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Podcast: Mistakes and Traps to Avoid on the FI Journey

June 29, 2021

Mistakes and Traps to Avoid on the FI Journey

In this episode…

We touch on some really important issues – mistakes and traps people fall into when pursuing financial independence.

Knowing what not to do is almost as important as knowing what to do.  Today we offer some reminders and also share what we’d do differently if we had our time again.

Prefer reading?  Find the transcript for this podcast at the bottom of this post.  Keep in mind, it’s computer generated, so it won’t be perfect 🙂

 

Listen to the show…

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Discussion points…

  • Additional comments on ethical investing  (01:57)
  • Saving too much  (08:55)
  • Working too much a.k.a. side hustle fever  (16:30)
  • Having no other interests  (26:04)
  • Addicted to accumulating wealth and safety  (31:29)
  • Waiting to start  (39:07)
  • Final thoughts and some reminders  (46:15)

Resources and stuff mentioned…

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Podcast Transcript
Mistakes and Traps to Avoid on the FI Journey - FIRE & Chill - Episode 30

Dave: [00:00:00]  Hello everyone. And welcome back to a new episode of fire and chill. Thanks for tuning in wherever you are  from our stats, we can see that most of our listeners are from the capital cities around Australia, which makes sense when you think about it, but we do have some listeners from overseas. Did you notice that pat?

Pat: [00:00:33] A few surely they’re just like ex-pats.

Dave: [00:00:36] Well, or accidentally clicking on us.

Pat: [00:00:38] Yeah. Maybe I don’t expect our information to be too relevant to those in where’s the next biggest country.

Dave: [00:00:44] I think we got like 1% from Europe and 1% from that’s at us. I think 1% from us as well.

Pat: [00:00:50] yeah. definitely

Dave: [00:00:51] Interesting. Yeah, Anyway, we’ve got a great little community of people here, which is pretty cool and we’re pretty grateful about that. So it’s, that’s excellent. And just before we get into today’s episode, we did have a little bit of a follow-up to our previous episode on ethical investing.

Just based on the feedback that we had, there were a couple of. Little pushbacks to what we had to say. And we just wanted to elaborate a little bit more on a couple of things that maybe weren’t quite so clear in the in the podcast we did. So did you have something you wanted to add there, pat?

Pat: [00:01:21] Yeah, I think you’re right. Like Dave and I can get pretty excited about things we talk about. And so we may not cover every single topic as clearly as we’d like to, or as clearly as we first thought we would, that being said there was some pushback. And though we felt we covered those topics. We’d just like to say a bit more about that.

So firstly, in terms of ethical investments, one of the say pushbacks was, well, look, you may not get it perfect, but getting it more right than less right. Is still worthwhile. And I would agree getting it more right than less, right.  Can still be worthwhile in a lot of cases. But in this particular case, we still have to come back to, are you actually doing any good by accusing which companies like choosing only ethical companies to invest in?

And the way I see it is you’re not actually doing all that much good by avoiding certain companies because they are still going to have their profits. The, their share price is actually irrelevant to the company in some, in this particular way, when they’re deciding what to invest in what to spend their money on how to make their profits.

And just another thing is trying to choose ethical companies by using simple filters, I think is just like almost incredibly, just too simplistic, a way to look at these things like plus having a filter that’s like fossil fuels equals bad. Therefore don’t invest in fossil fuel company is just, there’s no way to say this, except if that’s how simply you think the world works, then you need to get out there and see all the good that fossil fuels have done over the last 100, 200 years or the good they’re doing in third world countries.

And it’s just, it’s not helpful to have a simple black and white filter like that. Now having said that, can we do better? Absolutely. Should we be looking to move towards renewable energies? 100%. I’m an engineer. I love technology. I want to go into the future, but making feel good investment with basic filters that have no effect on or very little effect on the companies you’re investing or not choosing to invest in is not the way to get there.

The way to get there I feel is, consumer pressure, government regulation, putting pressure on your politicians and with your hip pockets, spending money where you think it’s best spent is the way to actually hurt a company’s profits and drive them to innovate. And the companies that do innovate and do want to remain relevant into the future will react to consumer pressure and government and regulation pressure far more than a small decrease or increase in their cost of capital.

Dave: [00:04:12] And I suppose the next or the other related pushback to that was that it’s better than nothing, it might not be perfect. It might not have this world changing impact like you guys are saying, but surely it’s better than not doing anything at all. And to that, I would say, we’re not comparing it against doing nothing.

We’re comparing it against using the same number of dollars to directly help the causes that you care about. And so when you back it out a bit, because we covered the point that ESG or ethically investing is likely to come with lower returns because of fees. And because of the fact that you’re likely to miss out on some of the long-term winners, whichever they may be because of the smaller portfolio you’re selecting.

That means you have less dollars to allocate to charities and to causes that you care about. So that is a cost. So you can think of it, like say you have a $1 million portfolio that may be ethically invested. If we’re choosing some reasonable type numbers, you may be losing maybe 0.5% per year to the higher fees you’re paying and to maybe missing a few winners along the way.

And maybe you don’t care about that, which is fine, but that means you’re essentially spending $5,000 per year or the equivalent of by investing in this way. And so that’s $5,000 that you could have taken by investing normally and taking that $5,000 surplus and maybe. Put it into causes and stuff you care about.

One silly example is you could probably buy solar panels for one of your neighbors. Every single year. You could go down the whole street and do that every single year, or you can put that money directly to conservation efforts or something like that. And the other thing people say as well, if everyone did it, surely it’s going to make some sort of change.

But think if everyone did this, took that surplus money and put it into solar panels, or put it into conservation efforts or something like that. That’s making tangible differences immediately. And that’s how you actually make a change doing those things at scale, not trying to bully a share price lower and hope that it causes some type of change to just happen.

Pat: [00:06:23] Yeah it’s really the success over feel-good tokenism versus actually making actual change in difference.

Dave: [00:06:31] Yeah. And we’re not against investing in this way, if it’s what you feel good about and what you feel comfortable with it’s totally fine. And we did cover that in episode, but don’t confuse that into thinking it’s gotta be better than doing nothing because that’s not the right thing to compare it against.

