Alternatives,  FIRE

The Frugal Samurai Interview Series – Ms FieryIce From Two To Fire

Reading Time: 3 Minutes

What’s up everyone! The rain’s are gone and Summer is almost here – WOOHOO!

Another guest interview today, highlighting the who’s who of Aussie FIRE Bloggers.

This week we have Ms FieryIce and Mr Fireball from Two To FIRE.

These two shows us that well, sometimes it does take two to FIRE! Haha.

If you want to read more about other FIRE bloggers, you can do so here.

Ms FieryIce from Two To FIRE

Let’s get started!

Hey Ms FieryIce! How old are you and Mr Fireball?

We are in our mid thirties and have been married for 8+ years now. It’s funny how when anytime we think about how long we’ve been married for, we actually have to stop, remember the year we got married in and then do a bit of mental maths. It feels like we got married yesterday and also that we’ve been married forever at the very same time. Much like Schrodinger’s Cat. Haha.

Do you have kids?

No kids yet, none planned for the future. We squarely fall in the DINK category, of the many acronyms floating around..

What area of the country do you live in?

We are relatively new Sydneysiders, having migrated to Australia in 2018. So yes, we understand the usual Sydneysider pain-points of high rents and high humidity…

What is your current net worth?

As of Q3 2020, we were at ~220k. We publish quarterly updates to our net worth under the header “State of the FIRE”, which we borrowed from the ‘State of the Union’ that the US hosts.

What are the main assets that make up your net worth and is there any debt that offsets part of these?

Almost all of our net worth comprises ETFs invested in two ways. I have a Self-Directed portfolio which I manage on my own, including ETF picking, portfolio balancing, etc. Mr. Fireball on the other hand invests through a robo-advisor. We have an interesting competition going between the two, (Wo)Man vs Machine where we compare the performance of our Self-Directed investments vs those of the Robo-advisor. For the record, Machine has been winning most of the rounds as of now, but I, being ever-so-hopeful, still believe that the ultimate knock-out punch will be that of the (Wo)Man. Let’s see how we go.

At present our portfolios looks like this:

  • 50% invested in stock ETFs
  • 19% in Super
  • 19% in Cash
  • 11% in defensive (Gold+Bonds) ETFs

We’re categorically anti-debt so there’s no debt that offsets our net-worth.

INCOME

Did you pursue tertiary education and if yes, what are they?

Yes both of us are tertiary qualified. Fun fact – Mr. Fireball & I were in the same course during our under-grad, but didn’t get together until after our post-grad which was in different unis in different cities.

What is your current job?

I am employed in the Finance domain and Mr. Fireball works in Marketing for a startup.

What is your annual income?

Post tax we are at a combined annual income of ~$130k

How has your income performed over time. What was the starting salary of your first job, how did you grow your income, and where are you now?

We made a mid-career shift to Australia in 2018. So it’s been a bit like starting from scratch for us, both in terms of our salaries and in terms of our journey with investing and Financial Independence Retire Early (FIRE). Our first jobs were overseas, but for the purposes of this question, it’s best to assume that we are in our first jobs here in Australia.

Would you recommend people to pursue the same career path? Would you choose a different job if you could go back? 

I think I do feel much more dissatisfied with my job than Mr. Fireball. My work requires longer hours and comes with much more stress than I would like. Also, I’m a bit of an idealist and the tedium of a ‘stable’ job starts to get to me after a while. Mr. Fireball is more pragmatic and he refuses to take his job more seriously than it deserves to be taken. Also in our experience there are very few people who absolutely love their jobs. If it is work, it will feel like work!

So, our advice to anyone looking to pursue any career path is to try their best to merge their passion with their job but to remember that it will not always be a bed of roses. There will be downs and there will be ups. And if for some reason you can’t mix your passion and your job together, don’t despair.  Give your job your 100% and keep working on your hobbies and passions on the side.

What tips do you have for others who want to grow their career-related income?

