To all those people out there on minimum wages or low incomes trying to reach FI it is possible! Don’t let negative comments stop you from achieving your goals!
November 13, 2020
In early 2019, I interviewed a Perth reader (now a good friend of mine) who had just reached Financial Independence at age 32.
At the time, he’d not long left his job and was settling into his new life with his wife and kids.
From the comments and feedback, you guys loved hearing Michael’s story. And some of you could resonate with his struggles against the strong cultural pressure (due to his Chinese background) for him to keep working and pursue more money for its own sake.
(If you haven’t already, go and read our first interview together.)
Well, Michael has been ‘retired’ for a couple of years now, and he agreed to this follow-up interview to share how things are going. So that’s exactly what you’ll find out today!
Even though Michael and I both reached FI at a young age, his story and life situation is very different to mine. I hope you enjoy our conversation 🙂
Michael: It’s been great since quitting work. I can now spend more time with my kids, send them to school, make lunches for them and take them out to places.
I can also spend more time on reading and exercising, which I really enjoy and never had time to do before. As long as you are healthy enough and invest wisely, your wealth should increase over the long term, so money shouldn’t be such an issue.
Since leaving the job, I feel more energetic and healthier; I exercise more and feel less stressed.
Michael: Yep, been doing some youtubing on cooking, making cakes and different types of cuisines. It’s amazing how the internet has changed how people live and learn, the amount of information available to people today is unimaginable compared to 10 years ago.
Michael: I don’t really get bored at this stage because I’m always occupied with kids. But I think when they attend full time schooling, I may indeed become bored.
I have been thinking about different options, maybe start a business? Work casual or just random jobs here and there or maybe get a job in financial counselling or planning? I don’t know – FI gives you time and options I guess.
Michael: No, I don’t miss work at all.
After I quit work, I completed a diploma in financial planning and have been thinking of maybe getting a job as a financial planner or something like that later down the track, as I have a keen interest in investing and also helping people understand investing and achieving FI.
I really don’t have a plan at this stage; maybe I will have one in a couple of years.
Michael: This is the time that they need you the most and actually want to spend time with you…the experience is invaluable. The amount of time that you spend with your family and kids is actually very limited. This is especially true after your kids move out and start their own family and as you age, your quality time with kids diminishes.
I’ve learnt to start appreciating simple things in life. There are a lot of things we take for granted and assume that’s the way it should be. But a lot of times, you only realise they’re valuable when you lose them.
Michael: Well, no more travelling for this year at the least, otherwise, not much change. We are lucky being in WA, places such as Victoria has been like a different world to us.
Investment wise, we have always lived quite modestly and had a high savings rate. We also retired with more than we need, which means even with a steep dividend cut, we’ll still be ok.
Luckily most of my investments didn’t cut dividends or only cut modestly, so it’s quite tolerable. Buying LICs such as Milton for $3 back in March/April also meant you are getting a very high yield even if dividends are cut, we are ok with that. When you buy things cheap, even if it’s not the highest quality, you will probably do ok over the long term.
Our holiday plans will get deferred for another year or two, which is good as we can save more and further compound those earnings.
Michael: Our property portfolio is not very impacted at this point. The income from them is still the same as pre-Covid.
The LICs and index fund in my share portfolio is obviously down from last year due to the recent market crash, but individual share holdings are doing quite well. I have been lucky to be able to purchase Nearmap (NEA) at 38c, A2 Milk (A2M) under $1, and Magellan Financial Group (MFG) at around $20.
In terms of income from shares, overall dividends have dropped by around 5%. Some of my holdings have cut dividends such as VAS and Milton. Others such as QVE remained stable while Brickworks (BKW) and Soul Pattinson (SOL) all increased dividends.
Michael: My main core holdings are still LICs and an index fund, also a selected few companies that I hold. I’ve sold a property since last time we spoke and deployed the cash into shares (just before the crash), so the timing wasn’t great.
Luckily, I didn’t deploy all the money at once and still had some money left which meant I was able to add to my holdings during the crash. I was hoping the recovery would take longer and such a sudden unexpected recovery is not ideal, however, the market is and always will be unpredictable. I’ve learnt to accept that.
I’m not too concerned about market price and dividend fluctuation; I believe over the long term, we will do ok. I never aim to achieve Warren Buffett type returns; just something in the vicinity of market return is sufficient for me.
My philosophy of lessening our property portfolio and increasing my exposure to shares remains the same. Properties are just not attractive enough and I don’t really see how I will ever buy another investment property again.
There is just too much unexpected and uncontrollable expenses associated with property and liquidity is generally poor. After I sold my property, it felt great, no more unexpected expenses and cash flow improved greatly.
