How a 21-Year-Old is Fast-Tracking Financial Independence | Strong Money Stories #2

Welcome to the 2nd instalment of this new series, Strong Money Stories.

These are real members of the community, sharing how they’re implementing all the stuff we talk about here.

Because that’s what it’s all about!  While I enjoy writing, I really want to see strong financial outcomes – actions taken, wealth built, and freedom created.

Plus, the more varied examples we have of regular folks working towards financial independence, the less excuses people have for not joining us 😉

If you’d like to share your journey so far (anonymously or not), reach out via my contact page.  I actually have a heap of these lined up already, which is fantastic, and I can’t wait to share them with you.

Our second Strong Money Story is from someone at the earlier stages of their journey, which we don’t get to hear about very often.  But as you’ll see, they’ve already learned some powerful lessons.

Can you share a bit about yourself?

My name is Kyle.  I’m 21, from Adelaide.

I’m in a relationship and am very lucky to have my partner already on board with our FIRE goals.

I am currently working as an Apprentice Electrician and my partner is studying Paramedicine at university.

When did you discover financial independence, or the idea of building enough wealth to retire early?

From a young age, I’ve always wanted to be comfortable financially.  But I just didn’t know how to do it quite yet.

Last year I was listening to podcasts at work and came across the FIRE concept.  I became hooked and started reading, listening, and watching everything I could.

What were your initial thoughts? Did you latch on straight away, or did it take a while for you to believe it was possible?

After getting a grasp of how FIRE works, I initially thought that it can’t be true.  There’s no way a normal person can buck the social norms and end up better off.

But after hearing about so many people who have already reached FI, and running the numbers for my situation, I began to realize how achievable a goal this really was.

Dave:  This is exactly why sharing information is so powerful! If there’s anything I want to have done, it’s simply to help people realise there’s a doable alternative to working 40+ years with little to show for it.  Whether people do it or not is totally up to them.

What’s your overall goal (FI, semi-retire, etc) and how far along are you?

My goals for the future are quite set in terms of financial goals.  But the retirement timeframe isn’t set quite yet.

My partner and I aren’t far enough into life to know if/when we want to cut back on work.  But we know we want to have the option as soon as possible.  The idea of being able to walk away from work at the drop of a hat seems hard to pass up 😊

The end goals for us (at this stage) are a paid off home and $75,000 passive income from investments.  We want to start with a large goal in the knowledge that once we start living with less, we will likely decrease that number knowing we don’t need much to be happy.

In terms of specific goals, I put together a list at the start of my journey and plan to review each year.

— Save $1,000 dollars as an emergency buffer (Done).
— Pay off my car loan (approx. 8 weeks left paying as much as I can from each paycheck).
— Boost my emergency fund to $5,000 (this covers 3 months expenses for me).
— Build my share portfolio.

What would your ideal lifestyle be? And what does freedom mean to you?

The ideal life for me is a situation where I can spend as much time as I like with my family, without the burden of money looming over my head.

I want to have a comfortable and stable income that is more than what we need.  I am happy to work for longer than some people in the FIRE community in exchange for a little extra in retirement.

Dave:  I like that he’s already personalising the approach, rather than assuming it has to be done a certain way.

What excites you most about the path you’re on?

The thing that excites me the most is the idea that in the future I will be in the fortunate position that work is optional.

The only reason that I’ll be going into work is to better my retirement situation, not because I need to be there to survive.

Can you share your income and expenses?

This could be a big answer so get strapped in.

At age 14 I got a job in the retail industry and worked my way up to an assistant store manager position by age 19.  I was earning approximately $70,000 before tax (amazing money for a 19–20-year-old living at home) and I spent it as quickly as it came in.

At 20 I was really struggling with my job; my boss was treating me very badly and it was taking a toll.  I decided I wanted to be outside more and work with my hands.  I found an electrical apprenticeship and quit my job that week.

Currently, I’m a first-year apprentice earning $31,000 after tax (a 55% pay cut).  A conservative estimate of my earnings once qualified is around $90,000, and this is the number I’ve been using in my FI calculations.

My partner is currently studying and has a casual job where she is making enough to cover her expenses.

When she and I are both qualified we will be earning approximately $180,000 annually and we plan to save as close to 50% of this as possible.  This will be focused 100% on either our future home loan or our investment portfolio, depending on where we’re at in life.

What’s your wealth goal / FI number / passive income target?

The current goal my partner and I have in mind is around the $75,000 mark in passive income.

This number is likely to shift up or down over the years as we learn what we really need/want to be happy.

What will your investment strategy be?

The investment strategy that we are using is a shares based strategy.

Primarily ETFs for now (40% Aus and 60% International), but will move to a more diversified portfolio later in life i.e. bonds and other less volatile asset classes.

The reason I have chosen a shares strategy is based around the timeframe my partner and I have.  We both have no set retirement date and both expect to be working for the next 20 years minimum.

This gives us the flexibility for market volatility (think the rare 20% drop) without any real effect on our goal in the long term.

Do you own a home, or plan to in the future? Will you pay it off by the time you hit FI?

We plan on buying our first home in the next two years, and we already have a sizeable deposit saved.

Then we will focus primarily on getting debt free from there.  We won’t be retiring until we are out of debt, which is a peace of mind thing for both of us.

Even though it’s early, any plans after reaching your chosen goal?

My ultimate dream is to be fortunate enough to no longer need to work, but still be able to.

I want to start my own small furniture business that allows me to do what I love (building functional objects) and possibly be paid for the pleasure of doing it.

