The world has spun on its axis quite a bit since 2020. Between the pandemic, geopolitical tensions and recent warnings of global recession, it's safe to say we've seen better days.
Naturally, these events have sparked a burning question in the Financial Independence, Retire Early (FIRE) community. Has our approach to achieving FIRE morphed along with the changing times? Has the FIRE philosophy itself changed?
Before we go there, let us reassure you: while the scenery may have changed, the destination hasn't. Financial Independence is still very much on the table. It's just that the roadmap we're using needs a few updates.
That’s what we are here to chat about in this Aussie FIRE episode. We explore what has changed in the world since COVID-19 and how the FIRE community has adapted to that. We also delve into practical steps and mindset shifts required to keep your dreams of Financial Independence alive and well.
We were forced to experience massive uncertainty
Just when we all thought we had things somewhat figured out, right? We were cruising along, enjoying a period of economic growth and stability, when suddenly, everything changed.
The pandemic was the curveball most of us didn’t see coming, and it definitely threw a wrench into…well, everything. We were living through what could only be described as peak uncertainty.
And for many of us committed to Financial Independence, Retire Early (FIRE), we faced our toughest year yet. Scary times, especially for those of us who thought we had our timeline on lock.
A wake-up call to rethink our finances
Firstly, COVID-19 showed us how quickly economies and personal finances could change. Share markets tumbled, businesses shut down, and job security became a thing of the past. Investments and superannuation funds seemed to shrink overnight. Suddenly, the mantra "control what you can" almost lost its brilliance.
The sight of long lines for Centrelink and people openly worrying about their next rent or mortgage payment was a reality check. It showed just how many of us were skating on thin financial ice. This was even true for those who seemed comfortably nestled in the middle-income bracket.
When times are good, it's easy to assume they'll always be. The pandemic shattered that illusion, giving us a profound lesson in humility and preparedness.
So, if there’s a silver lining to be found in this, it’s the lessons learned about financial resilience. For some, this meant saving for a larger emergency fund. Others looked at eliminating debts or downsizing their lifestyles. The goal became not just to weather the storm but to emerge stronger on the other side – and prepare for the next one.
COVID-19 highlighted lessons of income diversification
Meanwhile, for the FIRE crowd, the pandemic was the ultimate stress test. Like other folks who reached Financial Independence before the pandemic, Dave watched the market's downturn with a mix of concern and curiosity. Yet, diversifying income sources – be it part-time work or blogging – proved to be a saving grace.
It highlighted a fundamental aspect of Financial Independence often overlooked: reaching FIRE isn't the end game. It's not about sitting on a beach sipping piña coladas without a care in the world (though that does sound nice).
On the contrary, you might find yourself wanting to dip your toes back into the work pool, and that's perfectly okay. As we discover passions and skills along the way, it’s likely we'll continue to find fulfilling, income-producing work post-retirement. And in cases of emergency, the extra income streams we create may be our financial lifeline.
People woke up to other ways of living
We all had a taste of what life could be when the 9-5 hamster wheel stops spinning. Suddenly, you’re not squeezing into your commute shoes but padding around in your slippers all day. This jolt out of our routine prompted a bunch of us to question the grind.
We started thinking: "Hey, maybe chaining myself to a desk for the best years of my life isn’t the dream." Could a career pivot offer more than just a paycheck – maybe happiness or a sense of purpose? (Related read: Choosing work for income vs enjoyment | Aussie FIRE )
For some, this period of reflection has led them right to the doorstep of the Financial Independence, Retire Early (FIRE) community. Those who had been on autopilot – working because that’s just what you do – are looking to turn this temporary freedom into their everyday reality. They started seeing the appeal of frugality and long-term investing as the path to living that dream.
We’ve seen this change in how we live too. We saw a shift towards digital and remote work as part of long-term strategy for income diversification. As a result, some young folks have been reevaluating their living arrangements. Some now seek out minimalist and inexpensive setups that better fit this new, flexible lifestyle.
Then, there’s the veterans of the FIRE movement – those who’ve been in the game for years. For some, however, the pandemic was a stark reminder that life’s short. Too short, maybe, to spend another decade grinding before enjoying the fruits of their labor. So, they’re tweaking their strategies, aiming for a semi-retirement that starts, well, yesterday.
As the dust settled, we realised that COVID-19 didn’t just change the world – it changed us. The extra time made us question the traditional work-till-you-drop mentality and opened our eyes to the possibilities of living on our own terms. The FIRE movement has always been about freedom. But now, that message resonates louder and with a broader audience than ever before.
Housing became more expensive
If you were eyeing up that dream home or just hunting for a place to rent without draining your savings, you've seen the goalposts move. Dramatically.
First off, interest rates took a dive to historical lows. It tempted many of us with mortgages so cheap, they were almost too good to be true. And for a while, they kind of were – until everyone decided to get a mortgage. What was already expensive real estate got even pricier.
And it's not just buying – renting's gone through the roof, too. An influx of home-seekers and a string of construction delays have left us with fewer options and higher costs. It's like everyone suddenly decided they needed more space at the same time. The market's been struggling to keep up since.
For those of us on the cusp of buying, like Hayden, it’s a mixed bag. On one hand, the recent high interest rates should theoretically cool down prices. Stepping onto the property ladder now feels like a now-or-never move.
