Episode 182 | Financial Independence Retire Early | Aussie Firebug

What is the FIRE movement, and is it a reliable strategy?
Within the last decade, the Financial Independence Retire Early (FI/RE) movement has gained a cult-like following, with grassroots communities touting the benefits of living frugally today whilst creating wealth for tomorrow. Veronica and Chris talk with Matt, the host of the Aussie Firebug podcast. Since 2013 Matt has focused on retiring early by creating income streams from property, shares and labour, he projects that he will finally achieve FI/RE by his mid-thirties.

Chris asks hard questions about the movement’s current state, particularly citing the communities’ detrimental perspective on the yield over capital growth debate. Will this financial fad burn bright financially liberating individuals, or will the flame fizzle out with unfounded claims and misleading financial advice?

If you have ever been curious about the FI/RE movement, this is the episode for you.

GUEST LINKS:
https://podcasts.apple.com/au/podcast/aussie-firebug/id1080237514
https://www.aussiefirebug.com/start-here/
https://www.amazon.com/Your-Money-Life-Transforming-Relationship/dp/0143115766
https://www.mrmoneymustache.com/about/
https://www.reddit.com/r/financialindependence/

HOST LINKS:
Looking for a Sydney Buyers Agent? www.gooddeeds.com.au
Work with Veronica: https://linktr.ee/veronicamorgan

Looking for a Mortgage Broker? www.wealthful.com.au
Work with Chris: hello@wealthful.com.au

Send in your questions to: questions@theelephantintheroom.com.au

EPISODE TRANSCRIPT:
Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…
This episode was recorded in June 2021.

Veronica Morgan: Financial independence retire early. Sounds ideal. Doesn't it? But it's not just a dream for many, it's an actual movement. What does it take to be able to achieve a comfortable early retirement?

Veronica Morgan: Welcome to the elephant in the room. This is the podcast where we love to talk about the big things in property that never usually get talked about. I'm Veronica Morgan, real estate agent buyer's agent co-host of Foxtel's location, location, location, Australia, and author of auction ready.

Chris Bates: And I'm Chris Bates mortgage broker. Before we get started, I need to let you know that nothing we say on here can be taken as personal advice. We always recommend you engage the services of a professional.

Veronica Morgan: Don't forget that you can access the transcript for this episode on the website, as well as download our free fall or forecast report, which experts can you trust to get it right? The elephant in the room.com. Did I hear you

Veronica Morgan: Today? We're going to take a deep dive into the fire movement in Australia, and we're joined by Matt hosted the Ozzy Firebug podcast. He likes to be known as a country boy from regional Victoria, who is on track to reach financial independence and retire early by his mid thirties. And of course, fire is the acronym for financial independence and retire early. Thanks for joining us today, Matt, we're really interested in learning more about the growth of this movement in Austria. Pleasure to be here, Veronica.

Aussie Firebug: Thanks for having Me.

Chris Bates: Thanks, Matt. I mean, I guess a good place to start is, you know, what's really driving this sort of five movement, you know, how big is it? You know, when's it really sort of kicked off? I mean, what are those, some of your questions around the farm event? I can only speak for

Aussie Firebug: Myself about why I got interested in the fire movement, but let's, I guess go back a bit to the history of it. Some would say it's been around since the nineties, there was a book that was released by Vicki Robbins code, your money or your life. And a lot of people say that that was the start of the fire movement, but I would actually argue that it really started well, the modern day fire movement started when he'd go. I called Pete. He wrote a blog called Mr. Money mustache back in. I think he started in like 2011 or 2012, maybe a little bit, even a little bit earlier, but long story short, he retired when he was 30 and he amassed so much wealth that he could reach financial independence by the time he was 30 and move on to other things. And he's blowed become really, really popular in America and actually stumbled across it in 2013 and it completely change my life.

Aussie Firebug: And I was at the point I started full-time work at the end of 2011 and I actually didn't mind that the job that I was doing, but I was sort of blown away by how many hours a week it was taken up of my life. And not only just the work time, but the commute getting ready for work, you know, decompressing after work, doing all those things. I just, I was like, is this really going to be in my life for the next 40 years? And I started to read a few actually property investing books and I wasn't into the share market back then, but I just refuse to accept that that was sort of the, the life that was, that was going to leave full for the next couple of decades. And yeah, just sort of completely changed the course of, of my life when I come across a Mr. Money mustache and what Pete was writing about. And then I started the first fire blog, I believe back in 2015 in Australia. And since then, there's been a whole bunch of other blogs and podcasts pop up all around the country. And it's hard to know how big it is, but I would say, I think there's a subreddit of over a hundred thousand people that are interested in the movement. So if that gives you any indication, it's pretty big. I think

Veronica Morgan: So interesting because particularly in the property space, you hear these quotes all the time are retired at 30 or top 28 or mass 15 properties or this sort of, you know, pipe dream stuff. And I always think to myself, okay, so why are you still working to sell this supposed system if you really have retired? And so I know in the property space, there's a lot of charlatans around touting that they've retired, but they haven't really what makes the fire movement different?

Aussie Firebug: I would say different is in if someone, yeah, well, that's a, that's a good question because even the word retire means a different thing to different people to be not who you ask. And I know that there's a, this is probably the, the biggest thing that trips up most people about the five room is definitely the retire early part. And I've written a fair bit about it and it's not actually about n ot working. That's the thing. I think some people, when they listen or read about the movement and they think, you know, how could you not work for the next 40 years? You retire at 30? Like, what are you going to do? Are you going to sit by the beach and sip pina coladas all day, which is not actually what the movement is about. It's about having that choice and the freedom to do what you want when you want, without anyone telling you how to do it.

