Category: Opinion and News

Posts responding to events and news

When FIRE burns brightest

How FIRE thinking helps during Lockdown

Around the globe people are being asked to stay at home and save lives. A global lockdown that has profoundly changed the lives of a large proportion of humanity.

Finding that happiness has nothing to do with spending money has helped during these months of lockdown.

For over four months spending has come down massively. With no fuel costs for the car at all and no eating out costs, an already efficient lifestyle has improved even further.

At the same time we’ve had so much more time together as a family.  We’ve gone deep into our hobbies.  Explored the beautiful countryside around our home more than ever before.  We’ve learned together, played games, exercised in nature and read. We’ve enjoyed the home we spent so long buying more than ever before.

This got me to thinking: what do we really need and what do we miss from the old normal?

What do we really need?

  • Clean water
  • Healthy food
  • Shelter
  • Access to beautiful nature
  • Exercise outside (e.g. walking, cycling, running, weights)
  • Time with loved ones
  • Electricity for heat and light (renewable)
  • Books
  • Internet connection (for music, learning, blogs, films, creating)

What do we really miss?

Being with family and friends and being able to travel to explore the world.

Give yourself a Lottery win

I spoke to a neighbour earlier today and asked how he was finding it.  He said he was loving his time at home with his family as well.  “If I could just win the Lottery then I could live like this forever.” 

That’s what growing rich enough is all about.  It’s about making that Lottery win a reality.  Using simple maths, cutting out the waste, focusing on living your happiest life, then taking the surplus money and investing it to own slices of businesses.

Buying assets with your savings instead of more and more expensive liabilities. You can, in a relatively short time, buy your freedom.

Living happily at home

I’m enjoying the peace of being at home.  Enjoying free activities: walking, cycling, reading, learning, and creating.

Having this time together as a family is precious.

There are aspects of the current situation that are very similar to normal frugal FIRE living …

  • Eating well: whole plant foods, salads, nuts, seeds, berries, fruit, beans, turmeric, vitamins, whole grains, and ground flaxseed.
  • Exercising outside in nature. We’ve taken long local walks exploring new stunningly beautiful places on our doorstep. We are enjoying getting outside into the sunshine every day.
  • Staying calm and peaceful: reading, listening to music, not watching the news but instead getting accurate data (Information is Beautiful & Worldometer), sleeping well, meditating, and enjoying time in nature.
  • Reducing unnecessary travel: enjoying the local area and using Zoom to keep in contact with friends and family.
  • Avoiding crowds. As per usual we don’t go to places where you have to queue and even though the shops are open now we’ve stuck to doing one big trip for food every two weeks.
  • Practicing a bit more minimalism while we’ve got the time at home.
  • Improving our home ourselves (insourcing).
  • Enjoying free activities: catching up on reading, playing board games, Lego with the children, using streaming services for music and film, and there are endless creative possibilities (writing, photography, painting, coding, craft, etc.).
  • We’ve got the time to go deeper into the things we love.

Knowing you can enjoy life while spending very little money brings peace of mind in uncertain times.

Light from the Darkness

There are many positives to come out of the darkness of this pandemic: as people help each other with acts of kindness and our changing habits change the world.

The canals in Venice run crystal clear and Dolphins are coming in from the sea. Air pollution has dropped across the world as planes are grounded and cars parked up.

People are connecting even while staying physically apart. People are finding the beauty in their local area and getting to know their neighbours.

Quickening Progress

There is a good chance this global quietening will be the catalyst for some permanent changes that benefit humanity and other life on the planet.

Those that can work from home may find their lives improved without the need for polluting, wasteful, and expensive commutes; they may never go back to their old ways of working. The same applies to air travel for work.

This global challenge has already brought people closer together even as we stay physically apart. Maybe we’ll find a way to work together globally towards the other challenges that face the human race.

One of the things that this instant global change shows is that it is possible for us to make an instant global change if we want to.

  • How do we want the world to look when we come back out from our homes?
  • What new habits do we want to keep in place?
  • What have we learnt about the things that make us happy?

Into a better future

What would the future look like if everybody realised they only needed enough to enjoy life. With the realisation that excessive consumption has a negative impact on happiness as well as upon the world, the focus of our work could shift from maximum profit to maximum good.

Healthcare could be focused on keeping people healthy, on nutrition and exercise, rather than treating symptoms. Food production could be focused on quality rather than quantity.

