Financial Independence - If I Could Do It Again
A comment on one of my posts asked whether, looking back, I would have done things differently? What did I think of my career choice, my investments to get to financial independence (FI), and would I advise my kids do the same thing?
One answer is to say it worked, so why do anything different. I retired at 47, and in fact now realise I could have picked an earlier date than that.
I'm in a good financial space - my passive income covers my day to day living costs plus the extra things that I want to do. In fact, if I wanted to do/spend more, my income would cover that too.
Many people spend money simply because they have it in their pocket. It's not complicated, if you spend all the money you earn, then it will be a long journey to financial independence. I'm not like that, I'm happy to spend (sometimes quite a lot) on things that are important to me, but they are mostly measured decisions. I don't often spend just because I can.
So, I had a good start on my journey to financial independence because I didn't feel a need to spend all the money in my pocket. In fact, often it was the opposite, I was always nervous about financial security, so I made sure that I saved when I could.
Back to the questions posed in that comment:
What do I think of my career choice?
The starting point is that I didn't really make much of a choice. I got my first full time job at 18 years old as an accounts clerk - I finished school, needed a job, and took the first one that was offered. It worked out, but that wasn't particularly smart in hindsight.
My employer then sent me college one day a week which is how I gained my professional accountancy qualification. I probably wouldn't have taken that step by myself, so I owe that employer some thanks.
It's difficult to argue that accountancy is an exciting career but, on the whole, I enjoyed it. I worked hard, was diligent and dependable, and eventually rose to a reasonably senior position where I was involved in the wider business and not just accounting.
But what made my career enjoyable were the people I worked with, and it's geographic diversity. Outside of my home country, I lived and worked in Jamaica, Hong Kong, Johannesburg and Dubai, and visited another 20 countries with my job.
Career: What would I advise my kids?
I'd advise them to try to choose something that they enjoy and to work hard. I'd also advise them not to be afraid to make changes if they think they may have chosen the wrong career, but to also remember that the grass isn't always as green on the other side as they might imagine.
What do I think about my investments choices to get to FI?
These are the main things that we did to reach FI. As well as the pure investments, I've included some other items that played an important role.
Saved reasonably well, but did stuff too.
Bought a house at a young age (I was 21) - it was a very small house and it was with a 100% LTV mortgage!
Progressively traded up to larger houses.
Sold our large home (end of 2014).
Purchased buy to let properties (the first one in 2011).
Paid extra money off mortgages whenever we could.
Joined my employer's pension scheme when I was 24.
Invested money through a financial advisor (in 2009).
If I could do it again...
I'll start by going through the list of "what I actually did" and decide whether I'd do them again. After that, I'll think about the other things that I know now, and wish I'd known during my journey to FI.
Worked overseas ✔
Yes, I'd definitely do this again. I enjoyed it and it paid more and generally had lower tax too.
Saved, but did stuff too ❔
I did OK, but I wonder if I should have done more stuff. In particular, living in different regions of the world gave great opportunities to travel which I wish we'd taken better advantage of.
Bought a house at a young age ✔
This wasn't easy as mortgage rates in the early 1990's went to 15% so the monthly payments were scary. Negative equity also gave me sleepless nights. However, the monthly payments went towards an asset that we would own instead of frittering the money away on other things.
Traded up to bigger houses ❌
I'd change some things about this. We traded up as our family grew and needed more space. That was fine. But then we continued to trade up just because we could afford it, and probably to keep up with the Joneses too. Although we had a lovely house, it was much bigger than we needed and I would try not to do it if I had a do over (although Sally wouldn't agree with me!).
Sold our big house ✔
Should this even be on the list? I think so, because sometimes it's the exit decision that maximises the investment return, and we sold almost at the peak of the market. Prices have dropped 30% since. Not only that, selling this property was the start of our downsizing journey, and that's been a decision I've valued both in terms of our cost of housing as well as moving to more responsibly sized accommodation that still suits our needs.
Purchased buy to let rental properties ✔
We like rental properties, they make up 59% of our investment portfolio. I like them because I understand them, which is more than I can say for most investments. I'm satisfied with the returns so far - the monthly rental income is the money we live off, and they've made capital gains above inflation which I consider a bonus.
Paid extra money off the mortgage ✔
If I had money in my pocket, there was a chance I could spend it on things I didn't need. Instead, when we had extra cash we paid it off the mortgage. This did two things - it stopped me spending it on useless things and it reduced the interest charge on the loans. A double win.
Joined my employers pension scheme when I was 25 ✔
It's a no brainer to do again. If I contributed, then my employer contributed too - that's free money, so not to be turned down. It wasn't a big amount for me as when I worked overseas my employer didn't offer a pension scheme.
Invested money through a financial advisor in 2009 ❌
Maybe we were unlucky, but the advisor we used turned out to be bad news. Plus, we were living in an poorly regulated country that allowed products with horrendous fee structures. Perhaps I should have been aware of these things, but they hide them well. I'm sure there are good financial advisors and times when it makes sense to use them, but we had an awful experience as I wrote about in Investing nightmares - don't do what I did (if you read that post, the numbers show it really was a nightmare). We now do our investing ourselves.
Investments: What would I advise my kids?
I would, and do, advise them to start to save and invest early. As much as anything, this is to create the saving and investing habit, plus it's a big positive that these early investments will have a long compounding period.
I also advise them to take a long term view, to be well diversified, and to consider the fees associated to with their investments. I try not to tell them what to do, but I do share what I'm doing with them and the reasons for my choices, so that they can think about them before making their own decisions.
We talk about liquidity, about how stock market investing can be risky if you have a short investment horizon and might need to sell when the markets are down. And we're starting to talk about keeping an emergency fund.
I would also advise them to be open about money. Not recklessly so, but it shouldn't be the never discussed secret subject that it was when I was growing up. If nobody talks about it or shares experiences, successes and failures, how are people supposed to learn?
I'm definitely not going to complain about my choices. Overall, I got to financial independence somewhere in my early to mid forties which let me retire when I chose to at 47.
I enjoyed the majority of my career, perhaps the final years less. The good parts were mostly because of the people I worked with and the variety that my roles offered. The secret, in my view, is that what you get out of something is most often a function of what you put into it - that's definitely advice that I'd give my kids.
My money management to get to FI had good points, but also "could have done better" moments. My attitude to saving was good and our rental properties worked well. But I wish I'd never met that nightmare financial advisor in 2009 and instead had known about low cost investing via ETF's at that time. For now, I advise my kids to enjoy themselves, but to have some balance and therefore to save and invest some money as well.