In 2015, I happened across the Financial Independence Retire Early (FIRE) movement. I wasn’t actively looking for direction in our financial life, but I had been living with a vague discomfort that we could be doing more. FIRE galvanised me to once again take control of our money.
In 2016 we tracked spending, and saved an emergency fund. The next step was beginning to invest – but how? The idea of investing was scary. There are so many options, traps and pitfalls for the unwary that I wanted to be fully prepared before we started. This series of posts is about the resources we used, and the steps we took to ensure a level of comfort before diving in. Mr. ETT and I sat down once each weekend to work through these steps together. At the end of each post, there is a link to the resources we used.
Why Begin to Invest?
You are more likely to invest successfully if you have a reason for investing in the first place. We know from personal experience – without having a goal, it’s easy to lose focus. We worked hard to pay off our mortgage early, which was about 8 years ago now. Unfortunately, because I hadn’t discovered FIRE, we became aimless. We’d reached our goal, and hadn’t made a new one. Because of this, we simply wasted our money. Think how much closer we could have been to FIRE already! (Deep breath – no regrets, no regrets, no regrets. The best time to start was 8 years ago, the second best time to start was last year – which we did.)
The first question you need to ask yourself is “why invest at all?” Yes, we all know it is something we should be doing, but investing is a lot more risky than simply saving money in a bank account. Unless something terribly drastic happens, you can happily store your money in the bank, get a small amount of return in interest, and be fairly confident you can predict how much you will have after a time.
No matter how you begin to invest, there is an element of risk involved. If you want higher, stronger, faster returns, then the risk increases proportionally (occasionally even dis-proportionally). Even if you try to minimise your risks by diversifying for balance, there will still be periods of volatility along the way. Knowing why you want to invest will help you behave sensibly when everything looks like it is going to fail. Pete Matthew puts it succinctly: “Begin with the end in mind”. Investing and making money for its own sake isn’t healthy. What is your reason for wanting your money to grow in this manner?
So, What Are Our Goals?
Essentially we held a brainstorming session, where we put out everything we thought we could possibly want. Doing it together achieved two aims – we were able to bounce off each other and generate or inspire ideas in each other that we wouldn’t necessarily have come up with on our own. We were also able to envision a future for the both of us where we were in agreement as to what we wanted to do. This doesn’t mean we have purely couple goals – we have our own activities and interests now, and we don’t expect that to change in the future.
We came up with:
- Retire early.
- Work part-time.
- Catch up with friends.
- Be with family.
- Spend time with the kitties (like Tristan from DDU, sometimes I feel like the are a bit neglected).
- Be able to keep weekends purely for social activities and leisure.
- Volunteer at a school and/or hospital and/or with animals. (Mrs. ETT)
- Do more theatre work, and branch out into helping with production. (Mr. ETT)
- Get an RSA Certificate to be able to serve alcohol at shows.
- Go on day trips, sit in a cafe, or have lunch at a pub.
- Have overnight stays.
- Travel both inside and outside Australia.
- Go to museums and art galleries.
- Watch more movies, more anime, read more comics and books.
- Make jewellery.
- Learn lampworking.
- Attend U3A and other groups (Recently, it was Seniors Week, and our local Council ran some celebrations. They also published a list of activities for Seniors in our area. There are so many things to do, ranging from exercise to cooking, gardening, computing, learning, crafting, music and travel. I had no idea there was so much available; the majority is very low-cost and accessible. I wanted to try it all!)
We also sat down to quantify what it was that we wanted, to give us an idea of how much it would all cost. Before we begin to invest, we need to have an idea of how much we want to achieve, as well as how long to stay invested to achieve it. We then allocated our desires to short, medium and long-term spending.
|Short Term (1-2)||Medium Term (3-5)||Long Term (5-20)||Retirement (>20)|
|Replace Car Mrs. ETT||$15,000|
|Replace Car Mr. ETT||$50,000|
|New Motorbike Mr. ETT||$20,000|
|England & Germany||$20,000|
Hmmm, that is an awful lot of money. We’ll be looking further into this table in a later post. While this first meeting was enough to get us started, I have realised this is more about concrete goals, rather than identifying our “why” in-depth. There are further exercises we will be doing in order to flesh this out a bit more, and build a solid vision of our future life. Still, this was enough for us to move on to the second step. Stay tuned!
The resources we used to help us begin to invest step by step.
Meaningful Money Podcast, Season 2, Episode 1: Why Invest?