Sometimes I question who really owns the property – it must be the government as they take an annual land tax levy and various rates regardless of the status of your property, and if you don’t pay they can take legal action against you or repossess your property.
Worse yet, you don’t have any control over how much they want to take. I had a look at my council rates for the past 5 years, the value of my property has probably decreased by 20-30% but the council rate is 20-30% higher than 5 years ago.
The rate is based on your property’s GRV (gross rental value). Councils didn’t change your GRV valuation but they increase the % that they take from your GRV. When they make the rules, how can you ever win against them?
As I said, the majority of my holdings are still in LICs and index (so mostly these), and I only buy individual companies if I think I really understand them and if they seemed undervalued.
For future buys, I will buy more international index funds such as VGS. Australia is such a small part of world economy and buying VGS makes more sense to me. You are holding the largest companies in the world, the stock picking process is mechanical and unemotional. It will do well over the long term. It’s almost like an insurance policy on our share portfolio which is 95% Australian equities.
Michael: No doubt this is the greatest obstacle to overcome and I have to admit I still cannot 100% overcome it.
It seems that pursuing endless wealth and status is a must in today’s world. If you retire early and do “nothing” it is considered a sin and a waste of life or time. I’m still learning to think independently and care less about what others say, but it’s not easy.
People ask what I do and I just tell them I’m a full time dad. That’s the end of the conversation.
Michael: It’s still my view that shares are the best way to build wealth and I don’t mind sharing this idea with people. I wish someone shared this with me 10 years earlier as I’d be so much better off now.
However, I still find it extremely hard to convince others, even the ones closest to me. Especially when our strategy is so easy. If I made it sound more complicated and throw in some big words, that might convince them.
Most people I speak to all share the same view that shares are risky and if you buy shares then it better double in the next month or make a 1000% gain within a year to make it worthwhile. No one wants boring old wealth accumulation, but that is the surest way to wealth.
With what’s going on in the world today and over the past year – pandemic, global trade tension, foreign relationship with our biggest trading partner, huge deficit and also unlimited quantitative easing – it would be easy to think we are in for doom and gloom.
However, throughout history, we have “end of the world” headlines every year and the market just marches higher and higher over time. We can never underestimate the progress of human civilization. There will be hurdles and bumps along the way, but we will get there in the end.
I watched a few documentaries since I have more time on my hands now. There was a documentary on Alpha Go in which an AI (artificial intelligence) program designed by Alphabet (Google) beat the best GO player in the world.
What’s amazing about AI is that it can learn and self-improve over time. So as it plays more games, it learns from experience and becomes better. If a machine has the ability to learn and become better over time, the potential is limitless.
Also, Apple just announced their latest A14 chip manufactured with the 5nm technology. This allowed them to pack 11.8 billion transistors into a tiny chip and has processing power greater than most home computers.
Just 60 years ago, when the first computer was manufactured, it’s the size of a room with only 800 transistors, and if we go back a further 50 years, it was at the turn of the century that Einstein formulated the famous E = mc2 which laid the foundation for the modern physics including Lasers etc.
The world was essentially built on ruins after 1945, but look at it today! So never underestimate human endeavour, and stay positive, it never pays to be negative.
Michael: Not at the moment as I’m quite occupied with kids. I can enjoy weekends instead of dreading Sundays because I will be thinking “Monday I need to go into work again.” I can wake up naturally instead of needing an alarm. It’s very enjoyable to say the least.
Michael: We are probably spending the same or less. We hardly eat out, do a lot of cooking at home and we drive less. I used to spend around $100 a week on public transport and driving/parking at train stations, now that’s not necessary.
We also buy annual passes to places like Scitech and AQWA and take the kids there whenever we like, just some ways to keep the kids entertained and save money.
Michael: I don’t think too much at the moment, just trying to enjoy each day as it comes. Might have new goals in a few years’ time when kids attend full time schooling.
Sometimes I like to keep my mind blank, I think it doesn’t pay to think too much a lot of times. Some things if it’s meant to be, then it will eventuate. I’m not saying you shouldn’t think at all and hope money will come showering at you. But there are stages in your life when you realise that maybe trying too hard or forcefully wanting something might not be such a good idea.
Michael: Work part time or casual and see how that feels. If I loved my work or if the people I worked with were just a little more tolerable then I’d be happy to work casual instead of fully FIRE.
It’s often the people that you work with that are more important than the work itself. My view is Financial Independence (FI) is a must but Retiring Early (RE) is a choice. For me, quitting that job and spending time with the kids is a must for now.
Michael: What is the end point? Achieving FIRE is not just about reaching a number but also changing your behaviour and thinking. Just keep on working hard, save hard and invest regularly. When that day comes, you will know.