But then, there’s the reality of actually living in this market. It's hard not to feel a pang of guilt buying a place knowing it's someone else's loss. Behind every "For Sale" sign, there are stories of dreams deferred and financial plans derailed.
Meanwhile, owning a rental property doesn't add up like it used to. It's a peculiar time in places like Sydney, where the once-booming market is feeling the chill. Rental yields barely cover the mortgage interest, making the landlord gig less appealing by the day. This has seen a flow-on effect to tenants – many of whom have seen a dramatic increase in their rental costs.
The ripple effects of the pandemic even reached areas like Ballina and Byron Bay. We’re seeing in the news that the demand for more space and better lifestyles has priced out the locals.
Yet, amidst this somewhat gloomy picture, there are silver linings. The current climate has made us prudent in how we approach our FIRE goals.
There are those who've seen their property's value balloon and are now thinking: "Maybe it's time to downsize?" They're cashing in on the value their homes have accumulated to fuel their FIRE ambitions further. For these fortunate folks, it's a smart move to streamline their lives and focus on their retirement goals.
Higher interest rates
In the world post-pandemic, our journey toward Financial Independence and early retirement has taken some unexpected turns. The playbook we once relied on has had a few pages rewritten – including what we make out of interest rates. Although the general advice has slightly changed, it’s also an invitation to get creative with our strategies.
High-interest savings accounts are making a comeback
One can't help but notice how higher interest rates have flipped the script on what makes financial sense. For instance, those seemingly boring savings and offset accounts are in the spotlight.
Remember when everyone was chasing the stock market highs? Now, we're seeing a throwback to basics, with a savings account offering 5% interest not looking too shabby. People are moving their cash into these accounts at an unprecedented rate. And it’s not just for the love of old times but because, suddenly, they’re making sense more than ever.
Then again, higher returns from savings are just one side of the coin. Yes, there’s that extra bit of paperwork come tax season because our savings are actually doing too well.
As odd as it sounds, paying more taxes here means we’re earning more from our once-modest savings accounts. It’s a bit like finding money in the couch cushions, then realising you have to give a chunk of it away. Still, it’s more money than we expected to find, which is never a bad thing.
Pay off your mortgage early or invest?
The leap from 2% to 6% interest rates on mortgages has turned what was once a dilemma into a clearer choice. Paying off the mortgage suddenly looks like the shrewd move. Many of us also prefer the peace of mind that comes with being debt-free over the uncertain thrill of chasing higher returns.
With that in mind, the Aussie dream of owning a property is now up to debate. With the market’s ups and downs, we’re reminded that there’s more to investing than bricks and mortar. Equities, for example, have emerged as a compelling alternatives in our investment playbooks. This asset class can potentially save us from the expensive trap of property obsession.
Post-COVID investing and speculation
This leads us into a heart-to-heart about investing versus speculation. The line between the two can get blurry, especially when times are tough.
We dove deep into what investing really means in the full episode at the end. And let's just say it's not the same as hoping today’s “hot and trending” is tomorrow's goldmine. That's speculation, folks.
While buying speculative assets can be thrilling, it's not the foundation of a solid FIRE strategy. Real investing is about putting your money into something that has a reasonable chance of paying you back. It’s a principle that feels more relevant now as we navigate these unpredictable post-pandemic markets.
Has the FIRE philosophy changed in general? What can you do about it?
Since COVID-19 turned our worlds upside down, we've all been left wondering about a lot of things, including the path to Financial Independence. If you're part of the FIRE (Financial Independence, Retire Early) community or just dipping your toes in, you might be curious. Has the FIRE philosophy changed post-pandemic?
The quick answer? Yes and no.
Whether you're in a tech gig or a job that's been hit hard, we've all felt the ground shift. For some that sailed through okay, the pandemic was the nudge needed to join the FIRE movement.
However, it's one thing to dream about financial freedom “someday”. It’s another to feel the urgency when the world is in chaos. Many of us realised having a financial safety net and diversified income sources aren’t just nice to have. They are must-haves.
We've also seen a collective moment of clarity in the FIRE community. Pre-COVID, plotting a 10, 20, or even 30-year path to freedom seemed like a solid plan. Now, there's a palpable hunger for achieving Financial Independence sooner. Many of us are now tightening that timeline to freedom because, as we've all learned, the only constant is change.
Our takeaway? While the fundamentals of FIRE remain unchanged, our approach to achieving it must evolve.
The pandemic has been a litmus test for our financial strategies and our mindset. We’ve learned that adaptability, resilience, and a keen focus on our financial health are non-negotiables.
Now's the time to engage more deeply with our finances. Talk about money, think about money. Maybe, you'll find that every bit of attention you give your money starts to pay off.
A mindset of growth and adaptability is always great advice, too. If anything, our collective journey towards FIRE has only gained more depth, more meaning, in the face of adversity. On top of that, you can always lean into the Pearler community for support and inspiration.
Final thoughts
We’re all hopeful for a smoother ride ahead. But even if there are bumps along the way, we’re better equipped now than ever before. So, if you’re eager to dive deeper or seeking a guiding light on their FIRE journey, head to Pearler for resources, calculators, and community insights .
You can also share your thoughts, feedback and topic suggestions at hello@aussiefirepod.com. Or feel free to swing by and DM us on our socials at Pearler or Strong Money Australia .
Until next time, happy investing!
Dave and Hayden
