Gold Coast man Kaleb Schofield is hoping retire by the time he is 40 and has already built up an impressive share and property portfolio. (Source: Supplied)
A 24-year-old construction worker has shared how he is planning to retire by the time he is 40 through a popular financial movement that has been gaining traction in Australia and abroad. Workers are increasingly reassessing their approach to retirement and many no longer want to wait until their 60s or 70s to enjoy the perks.
The Financial Independence Retire Early (FIRE) movement promotes the idea of reducing your spending and investing the surplus while you are still working. The goal is to build your investments up to the point where you can get enough passive income to be able to retire from traditional work.
Gold Coast man Kaleb Schofield told Yahoo Finance he hoped to be “work optional” and be able to focus on the things he was passionate about, like radio, podcasting and property, by the time he hits 40.
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“I don’t hate my day job, don’t get me wrong. Absolutely, I like going to work. Is construction something I want to be doing when I’m 40? Probably not, and my body probably won’t either,” he said.
Schofield said he had grown up seeing people working because they had to, rather than because they were passionate about what they were doing.
“So if I could have that option by the time I’m 40 and put in all the hard yards now, that is really attractive to me and that’s why I aligned with the FIRE movement,” he said.
Schofield first became interested in investing when he was 16 and, with the help of his mum, started investing in ETFs and bonds with the money he made working on a family friend’s farm.
This helped him build up a 20 per cent deposit for his first home, which he purchased at 18, a $600,000 house at Tweed Heads.
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Schofield is currently investing $1,500 a fortnight into ETFs, with the help of a financial adviser, and hopes to have a $1.5 million share portfolio in the future. (Source: Supplied)
He has continued investing over the years, initially putting a few hundred dollars a week into shares while paying down his mortgage.
“Then, as I have progressed with investing in property, I’ve also had shares in the background, with the mindset of diversification,” he said.
Schofield now owns four investment properties, two houses on the Gold Coast, an apartment in Melbourne and a house in north of Brisbane, with about $1 million in equity.
Since seeking advice from a financial adviser, Schofield has become more aggressive with his investments and has been investing $1,500 a fortnight for the last two years.
He currently has a $120,000 share portfolio, which is predominantly ETFs, along with $80,000 in superannuation.
From his construction job, he is earning $160,000 a year and works six nights a week.
Mintwell financial adviser Josef Jindra told Yahoo Finance the FIRE movement was all about being frugal and living below your means to help you achieve your future goals.
“It’s aggressively investing, living frugal [and] high savings to create a small nest egg that will turn into a large nest egg,” he said.
“Through this, it means flexibility, it means wealth acceleration and it means resilience through the creation of stronger financial habits.”
Jindra said the FIRE movement wouldn’t be achievable for everyone and noted it generally suited to people who were single or whose kids had moved out of home.
Financial adviser Josef Jindra said the FIRE movement wouldn’t suit everyone and there were risks involved. (Source: Supplied)
Investing platform Betashares Direct noted it had seen an increase in younger people joining its platform, with a 200.5 per cent surge in new users aged 18 to 25 since the start of the year.
Betashares Direct head of product Matthew Fish told Yahoo Finance young Aussies were getting started earlier and using the power of compounding to help set themselves to buy a house, start a family or save for other milestones.
“ETFs have been the most popular choice and they in offer a convenient and cost-effective way to invest,” Fish said.
Jindra said the core idea of FIRE to save and make tweaks to your lifestyle was a good thing, but he warned there could be dangers involved.
“You could experience an over-sacrifice of your lifestyle. If you want to maintain an ultra-lean lifestyle, you’ve got to think what third-party stresses it can cause,” he said.
“I know people in some cases where they’ve got so deep into the FIRE movement that they stopped private health care.
“Then as a result a sudden expense comes up, health issue, and they are back at step one, costs blow out.”
More broadly, Jindra said it was important to have your finances in order before you started investing in the first place and to do your research properly.
“It’s great to invest in shares and great to invest, but always make sure you have your things at home down pat. Your bills are paid off, any utilities, everything is paid off,” he said.
“It’s absolutely critical to have an emergency account. Whether it’s $3,000, $6,000 or $9,000, whatever your expenses are for three months, that should be a rough indication of your emergency account.”
Schofield aims to build up a $1.5 million share portfolio that generates $40,000 to $50,000 in income to allow him to be ‘work optional’ by 40, and also hopes to keep expanding his property portfolio.
He shared he was lucky to live at home with his parents at the moment, having previously lived in his first property for a year.
For other Aussies hoping to retire early, Schofield echoed Jindra’s sentiment about the importance of having an emergency buffer saved up.
“I’ve got that buffer and all the right insurances in place. Having that three or I have six months of living expense at hand at any time, not in ETFs, just in cash,” he said.
When it comes to investing, he said people could start small and just do it regularly to get into the market.
“Go to a good broker for advice and education. Track your saving and your spending and see where you could potentially be cutting back on,” he said.
“Knowing your goals as well and not just doing it for the sake of it just because everyone else is, not just because it’s trendy to be part of the FIRE movement.”
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