Pat: [00:06:46] Have we spent enough time on this?

Dave: [00:06:49] I think so.

I think we’ve covered the main thing. So that really where we’re about making the most impact for a given level of dollars, which hopefully I’ve just described that. And just given that a bit of justice and for us, we believe that’s investing in normal type index funds And donating that other money that you would have had to, to charity and direct causes.

Pat: [00:07:10] And to add to that, I’m also just against a black and white view of what’s good and what’s bad in the world without understanding of the complexities and the interconnectedness. And like I tried to describe it in the last episode a bit with the example of the work I do, but I don’t feel like I explained it very well.

It’s genuinely very hard to determine if the type of work I’m doing is ethical or not ethical on that black and white scale. And that’s basically what these ethical funds are doing. They’re deciding with a black and white filter what’s ethical and what isn’t ethical.

And I just don’t agree with that. And I don’t think that a few board members in an investment fund are the best place people to do that.

Dave: [00:07:52] Yeah.  No, fair enough. I think we’ve covered that pretty well now. So should we move on to today’s episode?

Pat: [00:07:58] yes, please.

Dave: [00:07:59] All right. What have we got, mate?

Pat: [00:08:01] So today we’re talking about the mistakes and traps to avoid on your fire journey. This is a lot of things. We’ve done ourselves. A lot of things we see other people traps with see them falling into, and we thought it might actually be useful to cover some of these because they’re really common and knowing these traps ahead of time and what not to do is almost as important as knowing what to do.

Dave. How about you kick us off? What is, or what are some of the traps that we fall into?

Dave: [00:08:29] all right. The first one is a funny one and probably not what you’d expect to hear from pat and myself, two guys that are pretty, pretty passionate about saving. And so the first trap that people can fall into is trying to save too much while it does well, that kind of sounds like a silly kind of good problem to have at first blush.

It can actually be a bit of an issue because sometimes people take it a little bit too far. They you’ll see people essentially spending all their spare time, trying to figure out ways to save more money. Maybe they, for their groceries, instead of just going to one store and sticking to a reasonably sensible or frugal shopping list, they’ll go to four different stores to try and get the specials on every single item that they possibly can.

And they end up spending hours and hours of extra time that they didn’t need to trying to save a few dollars on things like that. Or maybe they’re avoiding social occasions because they don’t want to spend that $20 or $30 or something like that. So it can be even little things like that. People just, think if I’m saving X amount and I can save X amount, plus an extra whatever, that’s gotta be better than not doing it at all.

So they’ll start to cut down all these little things that might even be adding quite a bit of value to their lives and might even be either saving them time or it’s something enjoyable that they like to do. And it can start to eat into the enjoyment of their current lifestyle.

Pat: [00:09:50] Yeah, absolutely. And I find that this is something a lot of people do very early on when they discover financial independence and retiring early is certainly something that I did as well. Like I probably took it a bit too far, trying to cut back and save money and invest as much as possible. And yeah, definitely made some of these mistakes, but over the years, I’ve reigned that in, or I’ve started to spend a bit more here and there and just become a bit more relaxed about all of those tiny little purchases.

Dave: [00:10:19] Yeah. Cause when you realize, and when you take a step back a little bit, at first you’re super passionate and you just want to be like, holy shit. If I can save this amount and invest it, it’s going to make a massive difference over 10, 15 years.

Pat: [00:10:32] Yeah.

Dave: [00:10:32] sometimes spending becomes the enemy at the start because you naturally equate your freedom or your future freedom with how high your expenses are. So you ratchet those down and you’re like, I’m going to achieve that kind of freedom much, much sooner for having lower expenses. But then once you’re in the, at the level of saving thousands of dollars each month and investing that, having a coffee down by the beach on the weekend, isn’t such a big deal, is it?

Pat: [00:10:58] definitely not. This all ties into that pretty famous post by Mr. Money Mustache, the simple math of early retirement. People see that and they’re like, oh, look, if I could just save like a few more percentage points, I’ll save a few more years. And it becomes a rabbit hole where you just keep trying cut and cut.

Dave: [00:11:17] so I suppose the thing to consider here is you can cut down your spending by all means, but also consider whether those seeds that you’re cutting are things that are meaningful for you. So maybe your one splurge is something like boxing lessons each week, or maybe it’s like going out for dinner once a fortnight with your friends, or maybe it’s buying books.

Maybe you just absolutely love books or something like that. So you got to put these things in perspective and we can all have, a couple of things that we enjoy spending a bit extra on. And we’ve actually done an episode about that, not that long ago. So it’s definitely worth thinking about the bigger picture and realizing that you can take this a little bit too far if you’re not too careful and ended up being less happy for it.

Pat: [00:11:57] Yeah, definitely. Definitely. And there’s often a sweet spot as well, where there’s diminishing returns. Like you can spend like up to a certain amount and you can get like a pretty good product or pretty good experience for the amount you’ve spent there. But then spending beyond that, you get really diminishing returns on whatever that is.

Dave: [00:12:17] because that’s, that’s the moving to the luxury slash status category.

Pat: [00:12:22] yeah. Yeah. Luxury slash status or just oh, anything like with say wine wine is a really easy example. Like you can spend $2 on a bottle of wine and probably be pretty cool. But if you spend like $10 on a bottle of wine and get much better, once you start spending $200 a bottle of wine, I’d say you’d have pretty diminishing returns from like a $20 bottle of wine.

Dave: [00:12:44] isn’t there a study that shows That people can’t really tell the difference, even some quite up there, wine connoisseurs, they can’t quite figure out the difference between the $20 and the $200

Pat: [00:12:55] Yeah, definitely. I actually think that sometimes the cheaper wine is more suited to pallets such as mine, which really can’t tell the difference. Like they just not too aggressive or too like intense in certain areas, where an expert or someone might be able to tell the difference or appreciate more,

Dave: [00:13:17] Yeah. Fair enough. Yeah.

Pat: [00:13:20] be clear, this isn’t just about wine. It’s about all categories of things like, bicycles, computers, restaurants, yeah.

Dave: [00:13:28] Yeah. So really cutting out everything while you might have the urge to do that in the beginning is not really the way to do it. Yeah. Just keep in mind, like as long as you’re still making progress and saving a healthy amount, you’ve got a decent savings, right? Don’t worry too much about the little things.