Aussie Firebug: And I actually, I think meaningful work is a staple of a human. I don't think someone can be happy without meaningful work in their life, but it's the key word there meaningful work, because most people go to work to receive money. And I I'm, I'm still in that boat. I'm in the accumulation phase where I haven't reached financial independence, but there are parts of my job that I really like. But if we're being honest, I would, I don't know the statistics behind this, but what would you say 90% of people go to it, go to their place of employment to receive a there's other benefits associated with that work. But most people are there to get money. Let's be honest when you reach financial independence, the thing that changes is you can still work, but you're working on your own terms. And there's a world of difference between the two going to work for money and going to work because you want to, and you want to stimulate that, whether it be the creative each that you have, or working with people or being social, whatever it is that you get out of work, that's really the, the sort of the angle for me anyway, is to reach a point where I can do whatever I want whenever I want, but that includes meaningful work.

Veronica Morgan: So they use the other term you used was freedom. And that's really it in a nutshell, isn't it? You have choice, but what are the steps to get there?

Aussie Firebug: Yeah. That it is true that the choices is a huge component of it. The steps are relatively easy. Like if we, if we break it down to its the core concepts, it's literally spend less than you earn, invest the surplus of money and then wait long enough. And depending on how much your savings, obviously gonna dictate how long it takes you to get to financial freedom. But usually there's a, you know, a few years, a few decades even, and you'll eventually reach financial independence. It's like how to be thin and fit. Exactly. Right. There is no set. There is no magical formula. That's the other thing that people sometimes read about this movement. And I get these emails all the time. It's like, you know, I'm 32 at the moment. And like, well, you know, your, your 32 or your partner is 29. You've got this portfolio, like, what was your secret?

Aussie Firebug: And always say like, there is no secret. It's just the hardest bit is saving consistently and investing consistently in sticking to the plan. And if you compound that over years and decades, it's incredible what sort of wealth that you can build. But it's really simple. And back to your point about, you know, losing weight or staying fit, it's really, really simple. I, I like to think that most people know the foods, they should be eating what they should be doing, exercising and everything. Like, it's really simple, but it's just executing is usually the hard part. And people go looking for that magic pill or that magic fruit or vegetable or whatever it's got to do to, you know, miraculously transform their body. But it just, we know deep down that it doesn't work like that. And you've got to put in the work.

Chris Bates: So you mentioned I mean, 90% of people don't sort of enjoy their job. And I think gallops you know, it has research out there that sort of says that around 90% of disengaged and don't get fulfillment from work and it just rocking up to sort of get the paycheck. I think that aligns to what you're saying, but I mean, one of the challenges is you, could you just reframe work? Could you, you know, extra study, could you go into a different industry? You know, one of the challenges that other model is, well, I'm not going to make that choice until I've got sort of financial independence. They do see that that's a bit of a challenge or people that are stuck just on that rat race, earning the money, doing a job they don't like to, they get to the end of this five years. Okay.

Aussie Firebug: Yeah. That's, that's a another very question, sorry. A common, you know, some people will say, do what you love and you'll never work another day in your life, which is true. But I just think it's, it's sort of a pipe dream for most people. Like if I'm being honest, like it's not realistic for the majority of the population for everyone to love their job, but like, come on. Let's, let's be real. Now in saying that I definitely agree with you that when you're first starting out, sometimes it can feel it's almost detrimental to your mental health a little bit discovering fire super early. Like I remember when I was, I think I stumbled across it. The, the concept of financial independence from rich dad, poor dad, the famous book from Robert [inaudible] that's it. And that, that completely blew my mind because that was when I'd never seen it written.

Aussie Firebug: So simply the equation to financial freedom. I didn't even know what financial freedom was until I read that book. And it was simply, you know, assets generate money and it doesn't matter what assets, it can be, precious, metals, property shares, whatever it is, just gather enough assets and I'll eventually throw off enough income and you'll never have to work another day in your life. And I was like, whoa, like my brain exploded. And then what Pete at Mr. Money mustache was writing about was financial independence on steroids because a lot of traditional finance books, whether it be property and shares, whatever is sort of geared towards reaching that financial independence later on, like when you're maybe 55, 60, 65, but what Pete and the fire movement is about is, is supercharging that and reaching it early on in the piece in your fifties, forties, thirties, and sometimes if all the stars are aligned, you can actually do it in your twenties, but it's very, very rare.

Chris Bates: Do you think frugality plays a lot part of this though? A hundred percent minimize movement? I mean, and you know, if someone does want to live a pretty, not extravagant, but at least travel, then go stay, you know, experienced, you know, expensive experiences. How does, how does that align with a five movement or do you have to sort of give up on those types of motivations and focus on spending less for the rest of your day? So

Aussie Firebug: This is like a common misconception as well. And I just want to say that the fire movement is more of a philosophy on how to live your life. Then it is than it is a financial movement. Like everyone thinks that everyone in the five movement movement are investing geniuses and you know, we've got all the answers and that secret pill to be able to retire. So, so young, but what it's actually about is, is like you touched on there, Chris, it's more about stripping things down and finding out what makes you happy and then putting the time and energy into those things. And if you actually think about it and you jot down everything in your life that makes you happy, well, everyone's going to be different. But for me, a lot of the things that really make me happy, don't cost a whole lot of money. And a lot of things that cost a lot of money is actually the marketing machine at work. Like what society tells you, how to live your life or how to have a good life. It's sort of the, the chronic logical chronological order of, you know, do well at school, study hard, get a good job, meet someone, buy a house, get married, have kids like that's sort of the fairy tale story that we're told when we're young. And we got to follow that path, but life doesn't really work like that. And

Veronica Morgan: You call that a fairy tale story sounds horrific. Yeah. It's just, like you said, you know, traveling five star around the, around the earth and then amazing experiences in dining, incredible restaurants for research. That, to me sounds exciting, you know, and that's gonna cost a bloody bomb.

Aussie Firebug: It can, it, it can, but you can also do a lot of those things a lot cheaper. You know, if you, if you plan ahead, but I just want to touch on that point again, Chris, about the whole fruit frugality thing. So yes, the majority of people in the fire movement, if you look at the annual expenses, most normal people will probably be like, how the hell can you only spend that much money a year? Like there's no getting around it. And all I can say with that is I think I live a fantastic life. And if you are following the fire movement and you'll feel like you're depriving yourself of a lot of loss, luxuries, and happiness and joy, then you're doing the movement wrong. Like really you should be leaving the best life that you can live, but also be conscious with what you're spending on and really put your time and energy into things that truly make you happy. Because what you'll find is that those things don't usually cost an arm and a leg.

