in their personal

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Speaker 2: financial world. So to keep it simple for listeners, Fire

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Speaker 2: basically just focuses on extreme savings and investing, which a

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Speaker 2: goal to retire much earlier than usual. So I'm just

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Speaker 2: summarizing everything that's talked about Fire, you know, in the

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Speaker 2: world Wide Web and also in Australia. Essentially, it is

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Speaker 2: a movement, has no headquarters, there's no branch, there's no chapter,

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Speaker 2: and it was popularized by a book that's called Your Money,

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Speaker 2: All Your Life, back in nineteen ninety two. The other

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Speaker 2: thing to note is Fire doesn't originate from Australia, so

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Speaker 2: it's not ausy concept. It originated in the US. The

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Speaker 2: book is an American book, the authors are American, and

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Speaker 2: over there I guess over the years and also in summation,

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Speaker 2: some traits of here that you might come across in

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Speaker 2: your conversation with our Australian listeners. Is that typically those

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Speaker 2: who subscribe to the Fire movement, they say between fifty

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Speaker 2: to seventy five percent of their income, that's what they're

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Speaker 2: aiming to do. They might pick up extra jobs. Some

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Speaker 2: might talk about, you know, laying major spending events in

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Speaker 2: order to be able to save and invest with the

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Speaker 2: goal of retiring earlier than usual. So earlier than usual

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Speaker 2: here to me, we just mean before the statutory retirement age.

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Speaker 1: So you tuned into this pretty early, right, because your money,

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Speaker 1: your life which is still out there of course needs

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Speaker 1: to say revised and updated. Endasy. It's by Vicki Robin

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Speaker 1: and Joe Denis, published in the UK, was a best

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Speaker 1: seller at the time and remains always available. Tell me

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Speaker 1: you tuned into this quite a long time ago. It

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Speaker 1: was pretty fresh idea at that time in the nineteen nineties.

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Speaker 1: When you first came upon the idea? What was it?

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Speaker 1: What tell us they talk about nine steps to transforming

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Speaker 1: your relationship with money? What were the key aspects of fire?

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Speaker 1: The principle is the fire that attracted you.

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Speaker 2: So I came across Fire actually many years after it

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Speaker 2: was published nine ney two. So my engagement I guess

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Speaker 2: with the principles was in the late nineteen nineties when

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Speaker 2: I was working with the US market, So that's actually

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Speaker 2: where I came across the whole concept of fire. The

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Speaker 2: community of the fire committee wasn't really there yet, but

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Speaker 2: you know, it was building up steam. So again, for

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Speaker 2: the benefit of listeners who are new to fire and

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Speaker 2: without trying to confuse them with the many permutations of

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Speaker 2: fire that have taken place over the years, there are

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Speaker 2: four basic principles that I've extracted from all of that.

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Speaker 2: So the number one is what they call the fire number. Essentially,

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Speaker 2: that number is just an estimate of how much you'll

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Speaker 2: need to retire, and the way in which the fire

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Speaker 2: community derives that number is by multiplying your annual expense

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Speaker 2: by twenty five. So let's say if our annual expense

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Speaker 2: is eighty thousand dollars, you know, as a couple, then

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Speaker 2: your fire number is just simply two million. It's just

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Speaker 2: eighty thousand times twenty five. The second principle I took

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Speaker 2: away is the four percent role states simply how much

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Speaker 2: you can withdraw from your retirement fund in the first year,

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Speaker 2: and then every subsequent year that amount is adjusted for inflation.

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Speaker 2: So if we use the couple that has two million

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Speaker 2: dollars again, in the first year of retirement, the couple

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Speaker 2: would be able to only withdraw a maximum of eighty K.

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Speaker 2: That I extracted from the principles and the concept and

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Speaker 2: the movement that felt was practical to some ext then,

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Speaker 2: is that the Fire movement and Fire followers prioritize setting

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Speaker 2: up your emergency fund before focusing on investing, and that

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Speaker 2: fund should be three the six months worth of savings.

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Speaker 1: You're going through. The tape there is very useful, but

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Speaker 1: I think I have to say it seems to me

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Speaker 1: that's the hardest thing. Yes, but people have very little

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Speaker 1: money and they want to think about investing. The last

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Speaker 1: thing they're going to be able to do was put

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Speaker 1: away a few months worth of money.

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Speaker 2: Yes, And I agree as well. It's it is challenging

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Speaker 2: because you're trying to save and I want to say invest,

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Speaker 2: you're probably trying to safe and pay down some of

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Speaker 2: your big expenditure at the same time. I think that's

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Speaker 2: what a lot of listeners are probably finding themselves in,

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Speaker 2: especially more so today with you know, higher cost of living, inflation,

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Speaker 2: though all the variety of woes that are making it

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Speaker 2: tough to be an Australian today, but there are ways

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Speaker 2: to actually, I guess, get around or find a balance,

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Speaker 2: and I guess before going to the fourth principle. One

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Speaker 2: recent example was a conversation I had with an individual

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Speaker 2: in Ballarat, Victoria, and he was trying to actually build

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Speaker 2: his emergency fund while trying to pay down his mortgage

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Speaker 2: at the same time. Like that's a really tough thing

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Speaker 2: to do, right, but that is the reality. So what

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Speaker 2: we came up with as a solution was, look, if

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Speaker 2: we combine the emergency fund together with an account that

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Speaker 2: actually allowed him to pay down his mortgage, he would

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Speaker 2: get the best of both walls combined into one. So

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Speaker 2: we found that solution using a offset account and a

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Speaker 2: redraw facility, so his emergency fund would still be intact.