Having said that though, wouldn’t you say this bucket of people who take it too far is, is pretty rare, pat

Pat: [00:13:51] I’d say it’s more common in the fi community, but overall in yeah. If you take society in general, The problem is certainly the other way around. Most people are not saving enough and spending too much, I actually think,

Dave: [00:14:08] have, oh sorry. I was just going to say you went down this road a little bit, getting a little bit carried away earlier.

Pat: [00:14:14] for sure. When I was super excited, like when I’d had enough of work and I was just like, yeah, let’s do this fire thing, but I don’t know you the years go on you you’ll investment stash builds up and then you start just becoming a lot more comfortable with, okay, I’ve got all these investments buying a few extra bits and pieces here and there.

Isn’t going to make a huge difference to, my fire dates or my lifestyle in general.

How about you?

Dave: [00:14:40] Yeah, that makes sense. Know, I used to spend a fair bit of time, like looking at our kind of categories, where are we spending this money? And thinking we could probably improve this one or this one. And so I did get quite enthusiastic about it like this, but I wouldn’t say that I took it too far because we always, we’d still go out for lunch or coffee, whatever, every now and then we wouldn’t like live some ultimate sacrifice life.

Pat: [00:15:09] plus feeding yourself beans and rice, like for five years

Dave: [00:15:12] I mean, I like beans and rice, but no, I didn’t

Pat: [00:15:19] Yeah.

Dave: [00:15:20] Yeah.

That’s my point. Making your life now super miserable just to have a feature benefit. So you should still keep things in perspective and not worry too much about the little things.

Pat: [00:15:29] Yes, definitely.

Dave: [00:15:30] All right. What’s the next problem or trap to avoid?

Pat: [00:15:34] Oh, if you work too much or you get side hustle fever, or you’re always trying to increase didn’t we do an episode on side hustles and we were both like, eh, not for me. Yeah.

Dave: [00:15:46] Yeah.

I think it was in our episode on ways to make more money. I think we covered side

Pat: [00:15:51] that’s right. Yeah. There’s always a way to make more money. Right. You’ve always got an extra hour to spend working. So some people spend all of their spare time trying to make more money. It’s like their main prerogative to be pleased. Sometimes this isn’t just the fire community. Sometimes. Like these are people that a lot of people just like making money or they.

It’s intrinsically tied to their feelings of self-worth make more money, get ahead in life get more, get a bigger house, get a better car. And in the fire community, like I’ll get to fire earlier. How do I make, how do I do juice every hour of my day to make money?

Dave: [00:16:29] this is really a problem for everyone.

Pat: [00:16:31] Yeah, for sure. So whether that be in your current job or starting more side gigs can really get out of hand and you can really resent, not having any free time and your family can resent as well. Like you just not being around, which is big.

Dave: [00:16:46] Yeah, that’s a good point because you’re spending all this spare time working and not catching up with any of your friends or not spending time with your spouse or your family or whatever that can really put a strain on your relationships. And maybe you do end up achieving the goal that you set for yourself, over the next five or 10 years, and you are making the income you want, and maybe you’ve achieved the wealth level that you want.

But if you’ve got pretty crappy relationships at the end of it, it might not have been worth it. Looking back

Pat: [00:17:14] No, definitely not. So we definitely need to put a value on our spare time and our time in general, while on the road to fire, your time is limited. It’s especially limited while you’ve got a full-time working week to contend with, and you’ve got other floors and other duties. Just whatever it may be taking the kids around, like having a pretty demanding full-time job as it is.

Dave: [00:17:38] I think people undervalue their spare time. They think this is, it’s my spare time. So it’s nothing time. So it’s not worth anything. So if I work a bit extra, who cares, cause I wouldn’t have been making any money, it would have been relaxing or whatever anyway, but that’s valuable for its own sake.

You know, spending time with your family or going for a walk or doing one of your hobbies that you like, like that has so much value in terms of mental health, benefits and life satisfaction for its own sake. Even if there’s no dollars entering the bank account or even leaving the bank account, it’s, that’s definitely worth spending your time on.

Pat: [00:18:09] This is going to actually tie into our next topic a bit, but there are a great group of people were like, exactly that. Well, I would’ve just been at home, doing nothing anyway. So I might as well make some more. And it’s like, yeah. Wow. Okay, that’s a way to look at life for sure.

Dave: [00:18:28] Yeah. As we said in in our ways to make more money episode working extra, I think we’d make the rule for yourself that you can loosely follow that you should probably only be working extra or getting into side hustles. If you think you’re going to enjoy having spent in your time on that extra activity, rather than doing other things that you could be doing, and you have to know where to draw the line somewhere.

Pat: [00:18:52] for sure. Like going around doing Uber eats I couldn’t imagine a worse side hustle for me.

Dave: [00:18:59] What about sales?  Sales would be… What about in the shopping centre where you got to try and get people’s attention? When you’re in the middle of the, you know, those kiosks in the middle of the shopping centre you got, ah, man, ah, that’s the one I couldn’t do.

Pat: [00:19:13] But yeah, working extra hard, killing yourself, grinding away is glorified,

Dave: [00:19:18] Yeah. It’s like this hustle culture.

Pat: [00:19:20] badge of honor, people like, they say it with a smile on their face, how busy they are.

Dave: [00:19:25] Oh, I’m so busy

Pat: [00:19:26] I’m so busy. Yeah. Yeah. I just have no time to do this and I’m just like, oh God, I just am so busy. I want to stop.

Dave: [00:19:35] Yeah. Yeah. That sounds bad to me being so busy. You don’t have time. That sounds. Yeah, I don’t like that. Maybe it’s a personality thing too. I don’t like to have too much on my plate. So I’ll probably, one of the laziest, or not lazy, but, I wanted early retirement, so I could have much more time to myself.

Pat: [00:19:53] You’re one of the most driven, lazy people on the planet. Oxymoron, you were driven to build a lifestyle for yourself where you could be lazy.

Dave: [00:20:06] well, man, it sounds funny, but that’s actually what I used to, how I framed it for myself. When I was at work, I used to people ask me, well, how do you do so much overtime? This was in the couple of years that I was doing a ton of overtime. I was like if I work more now I won’t have to work at all later.

