My introduction to the world of financial independence (FI) was in April 2021. This is the story on how I got into this cult. I knew straight away I had a big task ahead of me and as they say "the hardest step to take on any adventure is the first". Right now I was at the bottom of the mountain looking up.
Every month my wife and I would have no money leftover from our salaries. We didn't buy a lot of things and didn't live a particularly fancy lifestyle. So I couldn't figure out where the cash was going and I could see long-term this was not ideal. It offered no stability or safety, and didn't offer any potential for a different lifestyle away from 9-5 working for the next 30+ years which we were destined to do. We were living paycheque to paycheque and any exiting things we would want to do just wouldn't happen. Our pay is average-to-good so it didn't make sense to me. Ultimately I knew we were doing something wrong, but didn't know what and had no idea how to fix it. It was also creating friction between us. It would stress me out that we couldn't live the life we wanted, and that each month we were having the same problem just keeping our head above the water financially with no buffer.
So one morning whilst my coffee stovetop was brewing I searched on my podcasts for anything to do with finance, I was open to anything here and did no research before opening up the app. Up popped the Mad Fientist podcast perfectly named 'Financial Independence Podcast'. I had never heard of the term 'financial independence' until that point, which if you think of it, is pretty mental. The term seemed perfect as it is was exactly what I wanted.
The first episode I listened to was the one with Mr Money Moustache (more on him later in another post). I couldn't believe what I was hearing. I was hooked.
I got to work absolutely blown away that this whole other life lived and I had no idea it was there. I almost felt cheated that it wasn't given to me before - which is illogical I know. Even after episode 1 I was thinking 'this should be taught in schools!'. I was pumped to learn more, so grateful I had stumbled upon this podcast, and ready to see how I could change the path I was on financially.
I felt like I was entering a cult. A new language, new idols, and a new way of life.
Each drive to and from work I smashed through over 50 episodes as quick as I could. Listening to each guests experiences and thinking how I could apply it to my own life and circumstance. In absolute awe and admiration of what these people have achieved and incredibly jealous of the life they were living. I wanted more information and apply everything all at once - a bull in a china shop level of excitement. You may have already realised it's all or nothing with me!
This podcast introduced me to others who had reached FI and others who were well on their way. Simply put they had put in the hard yards and were reaping the benefits of the life I wanted. They all had projects and "work", but none of them full-time working to the mercy of 'The Man' in a traditional sense. Any work was done because they wanted to, rather than had to. They were doing their work remotely from exotic lands, where their 'work' was completed in a stress-free environment. They had more time for hobbies, family and friends. This is what I wanted, and it gave me hope and a path on how to get there.
I knew this was a long term shift in lifestyle and so I wanted to do it right. It was also entering in my mind a risky world of investing and so needed to be thorough in my research. I could see this offering a change to me and my family so it needed my full attention. The next few weeks I wanted to read from others what they recommend before implementing the changes.
I read The Four Pillars to Investing, Rich Dad Poor Dad, I Will Teach You To Be Rich and the FI bible that is Simple Path to Wealth. I felt ready now to put into motion what I was going to do and followed the automation advice Ramit Sethi.
I didn't make a budget initially but tracked my spending for the previous two months and made an educated conservative guess on how much I could put into each pot. I would then tweak it as needed as I went along.
Thankfully I had no bad debt when I started. My mortgage was the only debt I had, and any credit cards were paid off in full each month. The year prior I had paid off the car loan we got, and I initially thought when I paid this off things would be easier, but I was still struggling.
So the first step I did was set up my different pots and allocated a set amount each month. I will go through in a different blog post more detail on these pots as it could quite heavy and make this post super long.
For pot 1 I had for my emergency fund which judging from my budget needed to be around £6000 for 3 months worth of outgoings. I decided for only 3 months as my wife and I have secure jobs with good sick pay. We generally are not out of work and are in an industry where in current climates we are in there is no shortage of jobs. I also have income protection should I have something more serious for long term where my sick pay would not cover. I intended to put in £100 per month on this.
Pot 2 was my stocks and shares ISA invested with Vanguard's Global All Cap Index Accumulation fund and this had a standing order for £100 also. I decided to start this alongside my emergency fund for two reasons. Firstly from an emotional perspective I had to start the fun stuff along side the safe stuff (emergency pot) to keep me interested. That whole 'time in the market versus timing the market' was key here. Secondly I took the risk (and still taking the risk!) that we have never had an emergency pot and not had an issue. Take into account our secure jobs and good sick pay I hoped that like the last 5 years of living together my wife and I should hopefully not need it. But it was probably more the excitement of starting my ISA S+S journey that was the real factor here!
Pot 3 is my sink fund which is proving to be a bit of an odd one. I will go into this in more detail with a budget break down post but ultimately I threw in another £100 here for three things: insurance for cars and house, holidays, house repairs. It's working OK but may need to change.
This has largely been my strategy from May 2021 to now in May 2022. The amounts have changed slightly but broadly speaking this has been my process for the last 11 months of paycheques.
There we have it. The random search for a podcast which set me on a path I am so grateful for. I have emailed the Mad Fientist thanking him for the effect he has had on my life, and he was so gracious in praise he just shrugged it off.
In my next post I will go into more detail on the pots, where they are invested and why.
Thanks for reading and until next time.
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