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Speaker 2: He would still be build that fund, but as he

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Speaker 2: is adding more money to that emergency fund, is a

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Speaker 2: is actually actively being down his principal on his mortgage.

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Speaker 1: Okay, so now what we will do. We're going to

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Speaker 1: let you to continue those principles. We'll take a short

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Speaker 1: break and I'll let you roll on where you were

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Speaker 1: getting to there. You had four I think you've given

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Speaker 1: us four and you can give us the rest after

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Speaker 1: the break. I'm sure people would be very keen to

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Speaker 1: hear what they are one moment. Hello, Welcome back to

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Speaker 1: the Australians Money Puzzle podcast, our special podcast on the

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Speaker 1: fire movement fio E Financial Independence Retire Early. It's a concept,

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Speaker 1: it's a movement around the world. It captures the imagination

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Speaker 1: of many people there are. One of the reasons I

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Speaker 1: wanted to do this show, especially at during the Christmas break,

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Speaker 1: was because it's something that you kind of stand back

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Speaker 1: from the day to day and think about and I

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Speaker 1: think it's captures, as I say, the imagination of many Australians.

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Speaker 1: It's a little bit harder to grasp. It's even harder

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Speaker 1: to get a handle on who and who's in it

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Speaker 1: and how it works. There are meetings around the country,

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Speaker 1: from Cooler roy to Melbourne's CBD. I've come upon on

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Speaker 1: the internet. There are many different organizations. No one owns

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Speaker 1: it and there is no one person who can say

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Speaker 1: they are in charge of it or the chief spokesman

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Speaker 1: for it. But today's guest on the show is Lionel Lee.

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Speaker 1: In the first segment, he was just starting to outline

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Speaker 1: some of the key principles. You might just tell us

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Speaker 1: the rest of the key principles of the Fire movement.

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Speaker 2: No problem. Yeah, I'll just leave our listeners with the fourth.

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Speaker 2: And essentially, the fourth principle is just that you're considered

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Speaker 2: financially independent and you can retire early if you wish,

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Speaker 2: once your passive income generates enough to cover your basic

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Speaker 2: living expenses. So that's the fourth principle that I took

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Speaker 2: away from the Fire Movement that I've out was useful

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Speaker 2: and practical for my personal financial needs.

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Speaker 1: Now, the other thing with the last one, which sounds

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Speaker 1: you know, sounds so sensible, Well, you know, you get

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Speaker 1: to the point where your passive income covers your expenses. Yes,

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Speaker 1: that is a lot harder than it sounds.

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Speaker 2: Yes, and I totally agree with you.

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Speaker 1: What do people in the Australian market generally use for

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Speaker 1: passive income to cover their expenses? Is it property? Is

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Speaker 1: it share market investing? What is it ETFs? What do

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Speaker 1: they use?

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Speaker 2: The Australian market is fairly narrow in its use of

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Speaker 2: a variety of financial instruments to create passive income. So

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Speaker 2: I would have to say that majority of moms and pops,

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Speaker 2: you know, even the young adults who are listening in

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Speaker 2: generally hit towards roast, so roastate becomes the common passive

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Speaker 2: income tall shru want not generator that. Then, of course

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Speaker 2: there are those that are invested in the ESX so

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Speaker 2: those drum stock exchange and market and folks of course

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Speaker 2: having fixed income as well that would include some cash,

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Speaker 2: maybe bonds, some deposits. Generally those are the treaming asset classes.

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Speaker 2: I'm not going to show in things like you know,

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Speaker 2: the digital assets like crypto and stuff like that, but

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Speaker 2: traditionally those are the three asset classes that majority of

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Speaker 2: our Austrian listeners have the moneies in and are using

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Speaker 2: to gerate passive income.

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Speaker 1: Okay, now, can I just say to you that the

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Speaker 1: challenge to me is that this goes really slowly. If

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Speaker 1: I have it in cash, it's three or four percent.

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Speaker 1: If I have it in property, the yields are two

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Speaker 1: or three percent. In net. If I have it on

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Speaker 1: the share market, the Australian share market, the dividend is

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Speaker 1: about four and a half. It's going to be a

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Speaker 1: long time before that passive income. This is why I'm

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Speaker 1: so skeptical, not that I completely admire the individual listeners

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Speaker 1: aspiration to achieve this, but I need to be I

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Speaker 1: feel we need to sober up on how long and

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Speaker 1: how hard it is to achieve this. Is there anything

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Speaker 1: you know that I don't know that makes it easier

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Speaker 1: than it sounds.

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Speaker 2: I agree with you, James, it's not easier than it sounds.

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Speaker 2: Even I wouldn't even as a I'm as not finance educator,

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Speaker 2: you know, and I teach in the universities, not just

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Speaker 2: in Australia but also Alsode Australia. I've been a guest

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Speaker 2: speaker at private client events you know that are organized

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Speaker 2: by banks, financial institutions, wealth managers. I always tell the

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Speaker 2: audience it is not easy, even though I'm being used

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Speaker 2: as a reference. So I'm sure that in your Google

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Speaker 2: search or background search of myself it probably pops up

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Speaker 2: that I'm one of those individuals who went from being

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Speaker 2: an employee to an ultra high network and therefore managed

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Speaker 2: to fire by h forty.

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Speaker 1: Ever had a fixed salary. You didn't do it on

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Speaker 1: a fix I did.

