A little over 3 years ago, I first heard about Financial Independence. I was living in Melbourne, Australia. I remember sitting at home with my housemate and while I was playing Playstation, he was completely enthralled with some website, which of course was MMM. At the time, I didn’t pay it much attention, why would I need to worry about money or saving for retirement? That was years in the future.
During the Christmas period, my sister came to visit. Naturally, I wanted to show her all that the city had to offer so we were eating out, going to different events, trying almost everything we could think of doing. At the same time, I had decided to buy a car, because I was sick of using public transport. After she had gone home, I was paying off a car, had very little in the bank account from a pretty frivolous few weeks. Money was tight and I didn’t like it.
Maybe this Financial Independence thing had a little merit?
In the evenings, I was actively trying not to spend money so I stayed in and started reading the MMM blog one of the evenings. Initially, I was still not convinced, but I wanted to avoid going out, so I kept reading. I came across the concept of a savings rate, and I was hooked!
As you can imagine, the first questions I asked myself, “Can I actually do this?” and “How can I do it as fast as I can?”
I am currently 29, I could definitely be FI in 15 years. Possibly less depending on promotions, future partner, etc.
Retiring before 45 still sounds too good to be true, right? I am not independently wealthy right now, there is no old family money. We have always be comfortable but not retire early comfortable.
Let’s have a look at my financial life to this point:
Medicine was a tough course in university. So much so that I wanted to help keep it as stress free as possible, so I lived at home. My college was only 10 minutes down the road, perks of living in Ireland, everything is driving distance. Another benefit to being in the Emerald Isle is that university courses are essentially free. Apart from registration fees, Irish citizens get a free education so I graduated with very little debt. I did have about €10,000 worth of loans, due to traveling and enjoying my time over the 5 years of study.
I worked 2 part time jobs during my time in school but that funded a student lifestyle, very little saving was actually done. Finally graduating at 24, I started full time employment and earned a regular salary. It was a modest one at that, being a first year doctor never pays well but it was a start.
This first year of regular earnings led to my first lifestyle inflation. I moved out of home, started going out more regularly, including eating more meals out of the house as well. I kept telling myself that I was spending my hard earned money cause I deserved it after the long days in work.
The first year after finishing college, I was saving about 10% of my take home. This was with the goal of moving to Australia in mind. Other than that, I was spending what I was earning. It wasn’t lavish, but still, it meant I was living paycheck to paycheck. Not knowing any better, I thought this was the norm as everyone else was doing the exact same.
Money Lesson 1: Just because everyone else is doing it, doesn’t mean it’s the best path.
Next chapter was the move down under. I couldn’t wait to get out of Ireland and experience living somewhere new. Not for any dislike of Ireland, purely because it was the next, new adventure. Money was not part of the decision making process.
The move did come with a salary increase, but also accompanied by a cost of living increase. I was thought I was saving more, as the monetary value was higher than the previous year. But my salary had gone up, so my savings rate had actually gone down, sitting somewhere between 5 – 10%
I had a lot more disposable income than I was used to and I was spending it as fast as I was making it. But then came the consequences after I over-stretched myself, all coming to a head after my sister’s visit.
Now I was paying a car loan, trying to pay off a credit card and just about making it from one end of the month to the next. I had to stop going out, avoid spending anything and it still took 3 months of worry, stress and obsessing over my financial situation. I hated that entire period because when I didn’t have money at the ready, everything became more difficult.
When I finally paid off the credit card and got the loan payments under control, I felt such a sense of relief. I vowed that I would never let myself get into the red again because I never wanted to feel that stress and sense of desperation. I am sure many people can relate to this, either from past experience, or might be living though it now. Let me say, it was not an easy time, there are a lot of sacrifices, you need to forget about those indulgences. The only focus should be the necessities and getting back in the black.
Finally, I discovered an appreciation and respect for money.
Money Lesson 2: Avoid lifestyle inflation
At this stage, I was absorbing whatever MMM could throw at me, started discovering other blogs and books. I became totally obsessed. Step 1 of my journey was going to be eliminate debt, which was sitting about 15k. It took me close to a year but I wiped out all my loans. I didn’t save, I didn’t socialize very much, I refused to buy anything I did not absolutely need. When I got there, it felt good! I reached my first destination, debt free.
Funnily, I was glad that I had a bit of a harsh wake up call. Guess I needed to be put on track. It came at a perfect time as well, as I had decided to move home to Ireland after 2 years abroad. This came with another small raise and yet another cost of living increase as I came to Dublin, one of the most expensive cities in the world.
Now, when I settled into Dublin, lifestyle inflation part 2 started happening. Entirely my fault, I knew that I wanted to reach FI, yet I lost sight of the goal and my expenses started creeping up. I kept saving but I could have save far more. When I realised that, I re-upped my efforts. Almost a little too much. I flipped from frivolity to ultra frugal. It SUCKED!
I spent months saving as much as I could, focusing only on the goal of FI. I neglected my present enjoyment. The together with a job I was not enjoying, I decided to make a drastic change.
Money Lesson 3: Don’t neglect your happiness now for something that may happen in the future
The FI-nal Push
A short period of misery taught me that third lesson. It took me a while to realise that it wasn’t just my frugality causing my unhappiness. I was in the wrong career for me, I knew it all along but never wanted to take the risk of leaving. My savings over the last couple years had actually passed out a year of living expenses. Now I had this safety net. More than a safety net, I had the vehicle to change lanes.
The entire principal of Financial Independence is being financial free, so you can decide what to do with your time rather than needing exchange it for money. Over a year of living expenses saved up means that I can leave my job that I hate, and not need to work again for over a year if I so choose.
I did exactly that.
I left my job and the medical career entirely, then shifted into finance which requires retraining on the job, new professional exams, the works. Along with this, is the fact that I already enjoy it more, have a work-life balance, and while the starting salary is 50% less than what I was, will ultimately pass out anything I would reach in my old career.
A nest egg that was large enough to cover my day to day was exactly the safety net I needed to take the leap and switch career. I discovered the power of FI. No longer dependent on the salary, at least for the next year, I was released from the shackles of that job.
Freedom felt good. Nearly 3 months without working told me all I need to know, I could get used to this. Eventually, I started into a new job, hoping it will be the final push towards FI.
I start on a lower salary initially, around €27,000 (take home of €23,000). I agree, hard to save much on this when my expenses come in close to that amount. Every exam I pass, leads to a raise. In a little over 3 years, I will have a salary of €45,000 (take home of €34,000). Within another 3 years, potentially can be €80,000 (take home of €52,000).
Assuming these promotions happen as expected, and I keep my expenses the same as now, I will be able to increase the savings rate from between 5-10% today, to 30% in 3 years and 55% in 6 years.
Quickly checking the savings rates, that would put me at 14.5. years to retirement with a 55% rate, plus the years it takes to get there, so I’ll call it an even 20 years. Now I have a starting point. As mentioned in one of my previous posts, I am setting a target of reaching FI by 45, giving me 15.5 years. Currently, I am not completely on track, but it is a great starting position.
Had I stayed in medicine, likely I could have reached FI maybe one or two years faster than my current rate, but at what cost? I would gladly spend that bit longer reaching my planned destination if it means I will enjoy he journey that bit more.
*Apologies for the misleading title. I realise tat I am not broke, but “From Doctor to Just Making Ends Meat” doesn’t quite have the same ring to it.