While this may sound clichéd, there really is nothing more important than a good attitude to get ahead in your career as well as in your personal life. Everything else like hard work, domain expertise, leadership skills, taking initiative, etc. emanate from it. The other tip would be – never stop learning. The world, including job profiles, is changing faster than ever. So it’s always a good idea to keep up-to-date by up skilling yourself. And lastly remember that your career is only ONE part of your life. Make sure you devote quality time to all the other parts as well.

What’s your work-life balance look like?

Ah, the fabled work-life balance. Catching work-life balance for us has been like catching rainbows and unicorns.  So instead we’ve decided to chase Financial Independence.

Do you have any sources of income besides your career? If so, can you list them, how much you earn with each, and how you developed them?

At the moment our jobs are our only source of income. We do get some dividends from our investments but we’ve set up DRIPs (Dividend Reinvestment Plans) for all of them andare reinvesting them.

EXPENSES

What is your household’s annual spending?

Pre-Covid we were spending c. $4,000 per month including our rent. That would translate to $50,000 per annum for regular expenses. Add to that another $10,000 on travel both domestic and international, we would come in at around $60,000.

We’ve seen our expenses come down substantially since Covid lockdowns began in late Mar 2020. We now average around $3,500 per month. Most of this decrease can be attributed to eating home-cooked lunch vs eating out and reduced cost of transport. Domestic trips are far and few and international travel is completely out of the question at the moment, so no expenses on those.

Can you break-down the main categories this spending relates to?

Since Mar 20, the biggest expense for us, which contributes to c. 50% of our expenses has been our apartment rent. Groceries are the next biggest contributor at 17% followed by health, medical and pharmacy related expenses at 15%. Eating out contributes to 6%-8% of our expenses.

Before Covid hit, travel and hotel related expenses also made a big contribution and were at around 15%, while the contribution of the other expenses was lower than what it is right now.

Do you have a budget? If so, how do you implement it?

We don’t have a fixed budget per say, however there are a few ways we make sure not to overspend. A lot of our monthly expenses are more-or-less fixed such as the rent, groceries, medical insurance, etc. The more discretionary expenses for us are eating out and shopping.

We are able to control our shopping impulse by not going to shopping centres or online shopping websites too much and only buying things that we actually need and not things that we want. It’s sometimes a bit hard to differentiate between the two, but we do our best to try. The other thing that helps is sleeping over a purchase. That’s the best way to beat impulse buying. If you wait it out a bit, the impulse to buy will go away. If after a few days, we still think that that item is needed, then we go ahead and buy it.

The eating out expenses are a bit harder to control. I’m not very fond of cooking and I get bored with the food that we do make at home, quite frequently necessitating our habit of ordering in/ eating out. Covid has helped curb that a bit. We are now starting to cook our own home-made breads and pizzas. But I’m not sure how I’ll fare once I start working from the office again when I’ll be tempted to eat lunch out instead of packing it with me.

The other thing we’ve done, which contributes in a big way to ensuring that our expenses stay within range, is that we’ve set up an auto-debit from our bank account to our trading account, which goes towards investing in ETFs. The auto-debit never makes it seem like we have a lot of cash sitting around for discretionary expenses.

What percentage of your gross income do you save and how has that changed over time?

Of our net income (i.e. income after taxes & super) we end up saving around 55% – 60%. We’ve never calculated our savings rate as a percentage of gross income because taxes would impact it significantly. However, with our savings rate calculated on net income, we do miss out on including our super contributions.

What is your favourite thing to splurge on?

Pre-Covid this would have to be travel. We do like to go exploring locally over the weekends and like to take an international trip once a year. However, since Covid, we’ve probably only given ourselves leeway to splurge on eating out and perhaps a bit of shopping for trackies.

INVEST

What has been your investment strategy/philosophy? 