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Speaker 2: It partly on a fixed I's I was an employee

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Speaker 2: and when I started, like most of the other folks,

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Speaker 2: I didn't come from a wealthy family I didn't have

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Speaker 2: any inheritance, so it's purely hard work. So I totally

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Speaker 2: agree and I support you, James in your statement to

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Speaker 2: listeners that it is not a quick fix, is not

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Speaker 2: an easy thing to do. It requires time and commitment.

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Speaker 1: So that's and lifetime commitment.

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Speaker 2: Yes, that's right, and that's something that I had to

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Speaker 2: do for myself. So you know, there's a couple of

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Speaker 2: things that even though I encountered the fire movement, as

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Speaker 2: I said early so in the late nineteen nineties, I

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Speaker 2: didn't think that everything that I picked up was useful,

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Speaker 2: practical and I could actually implement because there were things

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Speaker 2: that were missing. So what was missing was what I

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Speaker 2: actually picked up in my course of work. So I

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Speaker 2: work in an investment holdings company, I have to travel

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Speaker 2: the international market, so I worked in twenty plus markets.

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Speaker 2: I worked with ten more than ten industries. And what

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Speaker 2: I've learned in engaging with those corporations, family enterprises, family

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Speaker 2: offices as well as the ultra high network individuals is

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Speaker 2: how they manage and drew their wealth. So for them,

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Speaker 2: it wasn't about fire, because they didn't need to talk

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Speaker 2: about fire. It was more of how they were actively

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Speaker 2: getting wealthy. So I combined what I learned with fire

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Speaker 2: and what I learned from interacting with the individuals that

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Speaker 2: had a much larger wealth base what the journey need

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Speaker 2: to look like. So I realized that Number one, I

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Speaker 2: had to up my earnings. So if I had if

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Speaker 2: my earnings didn't go up and I was just looking

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Speaker 2: to save more and invest more, I wouldn't have a

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Speaker 2: compounding effect. So I need to up my savings after

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Speaker 2: up my earnings. So the more I earned, the more

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Speaker 2: I could sive. So when I started working, you know,

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Speaker 2: I only had one thousand eight are dollars a month.

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Speaker 2: That was my salary where I started working back in

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Speaker 2: the late nineteen ninety So I started working nineteen ninety

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Speaker 2: five one thousand and eight. I was a bit more

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Speaker 2: fortunate because I was traveling extensively. I could save a

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Speaker 2: lot of my income. So I made a safe at

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Speaker 2: best seventy percent of that monthly income, and I.

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Speaker 1: Would sorry, sorry.

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Speaker 2: Seventeen So I managed to save seventeen seven zero.

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Speaker 1: You were have to save seven zero of your income, Okay, But.

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Speaker 2: I need to disclaim to our listeners that I was

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Speaker 2: fortunate because I was traveling extensively, So I didn't have

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Speaker 2: a lot of expenses, right, and also I was working

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Speaker 2: seventeen hours a day, seven days a week, so I

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Speaker 2: had no time to go, you know, to the pub,

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Speaker 2: yeah at night, for example, So I had very little

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Speaker 2: social life as well. So that allowed me to save

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Speaker 2: seventy percent. But what I did with the seventy percent,

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Speaker 2: The first thing I did was to actually find any

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Speaker 2: kind of savings instrument that would give me the highest

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Speaker 2: interest rate and I would actually put it in. So

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Speaker 2: I just went for them deposits. I went firm deposit hunting,

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Speaker 2: you know. Every time I had free time between well,

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Speaker 2: I would go look for them deposits, and I would

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Speaker 2: just keep kept I just kept putting money in there.

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Speaker 2: Because at that stage of life, I was not in

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Speaker 2: present doing this. I couldn't afford to use the small,

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Speaker 2: meager amounts ahead.

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Speaker 1: Okay, and the certifire principle that you start, I suppose

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Speaker 1: in terms of getting that emergency money at the start,

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Speaker 1: you have to say you can't gamble that you have

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Speaker 1: to save it. Yeah, okay, that's right.

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Speaker 2: Yeah, So I applied Prince one number tree, right, I

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Speaker 2: applied Prince one number three without just look at it

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Speaker 2: as a emergency fund. I looked at it also as

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Speaker 2: a fund that would grow that savings. Right, So many

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Speaker 2: of the times when you did my emergency fund, we

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Speaker 2: just opened the bank account and just kept keep putting

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Speaker 2: money in there. But it doesn't row at a high

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Speaker 2: interest rate, so I had to look for the high

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Speaker 2: interest rate accounts. In this case, when I was doing it,

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Speaker 2: there weren't high yel savings accounts, So the best thing

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Speaker 2: I could find was turmb deposits. So I just went

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Speaker 2: from tomb deposit the tomb deposit every time interest rate

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Speaker 2: increased from the issue. So I did that for a

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Speaker 2: while and then that actually up my savings. So that

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Speaker 2: also gave me a buffer to start thinking about investing.

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Speaker 1: I know you're just a sample of one, but when

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Speaker 1: you did begin investing as someone to which the adherence

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Speaker 1: to the Fire movement and its principles has really worked,

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Speaker 1: and beyond the term deposits, then what was your first

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Speaker 1: sort of foray into an investment beyond saving?

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Speaker 2: Yep, So I did actually what every other I guess

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Speaker 2: the average ossie would do, which is go buy home.

