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Retiring in their 30s or 40s?

The stories about people who have embraced the FIRE — it stands for Financial Independence Retire Early — movement are fascinating.

 

 

They move to smaller homes, share Netflix accounts and squeeze the most out of every dollar to retire by the time they are in their 30s or 40s.

Once they have accumulated the required amount of money, they stop working and spend more time doing whatever they enjoy. There is always a sense of admiration for people who can be so disciplined and motivated to achieve a certain goal.

That said, just how you get the required level of confidence to have enough saved to maintain even a frugal lifestyle in order to step away from work for possibly the next sixty years is a challenge many of us may struggle with.

The guiding principles behind the FIRE movement are admirable – although it does seem to downplay the fulfilment and sense of community many people get through work. But irrespective of that, there are aspects that may prove difficult for many Australians to follow, particularly because the average super balance for those at or approaching preservation age (55-64 years) is $310,145 for men and $196,409 for women. That's far short of the $640,000 for couples and $545,000 for singles that the Association of Superannuation Funds of Australia estimates is needed for a comfortable retirement.

It's also difficult to imagine that many people will be able set aside half or more of their income, as FIRE guidelines suggest, when they are not accumulating enough even with the tax incentives and employer contributions available in super. Also, some FIRE advocates have been criticised for not mentioning income from their blogs or from a partner who continues working.

So, before you go buying the brown bananas that have become a symbol of the thrifty FIRE lifestyle, assess with a critical eye.

There are many concepts involved in the FIRE philosophy that are commendable – and make sense for people seeking to make their money go further. In many ways, FIRE is simply a new, perhaps trendier name, for what financial experts have always recommended: budgeting properly so that you live beneath, or at least well within, your means.

Pursuing the FIRE strategy can help you take the first step toward good financial health by setting long-term life strategy goals. Maybe you do want to retire early. Or maybe you just want to set aside enough money so that you can work part time while your children are at home. What matters is that you identify your goals and make plans to achieve them.

Thinking about long-term goals can help to clarify what is important to you. A larger house may suit someone who enjoys entertaining and having guests. In other words, some expenditures may be worth it. Budget according to what you value, and you will find opportunities to cut costs in some areas while, perhaps, spending more elsewhere.

Consider what moves will have the most impact. While smashed avocado on toast has become something of a cause for celebration on social media, it's wise to focus first on your largest expenditures, usually housing, transportation and debt. Reducing debt, including paying off credit-card and other bills every month guarantees much lower costs over time. Do you really need that shiny new car?

Young people in particular have an opportunity to capitalise on the benefits of keeping these larger bills manageable.

As you think long-term, consider small changes. Saving 50 per cent of your income is daunting. You don't have to do it all at once. You can start small by finding savings of, say, $50 or $100 a month. Investing what you spend on daily coffee over a month can add up to more than $100,000 over 30 years - not a bad start toward financial independence.

One fundamental way to save is by keeping your investment costs low. Vanguard research shows that an investor who sets aside $100,000 in a portfolio that earns an average of 6 per cent yearly will have $532,899 after 30 years, in a fund that charges 0.25 per cent of assets yearly, compared to $417,357 in a fund that charges 1.07 per cent.

You may or may not want to retire early, but setting long-term goals, budgeting sensibly and keeping costs as low as possible will give you the best chance to have the option.

In the investing world you get what you don't pay for.

 

Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
11 December 2018
vanguardinvestments.com.au

 


Sam El Shammaa

Sam El Shammaa

Director/Financial Planner

For more than 20 years, Sam has been a financial planner helping individuals and families achieve their financial planning goals, by providing advice on Investment Planning; Insurance Planning; Tax Planning; Retirement Planning; and Estate Planning. Working with a network of highly skilled professionals in Sydney he is dedicated to providing high-quality advice and integrated wealth management solutions that simplify and enhance the quality of his clients' lives.

Sam established his own firm in 1997 and has overseen its steady development and growth. Attention to detail, good listening skills and great empathy are symbols of his appreciation by his clients. He has built long-term relationships with his growing client base and aims to provide excellent customer service.

Sam began his financial planning career in 1993 after completing a Bachelor of Science degree in 1991. Since this time he has accumulated many professional qualifications such as:

Sam has volunteered with the Cancer Council of NSW and can be seen almost every year volunteering or participating in the 7 bridges walk.

Away from the business, he enjoys spending weekends with his son. He is also a football (soccer) tragic and is a massive Chelsea FC fan.



George Pereira

George Pereira

Financial Planner

Having worked for national financial planning companies in the past, George has extensive experience in the provision of advice in risk insurance, investments and retirement planning and is focused on forming long-term relationships with his clients.

George has been awarded a Masters of Commerce (Financial Planning) and a Bachelor of Commerce through University of Western Sydney as well as having the Diploma of Financial Services (Financial Planning).


Jane Lim

Jane Lim

Financial Planner

Jane Lim is a friendly character with a bubbly personality. She has the unique ability of making complex information sound simple and easy to digest.

Jane entered the financial services industry in 2006, and worked with big blue-chip financial companies such as Count Financial Limited and AMP Financial Planning Pty Ltd.

She holds a Master's degree in Applied Finance through Macquarie University, and she is a member of the Million Dollar Round Table.

Being a self-confessed "tennis nut", Jane spends many weeknights in the tennis court, and is a frequent member of Sydney's Eastern Suburbs Tennis Competition.

Being a highly motivated professional, Jane is always eager to help her clients on a wide range of financial planning needs.

Paul Jayashekar

Paul Jayashekar

Financial Planner

Paul has been a financial planner for over 15 years helping individuals and families successfully achieve their financial planning goals. He is very focused on building successful long-term harmonious relationships with his clients.

He provides a holistic approach on various aspects of financial advice encompassing areas such as Investment Planning; Insurance Planning; Tax Planning; Retirement Planning and has extensive experience and knowledge in these fields.

Paul's professional qualifications are:

Away from his professional life, he enjoys spending his time with his family doing various activities such as coaching his son and taking him to games. He is a very avid sports fan and a cricket enthusiast.

Christian Tanadinata

Christian Tanadinata

Client Services Manager

Christian joined Capitalwise as Client Services Manager, with backgrounds in both customer service and administration.

Christian is passionate in providing excellent customer service by being attentive to client’s need as well as being able to circumnavigate challenges.

He holds a Master's degree in Commerce specialising in Marketing through the University of New South Wales.

Volunteering is one of his delights in life, where he had spent time being involved with the Centre for Volunteering, St Vincent de Paul's Society, and Sculpture by the Sea in a variety of positions.

Jenny Zhou

Jenny Zhou

Administration Assistant

Jenny is a University of New South Wales graduate who joined the team as an Administration Assistant. She is keen to put her customer service and organisational skills to use, making sure day to day operations run as smoothly as possible.

Outside of work, Jenny focuses her efforts on karate and ice hockey. She can often be found coaching and practicing karate at her alma mater. The rest of her time is spent at one of Sydney’s many ice rinks playing, practicing, or officiating ice hockey.

In order to better serve you, please select the appropriate contact details for the department you are looking for below.

Department Phone Email
Financial Planning (02) 8599 0835 (Option 1) info@capitalwise.com.au
Accounting (02) 8599 0835 (Option 2) accounting@capitalwise.com.au
Conveyancing (02) 8599 0835 (Option 3) conveyancing@capitalwise.com.au