Dave:  I love that Kyle has already thought of a possible retirement gig or productive hobby.  I find people struggle with finding something that appeals to them, and it creates a running anxiety about what they’ll do without full-time work.

Is there anything about your situation you think is different from others in the FI community? And what could others learn from that?

The situation that I’m in is probably like most young people getting interested in FI.  I made some poor decisions in the past with money, but I’m now slowly working my way into better habits.

I am, however, in the very fortunate position where I can still live at home with my parents for a very low cost.  This is invaluable for starting good savings habits and building my assets early on a very low income.

Dave:  You’re learning a lot sooner and much faster than most!  Plenty of people use that opportunity to build consumer habits and expensive lifestyle tastes (new cars, clothes, travel, restaurants) since they don’t have any major expenses to deal with.

Has anything been easier or harder than you expected so far? Any surprises?

As I’m still very early in my journey it’s hard to say what has been easier or harder than expected so far.

The standout factor for me was how simple it was to drastically cut my spending and start turbocharging my debt repayments.

This was something I would’ve called unachievable 6 months ago.

What actions that have made the biggest difference so far in your financial life?

The primary action that has had the most drastic results for me was paying myself first.

I allowed myself a fixed amount per week that had to cover all expenses.  I made a deal with myself that when that number was reached, that was it.  I would have to say no to going out, getting that snack, or buying that new thing.

To make the above achievable, this amount included spending money and genuine necessities (fuel, rego, insurance, food and bills).  Which meant that once my weekly allocation was exhausted, I knew I still had the basics covered and would never need to dip into my emergency fund for general things.

Dave:  Wise move.  Putting a cap on total spending while still making sure everything is covered, can work wonders.  It’s amazing how you adapt when the money simply isn’t there because you’ve already allocated it elsewhere (debt repayment, investing, mortgage, etc). 

Which financial or life lessons have proven the most valuable to you?

The most valuable lesson that I’ve learned so far is that no matter how many things you buy, you will always want more.

Controlling and organizing your wants into fewer and more rewarding things is far more powerful than trying to earn more to cover an ever-growing hole.

Dave:  Read that last sentence again.  What an incredibly powerful statement, and so true.  Trying to find happiness through consumerism is like a mythical person with a bottomless stomach trying to make themselves full.

If you could go back, would you do anything differently?

The biggest change I would make would be to tell my 18-year-old self not to get that car loan.

I thought it was such a good idea at the time.  Now I often think back and wonder where I could be now if I wasn’t paying back a sizable loan for a depreciating asset.

Where do you think most Aussies go wrong with their finances? How can they begin moving in the right direction?

The biggest thing I’ve noticed is that many of my peers treat money and future-proofing their finances as a ‘later’ problem.

They always say that right now is the time for fun and they’ll worry about the cost later.  The philosophy of delayed gratification is ever more powerful in our quickening world.

Any other thoughts or experiences you want to share?

One of the more interesting experiences I’ve had since beginning my FI journey was learning that there are more people around you that can benefit from what you know.

If you are going at this alone, confiding in a friend, partner or family member can give you that push of accountability that may further your results.  It’s much easier to let things slip under the rug when nobody is looking over your shoulder.

Dave’s Final Thoughts…

Kyle has already learned some valuable lessons…

Shitty people can destroy an otherwise good job.  Car loans are a great way to set your money on fire.  Consumerism has no limit and indulging too much is unsatisfying.

He also realised the power of delayed gratification, despite its lack of popularity.  And that financial freedom is possible for average people with a bit of focus.

From the outside, and to his peers, it may even look like Kyle is going backwards right now:  He took a massive pay cut.  He’s spending less and being disciplined.  And he’s living at home when others might have their own space.

In reality, he’s quietly setting himself up for success over the next 10 years.  Because he’s:

— Found the power of forced saving to rapidly repay debt, and nailed down a money management strategy that works for him.

— Taking advantage of living at home to keep his expenses low.

— Found a partner on the same page (that’s a rare achievement in itself!).

— Already decided on a sensible long term investment strategy.

— He’s also got a well-paid job on the horizon, with the option to eventually start his own business.

Whingers would say, “well he’s living at home right now, so of course it’s easy.”  They’re missing the point.  The vast majority of people in this situation would simply burn away the advantage by machine-gunning their money in all sorts of directions – holidays, restaurants, clothes, on and on.   Just as the older high-income household does.

So this restraint and sensibility deserves a lot of credit!  Very few people develop this kind of outlook and determination at such a young age.

I really enjoyed hearing about Kyle’s experience so far.  The future looks very bright from here!  Let’s wish him well in the next stages of his FI journey 🔥

Thanks for reading! 

Here are some resources you may find useful on your wealth building journey:

My book: After 5 years and hundreds of articles and podcasts, I’ve now distilled everything down into an easy to follow book.  Designed as a complete roadmap to achieving financial independence and retiring early in Australia.

Mortgage broker: My personal broker of 10 years is More Than Mortgages. If you’d like help refinancing or getting the right loan for your needs, get in touch with MTM. They have fantastic reviews for a reason.

Sharesight: A great portfolio tracking tool for share investors, and free for up to 10 holdings.  It tracks all dividends, franking credits and capital gains, which is incredibly helpful at tax time.  Saves me a lot of time and headache!

Just so you know, if you choose to use these resources, this blog may receive a financial benefit at no extra cost to you.  Thanks in advance if you do.  And to be clear, I only ever recommend things I use myself and genuinely believe in.