And they’d just look at me like. I’ve got two heads or something like that. What, what are you talking about? It just didn’t, it just didn’t make sense them to work more now and then have a bunch of benefits later. They just wanted the benefits now. So I don’t know, I just framed it to myself in that way.

I guess I did want to, I wanted to work hard so that I didn’t have to work, which is like an oxymoron, as You say.

Pat: [00:20:48] okay. Oh, it’s fine. Especially when you’re young and you’ve got a lot of energy and you haven’t got a lot of responsibility. Yeah. It’s a good, yeah. Good strategy. One that quite a few people employ whether they realize it or not.

Dave: [00:21:01] yeah, I did take that too far though. While we’re on this topic, I did it did start to get me down after a while. Cause I did resent, not having the amount of spare time and the amount of, freedom that I wanted because I was, if I worked extra days, I’d have less time to recharge.

And then, so when I go back to work, I’d be tired. And when you’re tired, you get grumpy. And then the world just looks like a worse place when you’re tired and grumpy. So it had this snowball effect.

Pat: [00:21:30] then you can’t even enjoy the time you have off because you’re so tired.

Dave: [00:21:34] right. Yeah. And then you can’t be bothered exercising because you’re tired and then you don’t feel good because you haven’t done any exercise and it just snowballs from there. So I did stop doing that over time towards the end of my journey. So I did reverse that a little bit and get some of that time back and life improved at that point because Yeah, it was better to have that freedom.

Pat: [00:21:53] Yeah, David, I were actually joking before the episode about how blasé we are with money, especially now that Dave is retired and I’ve, well, along that journey that a few extra thousand dollars or a few extra, even tens of thousands of dollars on my salary, isn’t. It’s not the biggest deal.

Like it might save me a few months on the fire journey. So it’s yeah, whatever. And that’s, must’ve been what you were feeling towards the end of it. It’s like, oh, I could kill myself with all this overtime, but what’s it really going to get me?

Dave: [00:22:21] Yeah, I think that’s a good point because there’s probably a tipping point. I’m not sure where it is, but maybe it’s like when you’re three quarters of the way there, somewhere between half and three quarters of the way there, that you start to see the light at the end of the tunnel. And you’re like, oh wow, this is actually working.

This is going to happen. And then, so you start to relax a little bit like, oh, Maybe I don’t need to do this extra work or maybe, this extra expense doesn’t really matter too much because things have gone pretty well. So Yeah, you do ease off a bit in your mind, I think, and you move into a better place.

Pat: [00:22:51] Can where you are, where I’m I think I’m there now, to be honest.

Dave: [00:22:55] It sounds like it.

Pat: [00:22:56] Yeah.

Dave: [00:22:58] But back to this point on I’m working extra hard daily things, some of it comes from, the side hustle fever and the work hard play hard culture comes from it’s, like you said it’s part of its status that you’re like a big shot. I’m so busy makes people feel important.

But then at the same time, do you think it’s to keep up with a certain lifestyle that goes along with that work hard play hard situation. And then also those people thinking, saving money and being frugal was for Lou.

Pat: [00:23:29] I do know what you mean. Yeah. There is that kind of, that, like you said, that work hard, play hard culture.

Dave: [00:23:35] you get those vibes from those types of people

Pat: [00:23:37] Yeah. Yeah. I work so hard. I should be able to buy myself yachts and rolexes or whatever. I think it’s just a trap.

Dave: [00:23:44] Did you have any sort of, did you slip into this trap with working too much, pat? Did that ever happen to you?

Pat: [00:23:51] Oh, for sure. I feel like I work too much right now to be honest.

Dave: [00:23:57] But I suppose a lot of, that’s not a lot of that’s part of your job and it’s not really voluntary. So falling into the trap of pursuing a ton more work in your spare

Pat: [00:24:06] Oh nah, not with the job I’m in now has built in over time. If you will. Like I’m a salary employee, so it’s not like I get paid. Per hour or anything extra, but it’s just built in that’s expected. It’s the, I’m working on transportation infrastructure. So it’s you can only work on the, that sort of infrastructure outside of peak hour, which means outside of normal working hours.

So it’s built in over time, nights and weekends and all sorts of stuff.

Dave: [00:24:37] Yeah.  that’s kind of fair enough. Do you think you would, do you think you would be the top that would pursue or get a bit carried away with work if you just had a standard 38 hour a week job?

Pat: [00:24:48] Early on. Yeah, for sure. For sure. Now with say within striking distance of my goal, I would ease off that accelerate, accelerate a pedal so much. Yeah.

Dave: [00:25:00] All right. So let’s move into the next issue that we see coming up a fair bit. And this one is interesting. It’s the trap itself is that people have no, or very few other interests in their life. You’re saying this pep.

Pat: [00:25:17] for sure. Work becomes everything. Fire becomes everything.

Dave: [00:25:21] And so due to people just generally live in busy lives and working towards a certain goal or just working in general, they don’t have a lot of time for other things. It can be a problem, especially later on. And especially for people pursuing financial independence and that’s for two reasons.

So you can, firstly, it can make us reluctant to quit the job that we have, because we feel like we don’t know what we would do with our time, because all we done up until this point is just work, work, work, or relax when we’re not at work or we’re on holiday or something. So I feel like people really there’s not a, a lot of things that come to mind when they think of what if you had all your time to yourself, people are, oh my God…

I literally don’t know what I would do. So then they’re thinking if I quit, if I get to this point and quit my job while it sounds great, it brings up a fair bit of like anxiety. And then also like maybe some pressure to figure out what to do with their lost cause they’ll have all this free time.

It will be pretty overwhelming to be honest. And I’ve heard from people who are struggling with this, but I’ve had emails from several people who are this is their challenge – figure out what they would do when they’re not at work.

Pat: [00:26:27] Yeah. It’s really tough. Like you said, you get carried away with work with life and eventually you. Yeah, you’re just a worker like that’s it, that’s your whole identity. That’s your whole everything you do. And so of course it will be a bit intimidating, but it’s super easy to fall into this problem, yeah. Did you fall into this as well? When you left work?