Veronica Morgan: So it's not a miser movement. It's a mindful movement.

Veronica Morgan: A mean, you know, they're tight with their money. So the idea, you know, that the, and even the word for gallery in some regards conjures up this idea of being really tired and miserable about it. But you're saying is actually, well it's, it's sort of better for the planet anyway, as well as look, yeah, lots of knock on a good knock on effect. You'll, you're basically say it's a mindful, it's being very conscious about what we derive pleasure from rather than being sucked into the marketing vortex, as you mentioned, and probably why we couldn't find you on social.

Aussie Firebug: Yeah. I try to stay up. I watched that on a documentary on Netflix. Yeah. Like literally deleted my Instagram account straight off. And I had, the only reason I was still on Facebook for a brief period is because I had my Ozzy Firebug accounts on Facebook. But yeah, it's just, you know, and to be fair, me and my partner have traveled around the world for the last two years. We got back in Australia, in January and at the start of this year. So like, it's not like we aren't living a good life. It's not like a pit. Sometimes people think to be out to be able to achieve that savings rate or to be able to say that much money and to amass that portfolio at such a young age, you either have to be given a massive inheritance, win the lottery, have an incredible salary, or have to live in a cave and eat nothing but rice and beans.

Aussie Firebug: And that simply isn't true. Like I actually think we live in incredible life. Eve I'd even say that we live an above average life globally. Definitely like just being born in Australia, sort of you've already won the geo lottery a hundred percent. Like we traveled two months last year in Southeast Asia. And let me tell you that if you spend a good chunk of time in a third world country, you will know how good we have it in Australia. And there's just so many things that we waste money on and we spend money on these completely over the top. And I still do it like, don't get me wrong. I have a Samsung galaxy S 10, I've got a smartwatch like these heaps of crap that I still buy that is completely unnecessary. But I guess that we just avoid, and we optimize the hell out of the big ticket items. That's where you get the biggest bang for your buck. And if you're just aware and conscious of those big ticket items, it is insane. The wealth that you can accumulate over a decade,

Chris Bates: Children. I mean, have you, I'm not sure if you and your partner are thinking about it, but I'm sure a lot of people in your fire movement hemisphere are going to have kids. Absolutely certainly noticed that their whole attitude towards fire, what they thought was possible. You know, the values they potentially of work, that they need to instill in their children, how to, how children that shifting what they, you know, their, their fire beliefs

Aussie Firebug: As in spending money or like the way they live their life.

Chris Bates: There's lots of them. Elements to children is, you know, a lot of people would want security. They want stability for schooling. They want instill attitudes of work in their children costs go up. Housing needs are changing, you know, pre kids. It's easy to sort of be frugal, live, live cheaply, travel the world. But then when children come along, values shift and things that you want to provide shift and expenses and how you live your life shift and you can't just travel like that. So from your experience with people who have had children, maybe not yourself, cause you probably didn't sound there at that stage, but the people in the five movement when they hit this sort of children phase, do that, how to choose shift around fire. 

Aussie Firebug: Well, it's funny, you mentioned that because we, he, my partner actually meant to get married in two weeks up in Queensland and I'm in Victoria. So it ain't looking like it's going to happen the way don't even get me started on it. Like it's to

Chris Bates: Be drama kids. Yeah.

Aussie Firebug: Well, I did promise my late grandmother that I would, and I was planning to get married anyway. So but we, we are planning to have kids, me and my partner, and there is no denying costs will rise once we have kids. And it's actually a major reason. We ha we are currently unconditional on a house. Now this is the first house that we've ever bought. That wasn't an investment property. And I've actually, that's a another topic that we can touch on if you guys want to be honest, how many people buy an extraordinary, extraordinary, big house, like a bedroom on a 800, 900 square meter block at 2223 that I think stifles their ability to, to generate wealth into, to amass wealth. And that we can, we can get into that in a second, but this is our first house that we've ever bought.

Aussie Firebug: We've rented our whole lives. And the reason that we bought the house to your point, Chris is because we want that stability. When we have kids days, the reason that we bought the house. So yes, things did change. If we weren't having kids, I think we'd be happy to rent a whole lot. And that might shock a lot of people, but in the fly community, it's definitely a, on-site probably it's more to the norm than it is to buy a house because they really, in my eyes, the, the BS advantage of buying a house is that stability. Like if you're young, I don't know why, especially if you're in a capital city, like, especially if you're in a capital city, if you work out how much you pay in rent versus how much your property is worth in Sydney and Melbourne, the, the math really adds up, not so much in the country where I'm from, but if you're in Sydney or Melbourne to buy a house and to make the repayments is usually significantly more expensive then to just pay rent and to save the difference.

Aussie Firebug: And there's a whole, there's heaps of things to consider there. Like, are you a natural saver? Like, can you actually save the difference if you're renting in one of these cities, I hate the things to consider, but I just think if you're young, you've got no dependents, no kids or anything like maybe you want to change jobs. Like in a few years, maybe you want to go to a new city. Maybe you want to travel, like eat. You don't need to jump into the housing market. You can, if that's what you want to do, but it's just like, I hope these young people know what they're getting themselves into when they buy so young. And I know that society, especially in Australia, puts them on a bit of a pedestal that they're so successful, which, Hey, like, if you want to, if you can buy a house at a young age, like, and you want it, then that's awesome. You know, good on ya. But I just hope, you know, the opportunity costs. You're giving up to tying yourself down with such a big mortgage at such a young age,

Chris Bates: Besides stability. Was there other factors you made in terms of that housing choice? You know, if you have more than one child, if you want those children to go to certain types of schools or to be accessed to certain lifestyle reduced commute, or maybe not working. So, you know, what other factors did you base your decision purely besides stability, because you can get stability. You can get a roof over your head and that's not what drives housing, unaffordability, it's those other factors. So what other factors did you make as part of your decision?