We moved to Australia in Jul 2018. Mr. Fireball was the one who initiated investing. He started investing with StockSpot around Jan 2019. He had a bit of cash lying around and investing with a robo-adviser seemed like a very hands-off and less expensive way to start investing, with a low barrier to entry in terms of the initial investment required. When he started he chose the ‘Growth’ portfolio, however since then he has moved to the ‘High Growth’ portfolio, which is also the riskiest. Mr. Fireball’s experiences investing with a robo-advisor for a year are chronicled here.

I started investing in Jul 2019, only about a year ago. We typically use Mr. Fireball’s salary for all our regular expenses and leave my salary intact. Money started raking up in my savings account where I was being paid peanuts in the guise of interest. Around that time we were also starting to read more about the FIRE (Financial Independence Retire Early) movement and decided to follow the path. I set up an account with Self-Wealth and started investing there.

Our investment philosophy is as follows:

  • Choose the right investment portfolio – Picking the right horse to back is important. ETFs take the cake for us because of their low management fees and the asset diversification that they offer.
    • Invest in ETFs – we target to maintain a ratio of 70:30 overall between growth assets (shares, REITs, etc) and defensive assets (bonds, gold, cash). Within growth assets, we have an equal split between ETFs targeting Aussie, US & Developing Markets.
    • No property investments – we do not have any property investments. We find the housing market in Australia is quite expensive and some even say it’s in the midst of a bubble. For now, we have decided to stay renters and have instead invested a bit in REITs to try to include real estate in our portfolio
  • Invest regularly – Equally as important as choosing the right investment portfolio is investing regularly. We’re in this for the long run, so we don’t let the share market volatility daunt us too much. We have continued to invest even during the Covid-induced-downturn and know that in our investing life this isn’t going to be the last downturn that we’ll see.

What has been your best investment?

This may sound really strange but it’s been gold for both Mr. Fireball & I.

Mr. Fireball’s robo-advisor has consistently maintained a 15% contribution to Gold. I started out being invested only in shares. Back in Sep 2019 when the trade war between the US and China was at its height and the market volatility was really high, where they would go up one day and the next day be down.

I saw how gold really anchored Mr. Fireball’s portfolio. A lot of experts were also starting to talk about the impending downturn in the market and how gold would be the safe haven. I ended up buying a bit of gold around that time, albeit only a little.

It was in Mar 2020, when Covid – 19 infected the markets that I saw how gold kept up its end of the bargain. It single handedly kept our portfolios from going too deep in the red.

At present, gold is showing an overall return of 17% for Mr. Fireball and 15% for me. And these are over 1.5 years and 1 year, respectively. Not bad at all, I think!

What has been your worst investment?

Hands down, the worst investment has been my investment in the REIT (Real Estate Investment Trust) DJRE (SPDR Dow Jones Real Estate). It currently shows up with a return -16% in my portfolio!

One fine day after I started investing, I woke up worrying that our lack of exposure to real estate did not bode well for us. Because we weren’t looking to buy anything in Australia at the moment, I thought it might be a good idea to invest in a global REIT. Not only would we get exposure to different types of assets such as industrial, residential, retail, etc, we would also get exposure to most of the developed markets such as the US, UK, Japan, Australia.

DJRE was doing well until the Covid-downturn hit. But even after the stock market recovered from the downturn, DJRE has been unable to find its way back up. It’s no surprise given retail and industrial activity is down. Cities are empty. Many businesses have had to shut shop. All this has led to decreased rents and high rental vacancies. And given working-from-home is the new normal, the short-to-medium prospects for real estate aren’t that great, which is what the DJRE prices reflect.

What’s been your overall return?

The going has been a bit slow in terms of returns. Since Jan 19, which is when Mr. Fireball first started investing, his overall returns currently stand at 6.44%. My returns have been lower, at 5.99%. DJRE which shows a loss of -16% has been the biggest dampener for my portfolio.

How often do you monitor/review your portfolio?