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Speaker 2: So my first investment was actually using the tumb deposits

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Speaker 2: to save enough to actually put a down payment on

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Speaker 2: a property. So that's what I did. So it's not

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Speaker 2: you know, sexy stuff, it's not rocket science. Everyone else

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Speaker 2: does the same thing. So I did that, and so

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Speaker 2: that actually started my investing I guess journey. And also

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Speaker 2: I started looking at the stock market as well, so

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Speaker 2: public equities being another asset class that I encountered during

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Speaker 2: my work, so I get the chance to learn more

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Speaker 2: about it and also then edit some of that money

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Speaker 2: to buying stocks as well. But I'm not a trader,

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Speaker 2: so essentially I'm looking to build my investment returns over time,

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Speaker 2: and I want to make sure that those investment returns

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Speaker 2: do not get half along the way, so it builds

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Speaker 2: up stately. So I don't go after high risk, high

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Speaker 2: return stuff. I look for stocks and shares that allowed

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Speaker 2: me to get a certain level of dividend. At the

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Speaker 2: same time, it also has capital gains over a long

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Speaker 2: period of time, So unfold stables or staples with my

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Speaker 2: stocks and shares, and of course with the travel I

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Speaker 2: engage with different markets, so that also allowed me to

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Speaker 2: think about diversifying my stocks into different exchanges versus just

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Speaker 2: one stock market.

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Speaker 1: Do you did any individuals in exchange not not exchange

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Speaker 1: traded funds. No, I mean ETFs. Is that part of your.

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Speaker 2: Yeah, we're talking about the Yeah, so I wasn't. I

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Speaker 2: wasn't using ETFs. I still don't personally have ETFs because

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Speaker 2: I based on the stock portfolio that I've worked on

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Speaker 2: myself over time, it's behaved like an ETF. So I

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Speaker 2: created my own ETF before ETFs were available. I'm not

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Speaker 2: saying I'm smart.

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Speaker 1: I understand the concept and it's a very strong concept.

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Speaker 1: But I imagine that it was very much a blue

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Speaker 1: chip portfolio.

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Speaker 2: Yes, if you're looking.

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Speaker 1: For dividends as well as each time. Okay, very good.

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Speaker 1: So interesting, first of all the emergency fund, then the savings,

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Speaker 1: then the home then this sort of slow but gradual

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Speaker 1: opening out of your investment for the trio into investment markets,

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Speaker 1: including the share market. Very interesting. Okay, Now I'll take

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Speaker 1: a break and I want to sort of stress test

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Speaker 1: the whole concept with you in the final segment. Back

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Speaker 1: in a moment, folks, Hello and welcome back to The

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Speaker 1: Australian's Money Puzzle podcast. I'm James Kirby and I'm talking

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Speaker 1: to Lione Lee and we're talking about the fire movement.

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Speaker 1: Fior Financial Independence retire early something that really captured our

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Speaker 1: listeners imaginations during the year, and I wanted to do

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Speaker 1: a special episode on it. Lionel Is is in the

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Speaker 1: investment markets. He's also a financial as you cater he's done.

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Speaker 1: He also does some work in education, financial education in

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Speaker 1: universities and schools. As you can have heard from the

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Speaker 1: first segments, he's a very articulate advocate. And look, I

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Speaker 1: just wanted to throw one or two things at you.

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Speaker 1: I'm sure you're gonna I'm sure you're gonna have good

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Speaker 1: answers for all this, But there's two or three things

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Speaker 1: I want to ask about. First of all, in our

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Speaker 1: own market in Australia, everybody has to put eleven and

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Speaker 1: a half percent of their savings into super by law mandatory,

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Speaker 1: which is good, but it's also a problem in some fashion.

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Speaker 1: One of those ways is that if money is tight,

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Speaker 1: as it is for many people, and you already have

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Speaker 1: to put eleven and a half percent into your retirement,

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Speaker 1: whether you like it or not, right by law you

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Speaker 1: must do. It's mandatory superinnuation guarantee charge. Does that dilute

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Speaker 1: or in some way sidestep needs to follow the fire movement.

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Speaker 2: I don't think there's actually it doesn't really side step

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Speaker 2: the need to follow the fire movement. I think one

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Speaker 2: point of clarification is we are not encouraging listeners to

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Speaker 2: follow the fire movement. I think my opinion is you

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Speaker 2: should use what you understand about the fire movement as

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Speaker 2: a guiding light and then apply what you feel works

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Speaker 2: for you to actually achieve your personal financial goals, whatever

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Speaker 2: those goals might be. Some people are not looking to

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Speaker 2: retire early. They just want financial independence. They just want

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Speaker 2: the fire side, but not the reside, right, So it's

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Speaker 2: really up to the individual. But coming back to superinnuation,

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Speaker 2: I am a fan of supernuation because there are many

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Speaker 2: Fellows Stilens out there who are not in the habit

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Speaker 2: of saving. Superneration to me is a form of forced savings.

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Speaker 2: And I know that eleven saying is, you know it's

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Speaker 2: a tough fee, but it is still a benefit for

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Speaker 2: those who are not in a habit of doing so,

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Speaker 2: and that helps with such definement. But that helps with

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Speaker 2: their retirement because at least we know that at some

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Speaker 2: point in time, what whenever they decide to retire, whether

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Speaker 2: it's before after the statutory retirement age, they do have

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Speaker 2: some funds they're waiting for them to live off and

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Speaker 2: to enjoy life with. I think that the issue I

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Speaker 2: have with the superannuation is more of the fat name

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Speaker 2: because it is seen as passive. You know, every you know,

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Speaker 2: my eleventh percent goes there, it takes care of itself.