Aussie Firebug: To be honest, it was mainly stability and the probably other big factor was that it's even in my country, town of 25,000 people that I live, there is no places to rent in here. Right. I'm not kidding you. It's crazy that the vacancy rate is like zero it's, it's just bananas. And to be honest, we knew we wanted kids. So stability was really the big driver, Chris. I like that's to be honest. And I'll tell you what if Australia had tenancy laws like they do in other parts of Europe, like I've got a cousin in Germany, I know Amsterdam does it. Like you can literally take out 20, 25 year leases. And like the house sort of becomes yours to a certain extent as the renter at which might shock a lot of Australian landlords hearing this, but it's just a completely different culture over there. You're not, you know, people don't look down upon people as much if they rent, which has never bothered me at all, but I'm just saying that it's a completely different culture. So really the big reason that we bought was stability, to be honest.

Chris Bates: And do you think that would be possible if you, for example, wanted to fire plus live in a capital city in a, you know, in a ring or an sort of higher end expensive area? Absolutely.

Aussie Firebug: But it would just be harder cause it's just a numbers game to reach financial independence is just about math really and mean how much you can save and you know, how well your investments do. So it's a hundred percent possible. Are you going to do it on an average income and reach fire early? Probably not. Are you going to reach financial independence maybe in your forties and fifties? Yeah. A hundred percent definitely could. Like, it depends on a whole bunch of things, but buying in a capital city, you know, there's no getting around it. It's expensive. So it's going to, it's going to put you back.

Veronica Morgan: You mentioned something earlier, you said you, sometimes you feel like you discovered fire too early, too young. What did you mean by that?

Aussie Firebug: It was depressing to be honest with you. Sorry. I discovered it, I think, oh, it was what, 2013. So it would've been 25 or something or 24. And I just remember like coming across this Miriam and getting really excited and then being like, it's like a decade away till I get to this point. And it was bad for my mental health because I was quite enjoying my job until I got to that point. And I'm like, ah, like this sucks. And now every single time the boss was telling me to do something or, you know, had a bad interaction at work. It just compounded. And I felt like I was trapped and it was as a bad way to think. Like, I don't know how you get around that though, but it's, it's almost like I wish I come across it sort of middle towards the end because then I wouldn't have felt like there was another way. And I just would have been maybe contempt and happy with, you know, working for another couple of decades.

Veronica Morgan: So worried about that is it. I hear that. And I think, well, if you didn't come across it, you wouldn't have actually applied the practices.

Aussie Firebug: It's a double-edged sword. Yeah.

Veronica Morgan: I mean, I would be more depressive discovered it 35 or 45 and 25. Do you know what I mean? Like, cause a hundred percent you got the wrong way and that's what you need. Cause this is all just about the magic of compounding. Isn't it?

Aussie Firebug: The compounding is an eye and we are towards the end of the journey now. And like, you know, let me tell anyone out there, that's listening. If you're at the start of the fire journey or even just any wealth creation journey, it's so hard to understand compounding, like you can understand it, you Chuck it in a calculator, you get the mathematics fine. But until you get to, I'd say probably the sweet spot for us was like maybe a hundred grand in net worth or you know, a hundred grand in assets. It starts to really throw off some numbers. And then when she came up up and up, it's just like, it just turns into a base of its own and it's just on autopilot and it just does this thing. It's, it's a magical thing. Compounding.

Veronica Morgan: It is a wonderful one. What's a wonder of the world or something. Yeah.

Chris Bates: And that's the paragraph. I mean, what are some of the risks you say with the better financial advisor for a long time and lots of forecasting and you know, a lot of it comes down to the costs you want to spend on an annual basis and that can change, you know, health or, you know, just affordability inflation on different things, GABA different rights, you know, housing for example. But what are some of the things that you think where people get it wrong with the five movement? You know, an example could be you retired too early, right? You think you've got fire, but you're putting 9% capital returns every year. And you're it really be realistic about your expenses and you get out of the workforce. And then three years later you're like, oh, I need to go back to work. And you've got this big gap on your sort of CV. So what are some of the things where you think people get the fire movement wrong with not, you know, I guess taking it serious enough, the biggest

Aussie Firebug: Risk with a five movement is missing out on life early on in the journey. Let me just put a warning to people listening that I don't regret many things in life. And I don't like to even use the word regretted. Like, you know, it sucks. Don't like to think about it, but I didn't go that the one, no, one of the biggest things I regret is there was a boys trip. It was a [inaudible] trip that I declined when I was in my mid twenties that I could have afforded to go easily because I was in the accumulation phase and I was grinding away. And always, I was really starting to see some gains on my, I update my net worth every month just to keep track. And I was like, that is going to put a spanner in the works. I set these hard goals and I really wanted to achieve them.

Aussie Firebug: And now I look back and it's like, what? The difference that trip would have made is minuscule in the grand scheme. And like, I really just want to echo this point that you can't get your twenties back. So just be aware of that. I'm not saying go like go Yolo and you know, start buying the latest iPhone and like, you know, buy Versace shoes, whatever. But I'm just saying that those trips and those experiences you like, you can never do Europe in your twenties ever again. Even if you go back and you'd do south Asia in your fifties, it won't be the same trip. It can be

Veronica Morgan: Better. Trust me. It is something interesting about that. Is it. If you don't make those sacrifices, then you're not actually going to be able to achieve it. You know what I mean? Like, so

Aussie Firebug: It's sacrifice so in the right areas. So I would always say that travel and personal growth and investing in yourself is super important. And that's something else that like a major part of it don't be stingy when it comes to yourself and your own development, because the biggest gains and the biggest, the way that you can leap, frog your way to financial independence in my opinion is, and this took me years to, to figure out really because I was sort of happy in my little job and just like grinding away and saving a good chunk of money. And it wasn't until I moved to London in 2019. And I went into the contracting space and London was an area where my skills were in higher demand than they are in the country. Like I was on a pretty good wicket, like comparatively to my country peers.