Dave: [00:26:47] I’d say I fell into say a little bit. So I didn’t really think about much after reaching the FI goal. That was just all I thought about essentially, but I didn’t really struggle with the anxiety of what to do afterwards. I just thought I’ll just figure it out. Like I thought that was a pretty good problem to have, and I just didn’t imagine that it would be an issue, but I’m hearing that it’s, it’s a problem for a fair few people.

So it’s definitely something that I thought we should address on this podcast because, I have other interests obviously like investing and nature and stuff like that, but then you still have to build that structure or that, that list of things that you want to do with your free time. So it’s better if you can build some of those into your life as soon as possible.

Number one, just to see if you like it. Cause maybe you’re super interested in them, but you spend more time on them. You’re like, eh, maybe that’s not really for me. Maybe I’ll try this other thing instead.

Pat: [00:27:42] yeah.

Dave: [00:27:43] And then number two, so that when you get to financial independence, you know, exactly. Okay. I want to spend more time on this area on this area and this thing over here.

And so it’s much less of a shock and much less it brings a lot less maybe anxiety for certain people that when they get to that point, okay, I’ve got some plans, I’ve got some freedom in my lifestyle and in my, in my schedule, but I’ve got these ideas of what I want to do. And so it’s a little bit dangerous for some people not having any other interests when they are working full time.

And so I think that people should really focus on that a little bit sooner because it’s just a little bit healthier, I think mentally for when you do have where you’re, when you do get to that position, when you have more freedom.

Pat: [00:28:23] Yep, definitely. And we just don’t want to forget that all of this fire stuff, it’s really about your life and building the best life for yourself and having freedom and that. Money is just the tool to get there. So if you’ve spent all your time focusing on the money and focusing on the investments and like the previous issue, we talked about, like working too much, then all you’re really doing is sacrificing your life and freedom now for the expectation of life and freedom tomorrow.

And that’s not the best way to do it. I’d say a mighty better ways. What you just described, Dave, start looking at some of your interests, some of your hobbies, building them into your current lifestyle. And even if that means you work, whenever four hours per less week, less per week or eight hours less per week, not the biggest deal, because you’re already doing some of the things you want to do.

And some of the things that all that fire will give you a lot more time to do later, but you’re bringing some of that forward.

Dave: [00:29:19] use the shock to your system when you do eventually get there. And even if you’re spending time doing those things, now it can even help you imagine. Okay. Maybe I can actually do this thing over here. Or maybe I don’t want to completely retire. Maybe I like my current lifestyle because you’ve made it more enjoyable because you focus less on these other things and more on these other interests that you’ve created for yourself.

And so maybe the standard workweek is not terrible, but it’s not really what you want. Maybe you want 20 hours a week or 25 hours a week. And so you can spend a bit more time on these other things and kind of semi-retire instead.

But when you’re like 100% work, 50, 60, whatever hours a week, and then all the other time they’re focused on saving and optimizing your investments and whatever, it can start to feel like the work and the finances are the enemy, when really it’s the opposite they’re supposed to be helping you.

Pat: [00:30:08] Yeah, for sure.

Dave: [00:30:10] So the last thing I’ll say there is just, think about how you want to spend your life in the future. And even now, right. Like pat said, money is the tool that’s going to help you do that. So if you can write a big list of stuff that you want to do, or that you’re even just stuff that you’re interested in and start looking at some of those things now and spending time on them a bit sooner than you otherwise would.

Pat: [00:30:31] sounds good, man. Another one we see is becoming addicted to accumulating wealth and safety. This is the one more year syndrome or the one more year in perpetuate east syndrome.

Dave: [00:30:44] Yeah, this is pretty common too. I think man.

Pat: [00:30:47] We’ll definitely have a separate episode on this, but it gets to a point where some people can’t pull the trigger. And you hear this all the time. Some people end up doing one more year syndrome for three or four years or longer.

Dave: [00:31:03] I think this is, I think this is partly related to the previous the previous point we had about not having really other interests, so people can sometimes fall into the trap of just the status choirs, just so easy to just keep doing what you’re already doing. You see your wealth going up, your money comes in, you’re investing every month.

Life’s not too bad. And you’re like, wow, this is not to, this is actually pretty good. Get this, get to watch these numbers ticking up and up and up. And the, the new life that you planned is like, Yeah. it sounds good, but it’s a little bit scary at the same time because you, maybe, you’re not sure quite what you do with your time or you just think if I can just get to this number, then my finances will be even safer and it’s this upward escalator. And it’s a little bit tricky to step off it. So it can definitely be a trap for some people.

Pat: [00:31:52] Yeah, definitely. So wealth can definitely help you have a better life with a lot more independence and freedom, but it’s only there if you take advantage of it.

Dave: [00:32:01] And that’s the thing, right? Cause the people like they build up all this wealth, let’s be honest, you end up with usually a seven figure portfolio, like huge wealth, and then they don’t do anything with it because they’re just like, they’re just, afraid of what’s going to happen next.

If they leave their job and a lot of different anxieties and fears coming in at that point of stepping into something new and something different.

Pat: [00:32:23] Yeah. Yeah. I can definitely see how this would happen. I could see how this could happen to me even. It’s just that or just, I can just make it a bit more safer, a bit not necessarily cushioned to spend more, but just say oh, if there’s a major market downturn, then I’m even safer. I’m even more protected from that.

No, of course not. So it’s like you said, the fear of running out of money and stuck in the status quo, it’s just easy to keep going. It’s like, let’s put up with this for a decade. What’s another year.

Dave: [00:32:55] cause it’s comfortable, isn’t it?

Pat: [00:32:56] Yeah. It’s familiar. I wouldn’t say necessarily comfortable. Even if it’s something like you don’t like a lot, but just that fear and

Dave: [00:33:05] Fear of the unknown.

Pat: [00:33:08] Can stop you taking that extra step. It’s the whole, the devil, you know, is better than the devil. You do.

Dave: [00:33:13] Yeah.

Pat: [00:33:13] Yeah.

Dave: [00:33:15] I’d say I’ve seen this a few times as well, cropping up with certain people. And I noticed that. I’ve had a couple of people email me and they’ll even say in the email, I think my mind is playing tricks on me because to try and convince me to stay at work and just to keep everything the same because it’s so familiar and stepping into something new, this new life is a little bit scary.