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Speaker 2: The answer is it doesn't. So you have to. And

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Speaker 2: again I just repeating myself to listeners. You have to

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Speaker 2: because it's your money, pay attention to a super and

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Speaker 2: look for just like I've done with you know, my

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Speaker 2: meager salaries when I started looking for hiyo returns from

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Speaker 2: savings and some deposits, you should approach the super returns

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Speaker 2: in the same way. Look for ways to actually up

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Speaker 2: your super returns because every percentage counts due to compounding,

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Speaker 2: and over time that small percentage increase compounds to a

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Speaker 2: large dollar number at the end of twenty twenty five

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Speaker 2: or thirty years or even thirty five years for many

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Speaker 2: young and middle age Australian.

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Speaker 1: We shouldn't underestimate the power compoundings. And it's a key

436
00:26:32,000 --> 00:26:34,040
Speaker 1: thing obviously in the fire movement, that whole thing that

437
00:26:34,440 --> 00:26:37,480
Speaker 1: basically time in the market rather than timing the market,

438
00:26:37,640 --> 00:26:40,080
Speaker 1: which is so important. Can I ask you about that?

439
00:26:40,200 --> 00:26:42,680
Speaker 1: Of course, more part of fire is, as you say,

440
00:26:42,680 --> 00:26:45,119
Speaker 1: the second part of it. The first part is financial independence.

441
00:26:45,119 --> 00:26:48,159
Speaker 1: The second part is retired early. Super doesn't allow you

442
00:26:48,200 --> 00:26:50,119
Speaker 1: to retire early. You can't get your hands on your

443
00:26:50,119 --> 00:26:52,800
Speaker 1: super until you retire, So to that extent, it's not

444
00:26:52,960 --> 00:26:58,600
Speaker 1: very good from that perspective. What about borrowing? What's the

445
00:26:58,720 --> 00:27:04,040
Speaker 1: approach in relation to borrowing? Because borrowing at its best,

446
00:27:04,080 --> 00:27:07,040
Speaker 1: obviously it can magnify and accelerate wealth building.

447
00:27:07,160 --> 00:27:10,680
Speaker 2: Yes, so I think the word borrowing and the other

448
00:27:10,720 --> 00:27:14,159
Speaker 2: word that comes to mind will be leverage. So boring

449
00:27:14,200 --> 00:27:18,240
Speaker 2: and leverage they are. They might sound similar, but they're

450
00:27:18,280 --> 00:27:20,320
Speaker 2: not the same. So I think when we use the

451
00:27:20,320 --> 00:27:27,440
Speaker 2: word borrowing, most people are actually borrowing to get into debt.

452
00:27:27,680 --> 00:27:32,200
Speaker 2: So boring and debt I mean a car like good Buddies,

453
00:27:32,280 --> 00:27:36,000
Speaker 2: which is not good for the individual. So I cannot

454
00:27:36,119 --> 00:27:40,320
Speaker 2: use the word borrowing because it paints the picture of

455
00:27:40,560 --> 00:27:43,240
Speaker 2: you know, you borrow our consequences. It's like buy now,

456
00:27:43,280 --> 00:27:46,359
Speaker 2: pay later, right, so it's a car borrowing. I prefer

457
00:27:46,400 --> 00:27:48,840
Speaker 2: to use the word leverage that I prefer listeners that

458
00:27:48,880 --> 00:27:52,040
Speaker 2: think about leverage, because liverage means that there's an active

459
00:27:52,240 --> 00:27:57,040
Speaker 2: positive approach that you're taking to the borrowing. So if

460
00:27:57,080 --> 00:28:02,720
Speaker 2: you are liveraging assets, you know you're liverting your cash

461
00:28:03,080 --> 00:28:10,520
Speaker 2: to actually then acquire more income generating gains generating assets,

462
00:28:10,600 --> 00:28:12,600
Speaker 2: then yes, I would say, you know there's something you

463
00:28:12,640 --> 00:28:14,680
Speaker 2: should do, which is what I did.

464
00:28:15,320 --> 00:28:20,320
Speaker 1: So, for example, you're talking about active tax deductible investment

465
00:28:20,440 --> 00:28:26,520
Speaker 1: only investment focused borrowing, I e. Leverage. Is there any

466
00:28:26,560 --> 00:28:29,159
Speaker 1: guidelines as to how much or how little someone should

467
00:28:29,320 --> 00:28:30,000
Speaker 1: engage in that.

468
00:28:31,119 --> 00:28:34,679
Speaker 2: I don't really have a prescription. I would say that

469
00:28:34,720 --> 00:28:39,520
Speaker 2: really depends on your circumstances. So the way I will

470
00:28:39,560 --> 00:28:42,240
Speaker 2: look at it just to provide some kind of guide

471
00:28:42,240 --> 00:28:44,520
Speaker 2: to listeners who are thinking about this and I don't

472
00:28:44,560 --> 00:28:47,360
Speaker 2: want them to actually start doing it and get into,

473
00:28:47,520 --> 00:28:52,200
Speaker 2: you know, a fix I become debt ridden, is that firstly,

474
00:28:52,480 --> 00:28:55,640
Speaker 2: look at how much cash base you have. The cash

475
00:28:55,680 --> 00:29:00,520
Speaker 2: base is essentially your protection against liberty. Too much that

476
00:29:00,600 --> 00:29:03,120
Speaker 2: means that you are able to repay down some of

477
00:29:03,160 --> 00:29:06,760
Speaker 2: that liverage to be in a position whereby you are