Aussie Firebug: But when I moved to London, I more than doubled my salary and I just want it, everyone out there listening to know that I was on a very high salary towards the end of my journey. And I'm aware that me and my partner earned slightly above the medium Australia, Australia, nationally income. And I don't want that to sort of take away from the fact that you can definitely reach financial independence at a young age on a normal income or an average income because a lot of people think you need a super high salary. You absolutely don't. But the truth is that when I went to London, all walls on a relatively large salary, but that lesson taught me that if you go to places where your skills are in demand, or you upskill yourself and you can maybe jump a jobs to, to get a big income, it can really, really supercharge your way and wipe years off the journey towards financial independence. So investing in yourself, maybe looking at other jobs every couple of years is, is such a good way to, to boost your savings rate. Ultimately, cause if you're earning more money, as long as you don't fall into the trap of lost all inflation, you're going to be able to throw way more snow on the snowball as your portfolio is rolling down the hill. Well, it's

Chris Bates: Those two things, isn't it saving, which is hiring and servicing yourself and then cutting your expenditure. And, you know, that's probably a good thing for all of us to be doing is investing in ourselves. And I agree with you, Matt, but the other thing is what you've your capital sort of growth rate of your investments are at another day, drive, same with this whole fascination that I can quit a job I hate in five or 10 years time. And is the, what number they put on that, you know, is it 6%, a years at 7% a year? And a lot of people are very short term bias, especially people who started the fire movement last year would probably be thinking you're going to retire in three years time, but it also encourages speculative type of investing. And so this is whether it goes into property or whether it goes into shares or, you know, maybe Bitcoin, but where do you see that people get it wrong there where they think that they can not only save more, but they can also retire early because they're going to get this magical investment return over the next five or 10 years.

Aussie Firebug: So the, the magical number that majority like 90% of the fire community go off is the 4% rule. And have you guys both heard of that 4% rule? Yeah. Okay. So it rough, roughly it's based on a study called the Trinity study, which was a US-based study and it's not perfect because it was only factoring in a 30 year retirement. And to cut a long story short, what they basically did was they made a portfolio. I actually think it was 20% bonds, 80% equities. And they run a, ran a simulation on all the data that they had on the stock market all the way back, as far as they could go with it. And they said, if we withdrew 4% of the portfolio from, you know, starting from 19 40, 19 41, 19 42 and, and modeled different outcomes of would the portfolio essentially last a 30 year period, there was something like 95% success rate where if you had retired and withdrew 4% of your portfolio from 95% of the years from the data that they had, the portfolio would not only last, but more often than not, it would actually grow larger or as you kept on going, and we kept withdrawing 4% of the portfolio and in the 5% of cases that are deed fail.

Aussie Firebug: Yeah. It, it, you know, that it would fail in, in that case, you would have to go back to work. So that's where the 4% rule comes from now. Is it the be all end all? No, it's not. And I think this is a common misconception as well that people think that like somehow everyone in the fire community is just has their phone number and that's set in stone and they're never going to make money ever again in their life, which is to be honest, I've never met anyone in the fire community that reaches financial independence that doesn't go on to do meaningful work, that doesn't flip a buck in the end, not because they were trying to make money just because of they're doing something that they love and a hundred percent of the time I've I've yet to meet someone. I'm sure there is someone that just wants to read books and you know, like pinnacle art is old.

Aussie Firebug: I'm sure there's someone out there that wants to do that, but every single person I've ever met reaches financial independence, usually quits there, you know, their rat race order job and retired from that, and then goes into a field that they're passionate about. And every single one of them somehow makes money. Not, not because they want to, or they need to just the way it works. And usually they don't, they donate a whole bunch of it to charity or something. And they might, you know, might keep a little bit or, you know, they might do whatever they want with it. But my point is we are fluid in the fire community. So once you reach your number based on the 4% rule, okay, you you've, you've technically, you know according to that set of criteria, reach financial independence, but it's not to say that you're not going to have another source of income, because like I said, 99% of the time you do.

Aussie Firebug: So I don't really see that as a, as a huge risk if I'm being honest, Chris. And in fact, the majority of the five people are in a way better position. Then 99% of the rest of Australia, I always read these articles. It's like, oh, the stock market crash, like what's five people going to do now. Like the, the, the, you know, the plans, you know, thrown out the window. It's like, hold on. These people in the fire community have million dollar portfolios. And somehow they're in trouble because okay, on paper, their portfolio might've went down, you know, 30% last year with the eighth worst crash in stock market history, the coronavirus, they're still in a pretty good position. Even if they have to go back to work, you know, minimum wage or whatever one, they got a hell of, a lot of wealth behind them. And two, they live a frugal lifestyle. And majority of like 99% of people in the fire community live a simple life that doesn't cost a whole, whole lot. So I don't know where, you know, there's some of these articles and these journalists, right. Or how they come up with this idea that somehow a fire has failed when there's a stock market crash. Because I dunno if I know a bit like everyone, the fire community expects a crash to happen because that's just the nature of the markets. So that's my thoughts on that.

Veronica Morgan: They're not naive. And I'm glad to hear that because, you know, I was just sitting there thinking while you're talking about the 4% rule, like he will, you know, there's a good chance. You're gonna have to go back to work at 65 when everyone else is actually retiring. If you like, what you're hearing here, please share this episode with others, you feel would benefit. And while you're at it, why not leave us an iTunes review five stars, please. Every review helps make it easier for other people to find us and hear what our amazing guests have to say. We love hearing your questions and we're planning more listener Q and a episodes. Please send your questions in. You can send them via the website, which is the elephant in the room.com today. You or directly via email two questions@theelephantintheroom.com.edu. I'm curious to know, because what we haven't talked about is tax and, and certainly when we're in regards to home ownership, and that means the home you live in, as opposed to owning property as investments, there's a massive tax benefit in that. But of course, that's a long-term benefit too, because that's not realized you actually sell. And obviously if you're going to sell down 4% of your portfolio, you know, every year you're going to be paying tax on those gains, et cetera, et cetera. So where does tax planning come into this? And also actually, because in this country align with this sort of tax idea, we've got such a wonderful opportunity to have tax effective savings in superannuation. So how does, how does the fire community approach those issues?