I think you should still work hard and aim to make as much money as you can and save as much as you can before you reach that arbitrary number. I mean, let’s be honest, it’s not possible to achieve FI on minimum wages.
(Dave: It wouldn’t be easy, but I do believe it’s still possible as I wrote about here – Can You Achieve Financial Independence On A Low Income?) 😉
Michael: Having a car for work and then buying another car for play, eg. big 4 WD for the weekend.
Also never sitting down and looking at their income/expenses. Just changing banks, insurance companies and Super fund can save you thousands of dollars a year.
Michael: I guess it’s that you need to listen to your inner self and know what is truly important to you. What others say, whether they’re friends, strangers or even relatives, is just not that important. Having independent opinions and not being influenced by others is important.
Don’t let people tell you what you should or shouldn’t do. I admit it’s hard and I still get influenced, but I’m slowly changing. To be truly free, you need to think independently. If you follow the crowd, then you’ll just be one of them.
Michael: Appreciate the things around you and how lucky we are to be surrounded by families, friends and live in Australia. Be thankful for what you’ve got.
Learn to stay positive and optimistic. At the end of the day, I’d rather be optimistic and wrong than pessimistic and correct.
I’d like to thank Michael for coming back for this follow-up. I trust you enjoyed this interview with my fellow early retiree, and hearing what life is like ‘on the other side’ when you have a young family.
Sounds like Michael has been filling his days with lots of great activities and soaking up the freedom. I also get the vibe that he’s becoming more philosophical about life, now that his mind has the space to think and contemplate without the stresses of high-pressure work getting in the way.
If you have any comments or questions for Michael, please leave them below.
With any luck, he’ll stop by and answer them for you. (Keep in mind, we covered a lot in our first interview, so check there first in case your question has already been asked).
As always, thanks for reading!
In other news, I was recently interviewed on the Captain FI podcast. We had a great chat and a few laughs – it was like catching up with an old mate for a beer! Check out the podcast interview here.
To all those people out there on minimum wages or low incomes trying to reach FI it is possible! Don’t let negative comments stop you from achieving your goals!
Hi Bianca. I find the biggest obstacle is trying to do this on a single low income. For us, it is very important for mum to be at home with the kids rather than sending them to daycare, resulting in no second income. I see no path in reaching FI without both of us working….Maybe Dave can share an article on what to do on a single low income 😉
Damn, was expecting more around how he deals with the cultural pressures. That’s the worst part.
Great follow up though and Michael sounds very wise.
He’s right, the time he spends with his kids now is invaluable.
Hello all ,
Yes , mindset (psychology) plays a vital role in achieving financial freedom . Without physical, mental health & spirituality ( purpose ) , FIRE ain’t achievable.
Finally in terms of minimum wages , I have been on minimum wages all my life and having the skills to save and enjoy a simple yet satisfying lifestyle has been my blessing.
“ It’s not how much you earn but what you do with what you earn that matters “..
Thanks Dave and Michael for sharing, really enjoyed reading and would love to see more interviews with others who have FIRE’d!
Wow! Great interview. Thanks Dave and Michael. Some serious Zen Buddishm moments in there. The bit about not thinking too much and clearing one’s mind resonated with me. Best of luck to you Michael. Please keep in touch with us via Dave!
Great follow up interview Dave. It’s really impressive how both of you were focused so early and followed through on your plans. Me and my wife have always been frugal but a few poor decisions (property related ????) definitely slowed the progress. Sites like this are invaluable to blokes like me who had the puzzle pieces but couldn’t put them together.
Looking forward to the 2023 update. If Michael and his wife do choose to return to employment, a few years at 100% savings rate will ensure they’re wealthy beyond their dreams.
Hi Dave, great interview and thank you very much to Michael for sharing his experiences and wisdom. I have read both interviews and it is indeed very reassuring that somebody with a cultural pressure many of us won’t have can still overcome it and think independently. I have noticed myself over this past year becoming more pessimistic and having more negative thoughts for some reason and this year I have seen/experienced quite insane wealth which does permeate my mind a little no matter how much I try and push it out. Life is a journey and the mind is definitely a tough beast to conquer…
One thing I would like to know more about (appreciating and respecting Michael’s desire to privacy) is his individual share portfolio. In the first interview he mentioned a couple of individual shares and in this one he mentioned a couple more. I would like to know roughly how much of his share portfolio is in these individual shares? We all advocate LIC’s, ETF’s, etc. to slowly build wealth and for income, but some of those shares that Michael holds is akin to winning the lottery and would’ve increased his net wealth very significantly, very rapidly.
I have also seen and interacted with people that have insane wealth, it can make you feel like they’re living the dream and also make you feel like you are underachieving so much in life, however, I don’t think that is often the case.