478
00:29:07,200 --> 00:29:12,880
Speaker 2: actually not bleeding your financially. Then also look at the

479
00:29:12,920 --> 00:29:17,480
Speaker 2: cost of liverage. For example, if I were to borrow

480
00:29:17,920 --> 00:29:19,760
Speaker 2: you know. Let's sorry, let me let's go back to

481
00:29:19,960 --> 00:29:21,960
Speaker 2: I own a property, right, so I properly has a

482
00:29:22,040 --> 00:29:25,040
Speaker 2: lot of equity over maybe the ten, fifteen, twenty years,

483
00:29:25,320 --> 00:29:28,360
Speaker 2: I'm looking to borrow on that equity. That borrowing is

484
00:29:28,400 --> 00:29:31,479
Speaker 2: not free. It is leverage, but it's not free. So

485
00:29:31,680 --> 00:29:36,320
Speaker 2: if you are actually taking equity out at a high interest,

486
00:29:36,720 --> 00:29:39,720
Speaker 2: then your liverage becomes really costly. So the cost of

487
00:29:39,760 --> 00:29:42,960
Speaker 2: liverage is important because if you are safe, for example,

488
00:29:43,440 --> 00:29:48,040
Speaker 2: taking equity out and it costs you six percent, but

489
00:29:48,160 --> 00:29:51,920
Speaker 2: you're putting into something else that only gets you five percent,

490
00:29:51,960 --> 00:29:56,160
Speaker 2: you're losing one percent. So you have to live rich. Yes,

491
00:29:56,440 --> 00:29:58,800
Speaker 2: So the other thing you think about the cost working.

492
00:29:59,360 --> 00:30:02,560
Speaker 1: Okay, so do your numbers carefully and the numbers.

493
00:30:02,280 --> 00:30:05,800
Speaker 2: Move exactly exactly. That's right, And so you have to

494
00:30:05,800 --> 00:30:08,160
Speaker 2: pay attention. Right, You can't just sit back and think, Okay,

495
00:30:08,200 --> 00:30:11,440
Speaker 2: the banks, you know, the financial institutions, my my gro

496
00:30:11,600 --> 00:30:14,640
Speaker 2: go will take care of everything. They don't. So if

497
00:30:14,680 --> 00:30:19,000
Speaker 2: you've got money in you know, any kind of assets, well,

498
00:30:19,240 --> 00:30:21,000
Speaker 2: you've got money. You need to take care of your money.

499
00:30:21,000 --> 00:30:22,760
Speaker 2: You need to pay attention. You need to find ways

500
00:30:22,800 --> 00:30:25,880
Speaker 2: to get that money. However, little or much you have

501
00:30:26,320 --> 00:30:27,680
Speaker 2: to work better for you.

502
00:30:29,640 --> 00:30:32,600
Speaker 1: It sounds like the idea of set and forget is

503
00:30:32,720 --> 00:30:33,520
Speaker 1: not your idea.

504
00:30:33,640 --> 00:30:37,840
Speaker 3: No, do not ever set and for Yeah, yeah, I

505
00:30:37,880 --> 00:30:39,600
Speaker 3: like that. I like that don't set and forget. I

506
00:30:39,640 --> 00:30:43,680
Speaker 3: completely agree with you. Okay, it's very interesting. I really

507
00:30:43,760 --> 00:30:46,440
Speaker 3: like how you've presented all this. Just one last thing

508
00:30:46,520 --> 00:30:50,080
Speaker 3: about fire and the Fire movement, and I wanted to ask,

509
00:30:50,280 --> 00:30:51,680
Speaker 3: what if things go wrong?

510
00:30:51,920 --> 00:30:56,280
Speaker 1: So somebody has a plan they and they really are

511
00:30:56,440 --> 00:30:59,000
Speaker 1: serious and they start and they say, Okay, I'm going

512
00:30:59,040 --> 00:31:01,200
Speaker 1: to do this. I'm going to really do this. I'm

513
00:31:01,240 --> 00:31:04,640
Speaker 1: going to adhere to this, and it's not my New

514
00:31:04,720 --> 00:31:07,280
Speaker 1: Year's resolution. I'm going to do this for years. I'm

515
00:31:07,280 --> 00:31:08,640
Speaker 1: got to follow the basic I'm going to get my

516
00:31:08,680 --> 00:31:12,840
Speaker 1: emergency funds started so that I can cover emergencies of

517
00:31:12,960 --> 00:31:16,120
Speaker 1: whatever they may be. It might be a surprise health bill,

518
00:31:16,360 --> 00:31:19,520
Speaker 1: it might be that the interest rates went up and

519
00:31:19,560 --> 00:31:21,680
Speaker 1: I have to pay more per month. But they've covered that,

520
00:31:22,040 --> 00:31:25,320
Speaker 1: and they've got there, they've got their plans, and they

521
00:31:25,360 --> 00:31:29,120
Speaker 1: have their age in mind that they'd like to achieve

522
00:31:29,160 --> 00:31:33,840
Speaker 1: financial independence. What do you say to people when things

523
00:31:33,880 --> 00:31:36,920
Speaker 1: really go wrong they buy a bomb property. It was

524
00:31:36,960 --> 00:31:40,320
Speaker 1: asbestos in the building, or they were in the share market.

525
00:31:40,320 --> 00:31:42,480
Speaker 1: They'd never been in the share market. And guess what

526
00:31:42,520 --> 00:31:45,360
Speaker 1: there was a crash, you know, six months after they start.