Aussie Firebug: Yeah, great question. So I'll just, I just want to say as well, that 4% rule it factors in inflation and tax into, into that. And it, this is circumstantial, so everyone's different, but I'm going to use us as an example. Me and my partner, we track our expenses religiously, and I actually only do it like maybe once a week now. Whereas back in the day, I was a bit crazy. I used to it like every single day. Jessica's always obsessed and yeah, it was, I was way too full on back then. More time on your hands government. I work for the government. So yes, there was a lot of free time. It was it was a bit of a joke actually, but I know to the dollar amount that we spend roughly $50,000 a year to maintain it to, for us to maintain our lifestyle cost $50,000.

Aussie Firebug: And that's a pretty good law. If I'm being honest, like, you know, there, there could be, you know, we could add other things. There's going to be expenses coming up, especially with kids. So that number isn't set in stone, it's fluid. We are going to adjust as expenses rise in the future. But 50,000 is what we need. Now. We have our assets in a trust. And if we go off the 4% rule, let's say we need 1.2, $5 million in assets to generate 4% of a few dividends and maybe selling some stocks could generate that 4% per year to give us the $50,000 that we would need to maintain our lifestyle. Assuming that we have absolutely no income from any other avenues, which will most likely not be the case. If we split that between me and my partner, that is almost like the amount of tax that we are paying on that $25,000 each is very, very little it's, it's hardly anything because the tax-free threshold is what 18 and a half thousand or something at the moment. So you're talking about $6,000 and at a tax rate of, I should have had the, the tax numbers in front of me, but it's, it's very, very low if we split those a bit between us. So that's the

Veronica Morgan: First one. So those are all benefit of frugality, isn't it? Yeah.

Aussie Firebug: And it's really interesting because I think we're wearing like the traditional fire cause within the fire movement. And I don't even know how I feel about this, but this everyone's going to put labels on everything, but there's a whole like sub movement of lean fire, like traditional fire and then high fire, which is like a high fire. People want to want to sorta be balling in retirement. And they want a passive income of like, you know, maybe a hundred, $150,000. So they're sort of on a different trajectory to the majority of five people. It's almost like a movement within a movement, but then you get the lean fire people. And my goodness, you should read some of these expense reports that they post like, and these are the people that the journalists, you know, I post a story and then everyone thinks that everyone in flight is like that when it's really not like that.

Aussie Firebug: And we actually had a survey at the start of the year with 1300 people in the community, filled out the survey and the bulk of people roughly within the 45 to like $70,000 a year, which I think is pretty like that. That's a typical, if you're optimizing all your expenses, I feel like that's pretty typical for a normal Australian family to spend that, like, I could see that being realistic, but you get these lean fire people that they spend so little that they actually pay more tax. And this is incredible. We're thinking about they would pay more tax from salary sacrificing into super. Then they would building a portfolio outside super and receiving their dividends or rental income because of the 15% tax that you pay when it goes, when it goes into super, whereas they actually under the tax three threshold. So it actually makes more tax sense for them to invest outside super.

Aussie Firebug: And then it does incite. However, having said that, having said that that is rare to have happen. And majority of people, vast majority will have the biggest tax benefits in super, no shadow of a doubt, no shadow of a doubt. If your, especially if you're nearing the preservation age, I would like if that was me, I'd be dumping everything into super. The only reason that we don't build up our portfolio in super, the only reason is we don't want to use the drawdown method and have to rely on super or basically have to wait till our preservation age to get that money. So I would rather exactly, I'd rather pay a bit extra in tax and reach financial freedom outside of super. Then I would then like storing it inside. Even I know I've done the math on it, how much we would save in tax by salary sacrificing and letting it compound in a tax low tax environment. Like that's amazing. I it's rare, like, and it goes back to circumstances, but if you're super early on in fire, you maybe want to look at it and like building your, your snowball outside of super, but for the vast majority of Australians, super's going to be your best bet. It's the best vehicle that you can have.

Chris Bates: Well, I mean, yeah, I mean, there's a, I guess there's a two elements to it though. If ultimately your number that you're trying to achieve is to last you maybe to your 90 or a hundred, it would be for them, but could be a lot lower. And so, you know, you could say, well, my super balance is at once that's at 300,000, that's going to compound, you know, 200,000 or a hundred thousand, that's going to compound the next 30, 40 years. I'd have to worry about that 65 year amounts. So I can potentially retire a lot earlier. So you can just do people in the fire community, look at it like that and say, well, I want an outside of super a mountain inside a super amount to, to hit that button a hundred

Aussie Firebug: Percent. I actually have a calculator on my website that does exactly that the calculates, how much you need outside of super to then bring you to your preservation age. And then it works out how much you need inside. So it builds up at that snowball rolls down the hill in the low tax environment. So when you get to your preservation age, boom, it's your financial independence number. And then it works out how much you need outside. Now, when I did my, our situation in that, I can't remember exactly what it was, but it was something like, because we were doing it so young and this is where it throws it off. And it's so circumstantial. So you need to really plan for your own circumstances. Is we, I can't remember exactly. So I'm just going to do rough figures here, but let's say our financial independence number is 1.25.

Aussie Firebug: Cause that's what it is. I know that for the time being, because we were so young, we were going to need an incredible amount outside super to then last us to our preservation age. So it was something like, maybe I'm going to say 700,000, we would need outside super. And I thought at that point, I'm like if I get, if I've got 700,000 outside, so we bought, do I really want to start drawing that down? I think I'd rather just save an extra 500,000 and pay more tax and just get to financial freedom without relying on super that's, how I just looked at it. And I know it's not the most efficient and quickest way to get there, but I just chose, I don't want to do the down method. I just want to reach it outside super and I'm willing to pay a bit more tax.