Imagine if the economy could be directed towards 100% renewables, towards the growth of healthy food, away from waste, pollution, and destruction.

We could reclaim time with our families, time to exercise in nature, time to enjoy this beautiful world.

Cities and towns could be re-designed around people instead of cars. Giving us all the space to walk, run, and cycle in the clean air.

What would you like the future to look like?

I hope you and your family are safe and well. Sending you best wishes and love wherever you are in the world.

Welcome to the future

Welcome to the future. Welcome to the 20’s. This could be the decade that changes everything. I am rationally optimistic that the changes will be for the better.

Imagine a future where cities become greener with more trees and parks. With more people choosing to cycle and walk and an expansion of pedestrian and cycle infrastructure. Cities across the globe with clean air.

We could see 100% renewable electricity production and EV’s making use of all the free energy that our local star provides:

If we reduce the carbon dioxide and other greenhouse gases we’re putting into the atmosphere, we can avoid the worst effects of man-made climate change.

With the media’s focus on short-term bad-news stories it’s easy to think things are getting worse rather than heading towards a brighter future.

Positive Progress

If we look back in history and look at global trends we can see there is a case for rational optimism:

Life expectancy across the globe has doubled since 1800 and real income (accounting for inflation) is nine times higher.

Some of the amazing trends happening right now are counter-intuitive (again mostly due to the media focus on the individual bad-news stories rather than the trend):

In other cases there is progress we may not have heard about:

Instant improvements for the world

There are simple things we can do that provide instant improvements for the world as well as for our own health and wealth:

  • Cycle or walk our commute as often as we can
  • Change to a 100% renewable energy supplier
  • Change all lightbulbs to LED
  • Buy fewer things
  • Buy things without packaging where possible
  • Otherwise buy things with recyclable packaging
  • Plant trees
  • Eat less meat

The future is here

The future is here. We get to decide what we want it to look like. Having a clear view of the progress being made helps us to see where and how we can continue to make improvements. The positive trends are already in motion and each of us can make simple changes that will instantly improve the world.

The following books tell the story of these (often surprising) positive trends beautifully:

Wishing you and your family a very Happy New Year and here’s to a prosperous new decade.

Welcome to the future. Welcome to the 20’s 🙂

Assets vs. liabilities

invest into assets

As we established last time when we talked about wealth vs. income, net worth (how much you keep) is more important than income (how much you earn).

Net worth doesn’t give us the full picture though. For that we need to understand how our net worth is made up of assets vs. liabilities.

“Assets put money in your pocket … liabilities take money from your pocket.”

Robert Kiyosaki – Rich Dad Poor Dad

This simple definition of assets and liabilities is so powerful it can change your life forever.

A lack of this knowledge is the reason why some Lottery winners end up broke.

The more money you keep and invest into true assets the faster you will become rich enough.

Likewise the fewer liabilities you buy the faster you will become rich enough.

I followed the usual path for the first ten years of my career:

Chasing increases in income, letting my lifestyle inflate to match, and taking on increasing amounts of debt to buy the usual liabilities: a nice house and brand new cars.

Luckily I also spent that time reading some truly life changing books.

These lead me onto the path towards financial independence.

What makes up your wealth?

I recently stumbled across the awesome infographic above (from this page) showing the breakdown of net worth at different levels.

The red and orange in the graphic show the liabilities (primary residence and vehicles).

Both of these categories continue to take your money from you in the form of running costs, maintenance, insurance, bills, and additional purchases. The more expensive the house or the car the higher the ongoing costs.

It is no coincidence that those with high net worths have a high proportion of true assets and relatively few liabilities.

It is tempting these days, with low interest rates and easy access to finance, to load up on liabilities and take on the appearance of wealth.

But it is so much more strengthening to build true wealth by investing in assets.

Down the line some assets can also provide a lot of pleasure. For example, an apartment in the mountains or by the ocean can provide both income and free vacations.

Take on the habits of the rich

It is also obvious from the infographic that you’re only going to become a billionaire by creating and owning businesses.

Don’t worry though, you don’t need to be a billionaire to be rich enough. It is possible to reach financial independence as an employee by taking on the habits of the rich:

  • Keep as much as you can of what you earn
  • Invest in assets
  • Don’t take on debt to buy liabilities that are only going to make you poorer

Same Net Worth – Different Outcomes

Imagine the high income high spender we met when we discussed wealth vs. income starts with the same net worth as the Rich Enough saver heading for financial independence (FI).