527
00:31:45,840 --> 00:31:48,840
Speaker 1: How did people get through those hurdles.

528
00:31:49,160 --> 00:31:52,280
Speaker 2: To answer that question, I guess two hours satisfaction and

529
00:31:52,360 --> 00:31:56,040
Speaker 2: making it back to go. For a listeners, I would say, foste,

530
00:31:56,520 --> 00:31:59,760
Speaker 2: we need to think about two things. Number one, it

531
00:31:59,800 --> 00:32:03,280
Speaker 2: is possible to fire. I'm like I said, I'm not

532
00:32:03,360 --> 00:32:06,040
Speaker 2: advocate for fire. The way I approach it is I

533
00:32:06,080 --> 00:32:10,960
Speaker 2: look at fire and wealth management as a combination. So

534
00:32:11,560 --> 00:32:13,520
Speaker 2: I like to use with fire wealthy. That's what I

535
00:32:13,560 --> 00:32:18,920
Speaker 2: share with my students. And I know it's possible because

536
00:32:19,200 --> 00:32:21,880
Speaker 2: I've done it and the many other people who have

537
00:32:22,000 --> 00:32:23,960
Speaker 2: done it. That's why we've got so many high network

538
00:32:24,040 --> 00:32:28,400
Speaker 2: individuals and ultra high networth individuals in Australian. The other

539
00:32:28,440 --> 00:32:33,320
Speaker 2: thing that's important to think about fire is networth. So

540
00:32:33,600 --> 00:32:37,000
Speaker 2: that's how I approach fire. I approach file from building

541
00:32:37,040 --> 00:32:39,760
Speaker 2: my networth. And the reason why I use that word

542
00:32:39,760 --> 00:32:43,200
Speaker 2: and I repeat the word networth, is because building networth,

543
00:32:43,240 --> 00:32:45,720
Speaker 2: or getting our listeners to be in the mindset of

544
00:32:45,760 --> 00:32:50,959
Speaker 2: building networth, means that they are looking at actively taking

545
00:32:51,080 --> 00:32:56,240
Speaker 2: steps and those steps are positive to actually save to invest,

546
00:32:56,400 --> 00:32:58,920
Speaker 2: you know. And also it's not just saving any investing,

547
00:32:58,960 --> 00:33:02,360
Speaker 2: which is what Fire talks about, but it forgets that

548
00:33:02,760 --> 00:33:05,400
Speaker 2: you have to work better, you have to earn better,

549
00:33:05,800 --> 00:33:08,720
Speaker 2: you also have to spend better in order to meet

550
00:33:08,800 --> 00:33:13,600
Speaker 2: your savings and investment grow. Whcause it's all what's hand

551
00:33:13,640 --> 00:33:15,840
Speaker 2: in hand. You're all good friends, right, it's having It's

552
00:33:15,840 --> 00:33:18,400
Speaker 2: like having a platter, a beer platter, right, So instead

553
00:33:18,400 --> 00:33:21,400
Speaker 2: of just enjoying an ale or it's out, you've got

554
00:33:21,400 --> 00:33:24,520
Speaker 2: the you've got the best alos. And at the same time,

555
00:33:24,560 --> 00:33:26,840
Speaker 2: you need to understand how the world money works. So

556
00:33:27,000 --> 00:33:31,480
Speaker 2: what I term the money verse, because cocuar fire independent

557
00:33:31,520 --> 00:33:35,640
Speaker 2: of the money verse is actually something that that doesn't work.

558
00:33:35,800 --> 00:33:39,400
Speaker 2: It has to be together. So that's what our listeners

559
00:33:40,000 --> 00:33:43,560
Speaker 2: may lack. And and that's a comprehensive understanding. So why

560
00:33:43,680 --> 00:33:46,400
Speaker 2: did I Why am I saying this is because when

561
00:33:46,440 --> 00:33:50,920
Speaker 2: they do this, the chances of them actually failing will

562
00:33:50,960 --> 00:33:53,520
Speaker 2: be much lesser. So that's the first. So that's the

563
00:33:53,520 --> 00:33:56,000
Speaker 2: first to seconds. What happens when you know we've done

564
00:33:56,040 --> 00:33:58,600
Speaker 2: everything right and the universe is against us, and it

565
00:33:58,640 --> 00:34:03,080
Speaker 2: happens I've literally the Asian financial crisis. So you know

566
00:34:03,120 --> 00:34:07,520
Speaker 2: that I'm not that young. I've experienced sas before, I

567
00:34:07,600 --> 00:34:11,840
Speaker 2: experienced go financial crisis. You know, all these were major

568
00:34:12,600 --> 00:34:19,480
Speaker 2: slaghammers on my portfolio. What I did, when I was

569
00:34:19,520 --> 00:34:22,520
Speaker 2: thinking about my journey, my own personal finance journey and

570
00:34:22,560 --> 00:34:25,920
Speaker 2: building my network, was that what if these things happened?

571
00:34:25,960 --> 00:34:29,960
Speaker 2: And I pre the markets going down? So when I

572
00:34:30,000 --> 00:34:32,719
Speaker 2: looked at the suppose that I shared, what I did

573
00:34:33,080 --> 00:34:39,880
Speaker 2: practically was to actually change the principles to adjust for

574
00:34:40,320 --> 00:34:46,800
Speaker 2: these unfortunate circumstances. So when I mentioned about the retirement amount,

575
00:34:47,040 --> 00:34:50,320
Speaker 2: you know, your annual expertus, I'm twenty five, I actually

576
00:34:51,120 --> 00:34:53,560
Speaker 2: used a much higher number. I used more than twenty five.

