Can a young person on an average net salary of £25k buy a property and become FI by the age of 40?
“Impossible!” the mainstream media and the regular man on the street would scream. “Young people can’t even save enough up for a deposit to get on the property ladder due to the housing ‘crisis’. It’s so unfair.” would be the negative response.
I would have thought it impossible too, 12 months ago, before I discovered FIRE.
So, is it possible?
Damn right it is.
I’ve done some figures for my eldest son FU#1, who is 19, and you can read below to find out how I plan to help him to financial independence by 40.
I will expand on the steps in future posts, but here’s a brief outline:
1 – JUST START– For myself, I find it’s too easy to avoid starting something unless there is a perfect plan in place. I’m working to rid myself of this trait. You’ve just got to make a start with a rough plan. It won’t be perfect and can be refined/changed as you go along. The most important thing is to actually start on the path now. So what are you waiting for?
2 -MAKE A BUDGET – This identifies the savings rate you will be able to set up and achieve at the current/future expected salary. Read more here.
3 – DEVISE AN INVESTMENT STRATEGY – We will devise a strategy and set up a portfolio spreadsheet. This sets out and tracks the year by year value of the investments made and determines when you will actually become FI.
4 – SET UP THE REQUIRED ACCOUNTS – Following on from steps 2 and 3, we will have identified the savings/investment accounts in which we need to contribute to. These accounts now need to be set up. FU#1 already has a bank account with a 5% regular savings account attached, LISA (Lifetime ISA), Stocks and Share ISA, SIPP and an auto-enrolled workplace pension.
5 – PAY YOURSELF FIRST – This is one of the most important steps to achieve financial freedom. Automate your savings so that the money immediately comes out of your net pay before you are tempted to spend it. This forces you to manage/live on the remaining amount.
6 – DON’T GO INTO ‘BAD’ DEBT – Avoid at all cost credit card debt, and don’t take on ‘bad’ debt or loans for depreciating assets such as cars, holidays, clothes, furniture and consumer goods. If you can’t pay for the item in full you can’t afford it. If you really want something, save up for it and pay in full. ‘Good’ debt can be used carefully for appreciating assets such as property etc., as long as it doesn’t affect your FI plan or stretch you financially.
7 – ACHIEVE FREEDOM – Monitor and follow the plan to reach FI. Once you achieve FI you will be able to lead a fantastic life with 40+ years to do as you please, whilst most of your peers will be working into their late 60’s burdened with debt.
FU MON CHU will go into further detail on the above points in future posts.
There may be flaws/doubts in the plan I have set out, and no doubt other people will have different views on how to reach FI.
Of course, there are no hard and fast rules on how to reach FI and it obviously depends upon each personal circumstance.
Please feel free to comment, criticise or contribute any thoughts on anything written above.
I am still learning and won’t be offended by any comments.
FU MON CHU