And so your mind starts thinking what if this happens? What if that happens? But when you lay out those different scenarios. What if there’s a big recession and what if this happens, there are so many different things that you can do, which we should do an episode on in the future to navigate your life and your finances throughout whatever you may face that you don’t really need to worry about it.

If you think those things through, but it’s, I suppose all those ideas flash into your mind or what if this happens and it can really cause some, it can cause you to freeze up and Well, I’ll just, maybe I’ll just stick with what I’m doing because it’s the safer option,

Pat: [00:34:14] It’s not only the safer option, but it’s also doing something very different to what, like the normal path that society has laid out for you. So that can play that can definitely trigger some unconscious oh, am I doing the right thing? Is this really the right thing?

Dave: [00:34:30] Okay. So are you saying people are on this different path anyway, saving and investing, that’s already different in itself, but then to then quit your job. That’s a whole, That’s a whole new level of different.

Pat: [00:34:41] Am I crazy? All of my friends is still working. All my colleagues are still work. 99% of society. I still like doing this thing and I’m just going to quit.

Dave: [00:34:52] Okay. Well, I never thought about that. Yeah, So then the spotlight is on you even more, so you stand out like, what’s this person doing? Why are they doing that?

Okay. And then if something happens, then you might get criticized for making a wrong decision or something.

Pat: [00:35:05] Yeah. It’s like, whenever you’re doing something different to the pack, then you have to be pretty damn. So, you know, for yourself to not feel that you’re making the wrong decision

Dave: [00:35:14] so there’s more pressure because of outside forces or outside opinions, because you’re doing something so different.

Pat: [00:35:20] yeah. It’s not even just the outside opinions. It’s just, it’s pretty if you were just wandering through the world, like if you’re just an ape wandering through the world, it’s pretty safe to just do what all the other apes are doing. Like that. If you’re going to try and not get killed by a Tiger or something.

You just follow the pack, do what everyone else is doing. You’re just an ape in this world where as soon as you start doing something different to that, it’s like all this fear of the unknown risks you’re stepping away from the status quo, the pack. And that can I feel play on people’s minds subconsciously.

Dave: [00:35:54] Yeah. Okay. Yeah. Wow. I hadn’t thought of it like that before.

Pat: [00:35:57] Yeah. Right.

Dave: [00:35:58] I haven’t, I didn’t really experience that. I I saw what the pack was doing and felt, oh, hell no, I don’t want to do that. So I suppose naturally I thought I’ll just follow my own plans because what they’re doing is not appealing to me at all.

Pat: [00:36:12] I think in the kind of developed thinking part of your brain, you come to that conclusion, but like deeper down when you’re stepping away from the pack, like you get this little bit of uncertainty and fear.

Dave: [00:36:25] Okay.

Pat: [00:36:25] Not for you.

Dave: [00:36:28] Yeah, no, I don’t know, man. I didn’t really have that. I’ve always done my own thing,

Pat: [00:36:32] Hey, good for you.

Dave: [00:36:35] but it’s a good point. You bring up because we’re trying to, we’re trying to help cover some of the issues that people are facing. So that’s a good point.

Pat: [00:36:43] Yeah. And trying our best anyway, being unqualified as we are to try and explain why the, these things might be happening or say

Dave: [00:36:51] what’s up, it’s a podcast. We’re not like psychologists and financial experts.

Pat: [00:36:57] Oh, sometimes I feel like it’s best that we’re not financial experts.  I just did the air quotes thing for those listening on it.

Dave: [00:37:06] Yeah.

Pat: [00:37:08] I forget. It’s a podcast.

Dave: [00:37:11] And that’s what this podcast is, right. It’s just two guys hanging around and having a chat, which I hope that’s what comes through. We’re not trying to say we know everything or anything like that,

Pat: [00:37:18] Certainly not.

Dave: [00:37:20] Anyway, back to the point, like it becoming addicted to accumulating wealth, you can see why people get stuck into this because it is super safe and that there’s nothing new and nothing scary about it. But at some point you do need to, it does get to the stage where you need some level of courage to step away from what you’re currently doing and step into your new life, because that’s why you’re doing this in the first.

I think you need to remember why the big picture and why you’re actually building up these investments and building up this wealth in the first place. What was it for? Was it so that you could start a business and not have to worry about paying your bills? Was it so you could spend more time with your family and put more focus on your health?

What was it all about? So keep that in mind. If you are struggling with this one more year syndrome.

Pat: [00:38:09] What’s next?

Dave: [00:38:10] Okay. So another big one that we did cover a little bit in a recent episode is waiting to start, people get into financial independence and get interested in personal finance, and then there’ll be like, okay, so how do I, what should I do? First, how can I make the best decisions possible?

What’s the best investments that I need to get into and how can I make it all so that I’m not making any mistakes.

Pat: [00:38:38] yeah. So this is their whole analysis paralysis problem. And to be clear, Dave, and I aren’t saying that you should just, when you start, just go straight into the stock market and just buy whatever you want. Like we’re just talking specifically about. Going well overboard with getting stuck in trying to analyze the very best solution possible.

And then in that time, wasting months or years, even in this kind of this crap of trying to analyze everything to perfection.

Dave: [00:39:06] Come up with the best solution. So don’t spend a year reading and spend a month reading, but don’t spend a year reading about what the best kind of way forward is for you, because you’ve just lost a year of process.

Pat: [00:39:19] Yeah, exactly. The key that many people forget is if we’re going to put numbers to it, making an imperfect decision, I still good decision, but an imperfect decision cyclers, like such that you say get 5% returns for a year instead of making a perfect decision, which doesn’t exist, Dave. And I say this all the time and getting 8% returns.

Like you’ve lost 3% of returns for that year. So even if at the end of the year you sell the initial one and you rebuy into your more optimal solution, you’re still better off than having waited that entire year to make the best decision

Dave: [00:39:56] You’ve not done anything. at all because you were just waiting and analyzing and scrutinizing.