577
00:34:54,080 --> 00:34:57,000
Speaker 2: I achieve, applied more than four percent in my calculation.

578
00:34:57,320 --> 00:35:00,120
Speaker 2: And not only that, I actually added in inflation and

579
00:35:00,600 --> 00:35:03,839
Speaker 2: I added in hyperinflation in my own calculations as well.

580
00:35:04,280 --> 00:35:07,799
Speaker 2: So the final number that I adjusted for myself in a

581
00:35:07,960 --> 00:35:10,000
Speaker 2: day was much higher. So she meant I had to

582
00:35:10,000 --> 00:35:12,120
Speaker 2: work harder, I had to work better, I had to

583
00:35:12,160 --> 00:35:15,239
Speaker 2: earn better, you know, up my earnings. So all of

584
00:35:15,239 --> 00:35:18,799
Speaker 2: that provided me with the ability to buffer all the

585
00:35:18,840 --> 00:35:21,839
Speaker 2: different I just kickups in the financial markets. But also

586
00:35:21,840 --> 00:35:25,480
Speaker 2: the other thing I remember is everything in the universe

587
00:35:25,600 --> 00:35:28,799
Speaker 2: is psychical, meaning that when the financial markets go down,

588
00:35:29,239 --> 00:35:32,600
Speaker 2: they will rebound as well, because just like the elevators, right,

589
00:35:32,640 --> 00:35:35,040
Speaker 2: what goes up comes down, what goes down goes up.

590
00:35:35,520 --> 00:35:38,200
Speaker 2: So the important thing is to be able to be

591
00:35:38,560 --> 00:35:41,520
Speaker 2: in a position. I'll make sure that you're in a

592
00:35:41,560 --> 00:35:46,759
Speaker 2: financial position to actually sit tight right and to they're

593
00:35:46,800 --> 00:35:50,320
Speaker 2: trying to sit out, and and don't go jumping around

594
00:35:50,360 --> 00:35:52,680
Speaker 2: doing crazy things. Where is it crazy things? I mean,

595
00:35:52,719 --> 00:35:56,040
Speaker 2: you know, start you know, liquidating there, selling that, and

596
00:35:56,320 --> 00:36:01,600
Speaker 2: put yourself in a more challenged financial position. When the

597
00:36:01,800 --> 00:36:05,200
Speaker 2: markets recover, then you are actually even more backward than

598
00:36:05,440 --> 00:36:05,839
Speaker 2: you were.

599
00:36:07,880 --> 00:36:11,560
Speaker 1: Okay, all right, I like your approach. You've you've certainly

600
00:36:11,920 --> 00:36:14,560
Speaker 1: convinced me much more than I had been.

601
00:36:14,719 --> 00:36:18,600
Speaker 2: Like my people got to convince you, but it was

602
00:36:18,760 --> 00:36:20,320
Speaker 2: just a miche listeners.

603
00:36:20,320 --> 00:36:23,759
Speaker 1: Well you have, you have, you have, And I think

604
00:36:23,800 --> 00:36:25,480
Speaker 1: what we needed to do we needed to get a

605
00:36:25,520 --> 00:36:27,840
Speaker 1: show where we spelled it out and which stress tested

606
00:36:27,880 --> 00:36:30,200
Speaker 1: it and we really laid it out, and I think

607
00:36:30,239 --> 00:36:32,319
Speaker 1: you've done that very well. So thank you very much

608
00:36:32,400 --> 00:36:34,520
Speaker 1: for coming on the show. Line le great to hear

609
00:36:34,600 --> 00:36:34,880
Speaker 1: from you.

610
00:36:34,920 --> 00:36:37,120
Speaker 2: It's my pleasure, James, Yeah, thanks for having me. You know,

611
00:36:37,160 --> 00:36:39,040
Speaker 2: it's great to be able to chat with one of

612
00:36:39,680 --> 00:36:44,000
Speaker 2: Australia's most experienced financial journalists. You know, I also contribute

613
00:36:44,040 --> 00:36:47,239
Speaker 2: to articles through various news media, you know, in around

614
00:36:47,280 --> 00:36:49,319
Speaker 2: the world. But I must see that I do not

615
00:36:49,400 --> 00:36:52,200
Speaker 2: have the wealth of journalism that you have. So you're

616
00:36:52,200 --> 00:36:53,520
Speaker 2: definitely a role model for me.

617
00:36:55,400 --> 00:36:57,560
Speaker 1: There you go, Well, there's a career. There's a career

618
00:36:57,600 --> 00:36:59,600
Speaker 1: for you. There's a career for you journalism should you

619
00:36:59,600 --> 00:37:01,920
Speaker 1: ever wish to do so. Okay, folks, that was not

620
00:37:02,040 --> 00:37:04,759
Speaker 1: only great to hear from him, great to hear from you.

621
00:37:04,800 --> 00:37:07,440
Speaker 1: I hope you're enjoying your break. Be ready for our

622
00:37:07,520 --> 00:37:10,160
Speaker 1: season coming up, Our special season of the Outlook for

623
00:37:10,200 --> 00:37:14,600
Speaker 1: twenty twenty five coming up soon. Keep the emails coming

624
00:37:14,640 --> 00:37:17,920
Speaker 1: in the money puzzle at the Australian dot com dot au.

625
00:37:18,239 --> 00:37:18,919
Speaker 1: Don't you soon