A guy I know is probably worth north of 100M, he lives in a 10 bedroom mansion, has 2 Rolls Royce, 1 Ferrari, 1 Bentley, and numerous other cars. Yet, his health is deteriorating, his kids hated him and are quite rebellious, his wife always fights with him over money, and because he likes to show off his wealth/cars, most of his friends don’t like him, except the ones that wanted to take advantage of him.
Comparing yourself to someone else will always make you unhappy, no matter what, because 1) you only see the glamourous side and never the bad 2)there will always be someone that’s way more successful than you. There was a story that this CEO was so unhappy with his life, he thinks he is underachieving so much, yet, in everyone’s view, he is extremely successful…. why is he so unhappy? because he always compared himself to his roommate in college, and guess who his roommate is,” Elon musk”.
So sometimes what appears on the surface might not be true. Money does give you options but it’s only one pillar to life, to be truly happy you will need 3 pillars. Money, Health and relationship. Money is just a bunch of zeros, having one more or less doesn’t really matter if you don’t have the 1 at the front and that 1 is health.
As with my individual share portfolio, it makes up around 35% of my total portfolio. I have sold out of A2M and Bellamy last year for around a 1500% gain in 2 years. The gain might look very good percentage-wise but because I didn’t put too much money into them, it is not something life-changing.
I like Lics and Index but sometimes you will encounter companies with extremely attractive valuation and it makes sense to put money into them. So I don’t have a set rule of allocating say 70% to Lic or 30% to something else, it is whatever seemed attractive at the time of purchase. I tend to buy when I think the risk is low and the return is going to be reasonable over the next decade or so.
One example is BKW when it was trading in the low $10’s, clearly, the market sees it as a building product company and hence out of favour, however, at that price, you are paying for BKW’s stake in Sol alone and will get a building product business/top quality REIT/ridiculous amount of landholding all for free.
I want my portfolio to be diversified and Lic/index is probably the best vehicle to do so but I also don’t mind a concentrated portfolio.
Thank you Michael for taking the time for such a detailed reply. I’m unsure as to why seeing some with all of this wealth has started to affect me lately. It seemed to never bother me in the past. Maybe I just struggle to see where they are coming from because wealth like what you mention is a gift and I don’t understand what drives some of them to keep pursuing never ending money. I can see somebody like Elon Musk continuing to work. Tesla is his baby and his purpose. I highly doubt it’s about the money for him. I’m talking about people who are just regular employees dragging themselves through the motions for extra money… Maybe I’m just getting anxious or antsy as I approach my own early retirement too…
I figured you had a decent chunk in those individual shares. It has obviously impacted your portfolio in a very positive way. Thanks you again for being so forthcoming.
I think it’s human nature …. seeing someone who is similar to you more successful definitely affects your decisions.
Just try to stay independent, I find that to be vital for you to achieve success in many aspects of life and especially investing
Warren said once “ bubbles are caused by seeing someone dumber than you becoming richer than you”…
Money is not everything and ability or iq doesn’t always equal to more money or success… luck also plays a very important role
Hi Dave, Thank you for your response. I think you are 100% correct about mindset. The right mindset is responsible for almost everything we do and experience. My negative thoughts seem to revolve around never having enough money to retire early. Still doing calculations. I may seek your wisdom in a more private environment. Sorry – to clarify my statement about “experiencing” insane wealth… What I meant was that I have seen some people this year with an insane amount of wealth. This was the “experience” I meant. I have not gained, “insane wealth” personally this year. Lol! Slow and steady for me… Haha! Having said that, I live in Sydney and I really don’t think living here is very conducive to meeting/seeing people like yourself and Michael.
If you could clarify with Michael about his individual share portfolio, I would really appreciate that. To borrow Michael’s own “casino” analogy, some of those shares he names is like walking into a casino, betting on red and watching it get hit multiple times. Do these individual shares make up 20%? 30%? More or less of his portfolio and how much have these individual shares contributed to his bulk holdings of LIC’s and ETF’s? Michael mentions that his portfolio has grown since the pandemic, but I note that both MLT and VAS are still quite a bit below their pre-pandemic highs.
Thank you so much Dave and Michael for the sharing, i found it very inspiring. My husband and i are also in our early 30s and half way on the journey. We have a relatively high income and live a frugal style. We own one property each (with 70% paid off), and i invest majority in ETFs and a few individual shares. Your story inspired me to look into LICs!
I really resonate with Michael’s cultural pressure as we come from similar background. As i own an old small car, I often get peer pressure for not buying a better car and my car is the least attractive car among my friends as most of them own BMW, 4WD etc. One way I tried to overcome this is to show confidence about my choice and sometimes have to use the “environmental friendly” card to diver the attention.
Good luck to you all!