We typically keep a regular tab on the share markets everyday. I invest small chunks every week so I do like to see if it’s up or down on a particular day and whether I should invest or wait a day or two. So we typically know how the investments are trending.

We do an overall review of our Net-worth at least once every quarter on our blog. The latest one is here.

NET WORTH

How did you accumulate your net worth?

Our net-worth as of today has been accumulated from investing our savings. At present our only source of income are our day-jobs. Like I mentioned earlier, we use Mr. Fireball’s salary for our monthly expenses, but he does like to set aside at least $1,000 every week to invest with his robo-advisor. Most of my salary, we invest in chunks of $1,500 every week.

Any dividends that we have received from our investments have been reinvested back automatically though DRPs (Dividend Repayment Plans).

What has been the biggest contributor to your net wealth?

We think that there have been two big contributors to our net-wealth.

  1. Saving as much as we can – we aren’t as thrifty as we would like to be. We do indulge ourselves many-a-times but only on things that matter to us such as travel and sometimes eating out. With everything else, we like to save as much as we can.
  2. Investing all our savings – like I mentioned earlier, we’ve set out a timetable for ourselves when it comes to investments. We have set up an auto-debit facility where $1,500 get transferred every week from my bank account to my trading account and Mr. Fireball transfers $1,000 – $2,000 every month to his robo-advisor account. And if after a few months, we have a bit of extra sitting around over and above our 6-month emergency funds, we invest them too.

What has been the biggest detractor to your net wealth?

As of today, it’s safe to say that the Covid-downturn has been quite a speed bump for our net worth. But we also recognize that while this may be the first downturn we see in our investing lives, it is definitely not the last. It’s a good thing that we got a taste of it early on. Because we hadn’t been investing for too long, we didn’t have quite so much at stake. And probably because of this we weren’t as spooked. And thanks to this experience we’d be ready to navigate the next one even better when hopefully we’d have much more at stake.

What money mistakes did you make that we can learn from?

Here’s a list of things we could have done better, in no particular order:

  1. Did not start investing sooner – now that we understand the world of personal finance better, we realize that there’s nothing more important than starting early. The magic of compounding needs that essential ingredient of time. We could have been at a much better position had we started even a year earlier let alone when we started earning. But of course everything is much clearer in hindsight! We have also realised that it’s never too late to start at something good. We have a plan in place now, which we are diligently following, so our FI might be slightly delayed but we will get there!
  2. Choice of investment in super – it’s common to take super for granted and not spend time to find out more about it including the different investing options. We too have been guilty of that, even though our super had an option of adjusting the investment choice based on our age, we were on the default option! That has been corrected now.
  3. High medical insurance – when first considering medical insurance, we thought the more the better especially when it came to add-ons. I guess this is where professional advice would have been better. Insurance requirements should also factor in one’s life stage, pre-existing problems and the liabilities among other things. When re-considering our insurance coverage, we looked at each add-on to consider if we really needed it and used it in the past. Realizing that we did not need most of the add-ons, we trimmed them down and saved ourselves at least $100 per month, without compromising on the hospital cover. Hopefully, that will not come back to bite us!

How has Mr Fireball contributed to your net worth? 

I’m sure you’ve figured out by now that my spouse and I are in this together. Actually, he was the one who showed me the way of the FIRE. I knew I wanted to be more free, to have the ability to follow my heart and not be tied down by the 9-to-5, but I didn’t know how I would ever get there.

He found out about the FIRE movement and introduced me too. Both of us were struck by how little we knew about personal finance. Me even more so, because I work in corporate finance. But we both are now resolutely on the path to FIRE.

We both bring home almost equal salaries. And in terms of his contribution to our net-worth, I’d say it’s the same as me.

Do you have a target net worth you are trying to attain for FIRE, will you quit working when you reach this?

We do have a minimum net worth target, which has been worked with the 4% rule. But that said we are looking at it more from the Financial Independence mind-set at present and will consider the Retire Early part once we are there.

What are your retirement plans?