Chris Bates: So I mean, Frontica point was around the tax on home ownership either way. There's no tax and arguably leverage and leveraging income allergic any type of investing is where you'll get compounding better returns. If you over the longer term and property is one of those assets, you can leverage six times, you know, seven times your income and your money. You can leverage potentially 10 times and then potentially into assets that can grow tax free for you. And if you look at sort of a way of sort of growing wealth, especially if you do it well, how do the people in the fiber movement? Because a lot of people will say their home. They'll say it's just one security. I just want a place to live. But ultimately arguably if you do it well, it's probably one of the better investments you can do as well. And how do people handle that? That

Aussie Firebug: Is, that's a good question that I don't really think has been brought up that much in the community, the forum boards and the Facebook pages. If I'm just thinking about that myself though, I don't know, would I buy the best home that I, or the home that we would want to suit our loss, all like future aspirations, all that, all that good stuff, or would I buy a home because I think it would go up in value or I'd be like, it's slightly in investment. Like I know what you're saying, but I feel like, I feel like it's two different things because if I'm buying an investment property, which we, you know, had three investment properties before we're down to one at the moment, but it's a hundred percent a numbers game. Like I don't care what it looks like, where it is all that like it is relevant, but it it's all tied back to how much money can this thing make. Like it's about making money in that investment property. But a house to me is completely different. There's an emotional attachment to that. And I just feel like if I was trying to buy a house and buy an investment property or buy it for an investment at the same time, I might not get best of both worlds. I don't know. This is really

Veronica Morgan: Interesting actually, because I suspect listening to you talk about the difference between an investment property and your home. I suspect that you're less worried about the home growing in value because you aim to retire early, which means you won't have debt. And therefore, if you don't have debt, you're not as worried about the home going up or down in value, because if it goes down in value and you have debt, you've got this sort of benchmark of what do you owe the bank versus what's house is worth. And so, so that sort of becomes a different sort of thinking process. I guess one question in my mind is that if you have a frugal approach to life and you and also, I mean, I was reading up a bit on the fire movement before we had this podcast and this interview. And one of the things I read about was, you know, like the ideal is to invest in low risk, high yield.

Veronica Morgan: And I'm like, there's no such thing because your risk is a function of yield. And I know in property that if you invest in cheap property, typically they're not very good assets and people, if they're measuring their investment return on the yield alone and not on the capital growth, and they're actually missing the point. And, and I guess that's all of this is sort of wrapped up my head. I'm thinking these are all dangerous zones for, for the fire movement in my mind. And maybe I've got it wrong because the fact is that if you invest wisely in your own home, it should and can grow in value because it's emotional to you. It will be emotional to other people. And the actual main driver of capital growth in properties, actually owner occupier demand. It's actually not all the investors or the numbers or that sort of Plavix.

Veronica Morgan: The reality is that properties are emotional. Those that are get the more emotional response from buyers are the ones that get where the price gets pushed up. So it actually, it, and that's sort of the fundamental, his podcast is actually understanding the psychology and the emotions behind our decisions around property. So it's sort of interesting to come at it saying, well, you know, that doesn't matter with my own home, but it actually does. And it does for lots of reasons. And it actually can be made way more powerful than them making investment decisions based on numbers alone.

Aussie Firebug: Mm. Yeah. I hear what you're saying.

Chris Bates: Another way to explain it would be, let's say you believe in the fire movement, you don't believe in house is an asset because I'm living in a and financial houses, shouldn't be a financial instrument. But the reality is we live in Australia where our number one asset is residential property, which is four times the share market. And so absolutely it is a financial asset and it's everyone's biggest asset. And so even if you don't believe that the Hass isn't an asset, the reality is that's what the world is. And so you can either play in the system or you can sit on the sidelines with the system and say, actually, you know what, I don't believe in that. I'm just going to buy something to live in, but what you're also doing is you're missing out on that opportunity. And the way that the tax system is structured is around home ownership and encouraging people to take on home debt.

Chris Bates: That's what low rates are also doing as well and government grants, et cetera. And so even if you want to leave these, you know, five movement, one of the best investments you could potentially do is treat your home as an investment, you know, and think about it from an investment mindset and chances are, it's also going to be a great lifestyle asset anyway, cause that's what the best properties are. That's what they provide is lifestyle. And so, you know, I think that's a big opportunity where people potentially look at this fire movement and they say, well, I want to, you know, I've got a hundred thousand and I want to grow it so I can retire. I don't, that means I'd completely disregard property or I'll buy shares that are on leveraged. And I'll try to get this compounding thing over 10 years and I'll pay capital gains tax on it.

Chris Bates: But with the home, you know, for example, let's say someone bought a million dollar house in Western Sydney, you know, 10 years ago and they bought it for a million and now it's worth 2 million. Well, that gain of say a million is all tax-free, maybe they put in a hundred thousand. And so they've got, you know, 10 times their money tax-free versus that person who said, I'm going to rent, I'm going to save the difference. And I'm going to slowly build an investment portfolio over 10 years. Like the, the difference in where they will be is, is massive. And so I think they, one of the challenges of the farm movement is, is that I think around home ownership, I think they are potentially missing the system benefit. The other thing is that it does encourage people to be frugal with their investment decisions as well.

Chris Bates: And so for example, I will buy an investment property and I'll focus on cashflow because it's about sight, you know, the yield, but I will completely disregard the capital growth, which is what properties basically price on. And so the number of properties matters more. I've got three properties and it's the yield they provide rather than the actual growth. Do you see that a lot of people with the five movement focus on a number of properties, properties that are say worth, you know, under say three, 400,000 lot of regional property, high yield sort of positive cashflow, is that sort of what a lot of people in the five movement are attracted towards? I'm not a hundred percent sure

Aussie Firebug: In terms of the property type that that most in the fire community would, would lean towards. But what I can say is it's true that in the fire community, most people are trying to replace their incomes. So they are going after assets that can generate an income. Now, the issue that I have not an issue, but just the point I'd like to make, if you have the million dollar house in Sydney and it goes up to $2 million, are you withdrawing the equity to further invest? Or are you just basically becoming rich on paper? Because if the house goes up, unless you're renting out a room or something like that, it's actually not providing an income. If it's your primary place of residency,

Chris Bates: You can always sell that. Right? So if, if your number in the five movement is a number, then that person could sell it 2 million pay off that $800,000 mortgage. Now they've got $1.2 million in the bank. They could move to a lower cost of care out outside Sydney by buy a house at 250,000 and they've got a million dollars in the bank. That's going to provide them $40,000 a year income.