The spender’s net worth is likely to be dominated by liabilities. An expensive house and a fleet of brand new cars (that are regularly replaced) along with all the associated extra purchases and costs that these things bring.

They have to keep going back to a job to earn more money that is then given straight back to others.

The Rich Enough saver’s net worth has a far smaller proportion of liabilities, including enough house, a pre-loved car (bought for a fraction of the original price), and bikes used for local journeys.

Everything in their life is there because it brings joy and fulfilment. Their things are fully appreciated and fully enjoyed. Any other liabilities have been removed.

The saver’s net worth is made up primarily of assets which will generate a snowball of wealth. The passive income they produce is invested into yet more assets. Eventually the income generated is enough to fund their lifestyle forever.

The saver’s wealth will grow quicker than the spender’s and they will reach financial freedom far faster because they need less.

How much do you need?

It is massively freeing when you realise you can live a lifestyle that is full of all the things you love doing, while spending a fraction of what you used to.

A lifestyle that immediately gives you the space and time to truly live. A life that is actually better now you’re spending less.

As a measure, net worth becomes less important because it doesn’t take into account how much you need to fund your dream lifestyle.

“I have what other wealthy people will never have. Enough.”

John C. Bogle – Founder of Vanguard

So while net worth is a useful measure it doesn’t matter as much as your wealth number (the number of days, months, or years that you could go without earning any more money from a job). The aim being that your passive income can fund your lifestyle forever.

Your Asset Percentage

The percentage of your net worth invested in true assets is another useful measure. The higher the percentage the faster you’ll reach financial independence.

I hadn’t calculated this percentage for our net worth before. Our number has increased massively over the last five years since stepping onto the path towards financial independence:

As of today our asset percentage is 62%.

This increases with every passing day as investments grow and additional savings are made.

Aiming for an asset percentage of over 70% is a good target.

A simple step to take today …

Calculate your net worth and your asset percentage.

Memories are free

Martin Stewart, director of the financial advice firm London Money, told the Daily Telegraph in September. “Sure, save half your salary, eat the roadkill, bin-dip, raid the charity shops, recycle everything, just stay in and actually read the T&Cs of things rather than waste money going out. From this you will create lots of savings, but sadly very few memories.”

I disagree 🙂

Memories need time more than they need money.  Memories are free.

Memories need time more than they need money.  Memories are free.

I took all of the photos above over the last five years.  During the same period, I reduced spending from ~50% of my income in the first year to spending ~25% of income this year.

Vacations and travel can, as with most categories, cost wildly different amounts of money and be wildly different in terms of the fulfillment, happiness, and memories they provide.

Our approach is to spend as little as possible on the necessary costs of getting to the new places, but once there, we live much as we do at home.

We don’t:

  • Book package holidays
  • Eat out much
  • Go into many shops
  • Tend to visit expensive attractions

Instead we enjoy the beauty of the places we have come to see.

In this way we have visited some incredible places in the world whilst spending a fraction of what could be spent on a single week’s holiday.

We like outdoor sports so spend our time exploring the world and hiking, cycling, kayaking, swimming, climbing, or skiing.  Once you have the equipment these activities cost very little but have a massive positive return in terms of fulfillment.

We have incredible memories from the last five years including:

  • Touring as a family through six countries in Europe in a camper-van
  • Exploring India with friends
  • Twice yearly trips to the mountains
  • Kayaking in the ocean
  • Ice-climbing in Norway
  • Climbing in the Swiss, Italian, and French Alps

We’ve also been on city breaks, skiing trips, hiking trips, and beach vacations – at the same time as massively reducing our yearly spending.

Good memories come from having adventures together and exploring the beautiful world whether it is on your doorstep or on another continent.  They come from spending quality time together as a family, and with friends, wherever you are.

Breaking the link between spending money and having a good time will be one of the most strengthening things you do.

I would argue that you create better moments, better memories, and have better experiences when you take spending out of each day.  You’ll find yourself in fewer queues and fewer traffic jams.

Instead you’ll find you have the empty mountain trails all to yourself.

You’ll feel like the whole world is yours to experience and enjoy.