We surely would want to travel much more and live like locals in the places we travel too and not as tourists. The other motivator for us is to spend more time with our parents. To be able to achieve these without the monkey-on-our-backs of where the money is going to come from on a day-to-day basis.

MISCELLANEOUS

How was your childhood? Was your family wealthy, middle class or low-income? 

I grew up in a middle-class household and had a pretty happy childhood on the whole. While we were generally comfortable, I do recall a period where my parents did go through some years of financial hardship. Most of that hardship came about because my dad had taken on debt to start out a business. The business didn’t take off and he was stranded with loan repayments where he didn’t know where the next payment was going to come from. While he kept me pretty insulated from all the stress he was under, that was my first brush with how problematic debt can be. My dad has been pretty much against debt since then!

But that didn’t deter either Mr. Fireball or me from taking on debt in the past. We’ve had an education loan, a few car loans and even a home loan before we came to Australia, but we’ve paid it all off. As we’ve grown older and found out more about FIRE & Personal Finance, we’ve become more and more anti-debt.

How did you learn about finances and at what age did you “get it”?

I’ve been in the field of corporate finance for more than a decade, but I only ‘got it’ about two years ago. It’s super-surprising how someone who’s majored in finance, is super clued-in on how corporations manage their finances should be so clueless about their own finances. It all started with reading up Mr. Money Moustache and Aussie Firebug’s blogs. After that it took little time for things to snowball. Cut to two years later and here we are pursuing FIRE.

How do you think differently than the average person when it comes to money? 

A big difference from the time we have started our FI journey, is in the way we have started evaluating every $ we spend. Does this spend really bring joy to us and do we really really need it. So, not comparing with others but with our before and now state, the consumerism aspect has reduced with a focus on overall happiness and long term mental peace. Therefore the role of money has transformed from a tool to satisfy the wants to the means to achieve independence and peace!

Do you have any favourite money tools and resources you recommend (books, podcasts, apps etc)? 

There are many tools and resources which we use to monitor and track our investment and expenses from fintech platforms such as  Moneytree, Sharesight, Stockspot to the humble Google Sheets. We love Sharesight just because it makes tracking investments so easy. We invest with a robo-advisor as well as through our own self-directed portfolio. So, collating it at one place and then evaluating the performance and asset allocation is such a breeze with Sharesight.

The books we recommend are The Barefoot Investor to know what should be the basic personal finance strategy and Atomic Habits to follow through on the strategy. We always hear about these brilliant ideas that we should be following but a lot of times we end up getting in our own way. This is where Atomic Habits comes in, it is such a powerful book which can transform your life.

What does money mean to you? Should everyone pursue it? 

Money to us is a means to an end.

We all want to live comfortable lives, travel, eat well and generally make merry. And to do that, we all work hard. We trade our time for money. And then we trade that money to buy things we don’t need to impress people we don’t like. And that becomes a vicious cycle necessitating that we keep running on the treadmill.

What we don’t realize is that while money sucks us into the life of a hamster-on-a-wheel, it is also the exit plan. If instead of spending it all, we invest wisely and let capital grow into more capital, that there is our exit. The more we save and the more we invest, the earlier we can retire from the Highway of Always-Work.

We do think that everyone should pursue it to make sure that they can provide for themselves and their families. We do not however think that money should be pursued at the cost of all else.


Finally, is there any advice you have for The Frugal Samurai readers regarding wealth accumulation?

Punchy & pithy, our advice would be:

Save Daily – Invest Consistently – Retire Early

~~~

Thank you Ms FieryIce! Loving the partnership with Mr Fireball. Sounds like you both work fantastically well together, as it should be!

To be honest, I’ve never considered Robo-Advisors so might have a looksie myself in this field. I like the competition between the robots and being self-directed, wonder who will win?

If you enjoyed this interview as much as I did, then make sure to check these two out at their blog, or Twitter and Insta.

See you next time!

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