Pat: [00:40:00] Yeah, exactly. So getting things sort of 80% correct is far and getting on with it, instead of trying to like, get that last 20% and analyzing it to death is often better because people forget, like things aren’t as cert like artists fixed as they think they are.

You can always make changes down the track. Yeah. You experienced a little drag while you make those changes, but experiencing a little bit of drag for making a change is better than not having earned anything at all in the first place.

Dave: [00:40:30] Exactly. You can always change and adjust and tweak things as you go. And that’s exactly what everybody does, everybody,

Pat: [00:40:37] Yeah. I’ve not met a person that has made a plan and stuck with it and it’s been perfect for them the whole way through.

Dave: [00:40:45] and they’ve never tweaked it ever in their life.

Pat: [00:40:47] Yeah, no, that doesn’t happen.

Dave: [00:40:50] And so I suppose another thing to point out here is when you actually get started and I’m doing it, even if you’re not. Doing it perfectly, you will learn by doing it itself. So the fact that you’re taking action is helpful for its own site because you will learn things along the way. Right?

Pat: [00:41:08] Yeah, precisely. And I actually, I have a friend that listens to these podcasts and so he’s going to know who he is when I say that. It’s I remember when he wanted to start investing. And he was like, obviously I’m that guy in my friendship circle. Cause they know like my interest in this topic. So he came to me and he’s oh, how do I do this?

What do I do? Let’s go for a coffee. Let’s go for a walk. Let’s do this. And I just said, just okay, 50% VAS, 50% VGS just invest in those. We spoke for about a few hours and he just did it and it was great. And that was exactly what I was trying to achieve. Like just get them in from the start with something that’s fairly simple and we’ll get them started very quickly and it’s 80%, correct.

Let’s say, or even more in this case, but as time goes on, like he’s like, oh, okay. I probably want to reduce by Australian exposure a bit. So he’s now working that down. But in the meantime, like if he waited, like trying to analyze the best allocations for months, he would have missed out on all of these returns while trying to analyze like the best allocations for himself.

Dave: [00:42:10] And not only that. Yeah. And not only that, but that whole process of analyzing and scrutinizing everything is so exhausting. Whereas just especially for our beginning, because then it feels oh my God, this stuff is insane. I have to learn all these things because there’s so many, I think because there’s so many options, they feel like they have to be across all of the options and have to understand all of the options when maybe they don’t have someone in their life.

Maybe like you pat, who can just apply a filter and say, ignore everything. Here’s a couple of things that are well. Well, good enough to get you started. If you just do it. And save and put your money here. You’ll do very well over time. Is that perfect? Maybe not, but what is perfect. Nothing.

So keeping things simple, especially in the beginning is absolutely the way to do it.

Pat: [00:43:00] And just as a side note, I found that I used to do this when purchasing products. It’s a bit of a digression, but like I used to want to research the perfect product and I’d compare like five products online and have the tabs open and go through the spec sheets for them, if it’s like an electronic or something and I’d waste hours and then try and find the best price from the best seller of it.

And, uh, it’s exhausting. And now it’s just oh, whatever, just let’s try and find good enough for a good enough price. I’m not, if I can get there in 15 minutes instead of spending three hours, then that’s a far better outcome for me.

Dave: [00:43:39] because unless you genuinely enjoy all of that analyzing and research and. Then you just lost three hours of valuable time that you could have spent on something more enjoyable and more fruitful in the end.

Pat: [00:43:51] Yeah. And it was nonsense, right? Cause like I’m not talking about researching like a $40,000 car or something like I’m talking about a product that might be in the range of a couple of hundred dollars or something. So the difference between one seller and the other sellers, probably 20 bucks, you know, wasting two hours to save 20 bucks is a stupid waste of time.

Dave: [00:44:11] It comes back to putting a value on your time, like we said earlier, like on your spare time.

Pat: [00:44:16] Yeah, exactly. Exactly. So luckily then financial independence is pretty simple, right?

Dave: [00:44:23] Definitely.

Pat: [00:44:24] You shouldn’t get stuck on this one. It still happens, but it’s pretty straightforward.  Invest in diversified index funds and learn the rest along the way.

Dave: [00:44:33] And I think the simpler that people like us can make it pat, the more, the easier it is for newbies and for people who may be struggling with something like this to maybe not get stuck in that paralysis situation and get started sooner.

Pat: [00:44:48] Yeah, you’re right. We could probably give the impression since we’re now up to 31 episodes of this, that there’s a lot to think about, but in some ways I feel like you and I are just repeating ourselves for 31 episodes. It’s like, it’s really simple. Just do this. It’ll be okay.

Dave: [00:45:10] So is this our last episode?

Pat: [00:45:11] nah, we’ll keep talking. People keep wanting, wanting to hear this.

Dave: [00:45:17] All right. So let’s go through a couple of final thoughts and a few reminders to finish off with. Okay.

Pat: [00:45:22] don’t go overboard and cut every single thing out of your life, including the things that are valuable and that you enjoy, find an efficient balance is probably the way I’d say

Dave: [00:45:33] With your spending, you mean?

Pat: [00:45:34] Yeah. With your spending, get the best bang for your buck. Still do the things that you like. Don’t overthink it or go too far in that direction.

Dave: [00:45:43] Yeah,

Pat: [00:45:43] Cut away the shit that doesn’t matter.

Dave: [00:45:45] yeah, yeah.

Pat: [00:45:46] Yeah.

Dave: [00:45:47] Don’t fall for the, a side hustle fever trap and work insane amounts. You probably will be miserable. You won’t be able to sustain it for very long and life won’t be very good if you’re spending all your time working

Pat: [00:46:03] Yeah,

Dave: [00:46:03] then related to that, make sure. you have some other interests besides work and besides financial independence, because not only will that make your life better now, it will make it much easier to step into your new life a bit later on when you can, when you have the ability to do so.

Pat: [00:46:20] Yep. Know when to draw the line with having enough wealth and try and stick to it. Like getting addicted to accumulating wealth in loses sight of the bigger picture. You know what they always say? You can’t take it with you. So find what’s enough and try and go from there.

Dave: [00:46:37] And just start, just start right now. No more analyzing it. No more scrutinizing and trying to perfect everything. If you’re listening and you haven’t quite started yet just get started. Like you can always change things along the way. Will you make perfect decisions? Probably not, but nobody does.

So just start with something and you can always improve on things as you go along. But the important thing is to not wait too long before you do to get started.

Pat: [00:47:03] Yeah, I’m actually pretty certain that if you’ve spent maybe a few hours reading up on it, you could probably get going. We were awfully generous when we set a month last time. If you’re spending a month researching this, then you’re already in the realms of analysis paralysis.

Dave: [00:47:23] That’s fair. Yeah.

Pat: [00:47:25] Yeah. You’re well deep into analysis paralysis. This is really quite simple.

So definitely more tracks and other like things that you can get stuck in then what we’ve discussed today. But Dave and I just felt that these are the most common ones that we can think of. So whether your like guilty of some of these things, that’s okay. Many of us are, no one is perfect. And since we’re trying to achieve something pretty big and pretty unusual, there’s bound to be struggles along the way.

Dave: [00:47:54] So the real secret to enjoying your journey, and I guess your life in general is to avoid being too extreme in any one direction. Whether it’s your savings rate or whether it’s your work or things of that nature, just a little bit of moderation goes a long way and just keeping things a little bit more balanced is a really healthy way to approach. What just as a final thought, pat, what do you reckon is the worst pitfall to succumb to out of all of these ones? Yeah.

Pat: [00:48:22] I think the worst is what you just described. It’s extreme moderation or sorry, extreme

Dave: [00:48:30] Extreme moderation?

Pat: [00:48:33] I misspoke you can’t.  Extreme goals and extreme frugality and likely to lead to extreme failure. I like to say,

Dave: [00:48:47] Okay. Yeah.

Pat: [00:48:48] cause that’ll never last.

So try and find where it works for you. Where’s the best balance. Where’s the best bang for your buck. So to speak,

Dave: [00:48:58] Hmm.

Pat: [00:48:58] how about you dough?

Dave: [00:48:59] I think probably waiting too long to start. And over agonizing about maybe the investing side of things, but then also the fear of not having enough or the addiction of, more accumulating a little bit more to have a little bit more safety. I feel like that’s, I feel like that one is the most unfortunate only because you’ve already got the wealth to enjoy your life as much as you possibly could, but you’re not, you just don’t have the courage or whatever to actually pull the plug in and step into that new life.

So it seems like a real opportunity gone begging, and it just seems a little bit unfortunate, because you’re there and you just can’t quite get yourself to do it. So that seems like that one’s the worst one for me. Yeah.

Pat: [00:49:43] Yeah. Fair enough.

Okay. Is that a wrap?

Dave: [00:49:47] Idea.

Pat: [00:49:47] We hope that this helps you avoid some of the most common pitfalls we see people making. If you enjoyed this episode, be sure to subscribe wherever you listen to get every episode. And as usual, if you have any feedback, topic, requests, or questions, you can send them to fireandchillpod. That’s all words.

F I R E A N D C H I L L P O D@gmail.com. And you can find more from Dave and I at our blogs, pat at lifelongshuffle.com and Dave at strongmoneyaustralia.com – have a great week and we’ll talk to you soon.

6 Comments

6 Replies to “Podcast: Mistakes and Traps to Avoid on the FI Journey”

  1. “You can either cash out for a hefty gain or hold and become a WHSP shareholder – I think both are good options.”

    Can you expand on this? MLT is one of my biggest LIC holdings and I’m not sure if I want to be a WHSP shareholder as their portfolio is alot more concentrated.

    1. You’re right Jack, it is more concentrated, which is something to consider. Personally I still think it’s a good investment company. If you haven’t seen it, I wrote a review about WHSP here.

      Whether it fits how you want to invest, that’s up to you. It’s different from Milton that’s for sure, so have a think about it. You could simply decide to sell your Milton now before the merger and put that money into another similar LIC so your investment exposure stays roughly the same. Or maybe you could sell half (or more), reinvest that elsewhere and keep some WHSP if you like it but don’t want the same size exposure as you have in Milton right now.

      Lots of ways to do it depending on what you feel most comfortable with. I hope that helps.

  2. Hi Dave,

    I’ve been listening and reading, a lot, mainly Aussie Fire Bug, Peter Thornhill, Barefoot Blueprint for a few years and now listen to you guys. I have done the, almost obligatory, analysis (best product) and trying to time the market and get a better a price etc. I think those things are unavoidable human nature – even with good advice. Also, although I did buy shares last year during the downturn, I worried, and in hindsight should have bought more blah blah lol!

    I have even consulted financial advisors (only two, lol, for an hour each for peace of mind and at minimal cost) when I told them what I was doing they basically couldn’t offer me anything advice wise. I suspect if I knew nothing this would have been different.

    I have some smaller LIC holdings and individual shares but the bulk of my portfolio is VAS and VGS. From here on in it’s all VAS and VGS. I actually think VAS/VEU/VTS is the best investment, fee wise, but I sleep better with VGS (domiciled in Aust) knowing I won’t have to worry about possible changes in the US.

    Love the podcast guys and look forward to them. Keep up the good work and good advice.

    1. Hey Geoff, thanks for sharing your story and appreciate the kind feedback 🙂

      Sounds like you’re in a great place and have made some very sensible moves along with your effort on continued education. So, nice work – the future is bright!

  3. Hi Dave and Pat

    Great podcast. As I listend to this it got me thinking about my fire journey. I have made a number of these mistakes. The other mistake, I have made is listening to too much daily financial news.

    Looking back on this, I think I needed to make these mistakes to go on the journey to work out what my true goals and see what retired life could look like.

    Dave as someone who has retired. Do you feel that making these mistakes helped you work out what you wanted and were benficial to where you are now?

    1. Oh the news, that’s a big one! So much so, you might remember we did a whole episode on tuning out the noise 😉

      I think you’re onto something there. Making mistakes definitely helps you figure out what works and what doesn’t, in general and for you personally. Having said that, often we fall into these traps/mistakes because we think they’re necessary to get to the goal (extreme saving/work, to learn everything about investing, and so on).

      So pushing the boundaries is sometimes useful, but I think we also need to be aware that doing so isn’t really needed to reach FI (which many of us aren’t until we learn it by ourselves).

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