Aussie Firebug: They could. I'm not saying that they couldn't. All I'm saying is that if I'm buying a house, I'm not relying on it too, to have that happen, to, to turn it from 1 million to 2 million. And I know that it has happened in the last few decades. Will it happen in the future decades? I don't know. Will houses go up a hundred percent? They will just because of the nature of the markets, it giving a long enough period. It a hundred percent will. I prefer not to play the capital gains game where essentially you're relying on someone to buy the asset at a higher price than you paid for it all the while you're losing real money in the bank account. And your only payout is at the very end when you sell to someone at a higher price, I know it can work. I know this is a strategy that a lot of people do, but I just would rather build up steady and slowly and have the consistent income being thrown off from the portfolio and reinvest that income and do it that way. They're just two different games. And it's just about the irritability

Chris Bates: Going back and look to potentially what, you know, when you had enough for a first deposit, let's say you had 15%. I don't know. Let's say you had a hundred grand and a decade ago. I think you started this in 2013. I think you said. And what your difference in terms of, you know, potentially you would be today Sydney real estate. Well, it depends on what you could have access to with your incomes, et cetera, but it is something in the fi community that the district, because they've got that believer around sort of financial ization of property, et cetera, property is not an asset. I'm going to leave you there

Aussie Firebug: Definitely an asset, a hundred percent. I've made more money through property than I'll probably ever make through the share market. Don't get me wrong. My first property had an annualized return of something like 35%. Joel never get in the share market unless I'm the next coming of Warren buffet. So I'm not saying, I know I'm almost sounding anti property here, but I'm a hundred percent not. I love property as an asset class. It's just, I'm at the time of my life, where I fought for me to get the returns in property and like the, that I was a property investor because I'm not really anymore. I had to put sweat equity into the property and I had to do a few things to bump up the value where I wasn't. And I didn't like my original strategy. My very first strategy was to amass 10 properties.

Aussie Firebug: That's the road that will go in down and I hit three properties. And then opera changed the leaning regulations in Australia. And I maxed out on my learning capacity. I had like nearly like $800,000 in debt at one point. And I went for my fourth house and then I got knocked back. And that's when I started learning about the share market. And the reason that I was attracted to the share market was one, because it's a hundred percent passive on Darnley to lift a finger. I get four payments of dividends each year. They get transferred into my account like magic and my, wow, that's incredible. I don't have to deal with any tenants. I don't have to deal with any of that stuff, but I'm not doing property at all because it's an incredible wealth building tool. They're just completely different tools. And I'd say that most people are more suited to be passive investors.

Aussie Firebug: Like I'd say probably like 70% of people are not built to be property investors, because in my mind, there is a certain things that you need to do and you need to treat it like a business. Almost need to treat property, investing like a business. And if you don't, you can still make money, but you're less likely to make money. And there's headaches and time, energy that you got to put into it to make it work. That's why our Indiana, like we started in property when I had a whole bunch of time in my twenties and then come in, we're slowly going to a hundred percent passive portfolio.

Veronica Morgan: It's a good point. I think that people underestimate how active property investment needs to be particularly at at times. And, but so you, it sounds like you manufactured well, so it sounds like you actually made, that was my strategy at sweat

Aussie Firebug: Equity. I was laying concrete knowledge landscaping, and I just was like, I, and that's what I said. I made 35% or 33% annualized returns, but that's not factoring in how much my time is worth per hour. You know what I mean? That's just how much I got out of the deal. Like there was, I think I bought for like three 40 and I sold for like five 15 or five 20, then the outskirts of Melbourne. So I made a really good profit. I was so happy with it. And like, I'll never get that sort of bump in the share market just because I bought two built in 2012 and it wasn't no 2013. And I sold in 2018. Yeah.

Chris Bates: Most of the big boom of Melbourne market.

Aussie Firebug: Yeah. Just on the tail end of like, it started to dip. And to be honest, I wish I'd held it. The hindsight's 2020. So I made a really good profit and I was happy with it. And I'm like, I try not to be a creative person. I was like, yeah, I can dwell that. It went up even more like crazy. Like I look at the prices now it's in the sixth is easy, but I'm happy with the profit I made and anyone can look back in history and be like, I should've bought Bitcoin in 2013. You know what I mean? So it's like, you can play this game forever. Have

Veronica Morgan: Hindsight, never a mistake is made.

Chris Bates: It's one of the things that I, you know, I think the five movements missing and I think they around the home and understanding property and what drives the market the system and behind it, even if you don't want to be a part of that, you want to avoid, you know, the different to the system and which are definitely aligned to a lot of that as well. The missing a trick around playing the property market, you know, especially around their home. I think the other thing is that you, you were kind of going down the dangerous path that I think a lot of the people in the fog movement do as well, where they think the number of properties you mentioned that you wanted 10, what fortunately they do is they'll go for higher yield and they'll go for quantity. And a lot of property spruikers play in this space.

Chris Bates: And I encourage people to go into, cause it's our number. I've got to buy more than 300,000. I'll get for it and I'll get another one, another one. And what they do is they end up getting not the greatest investment returns, those maintenance issues. You spoke about tenant risk. The growth is in the affordability markets, supply risk. And so, well, I should've just done is go and buy one really top quality investment property for a million let's say, but they go and try to buy this number of properties. And I think you'll find that a lot of people in the fire movement are thinking like that. They're thinking I've got to get as many properties as I can. It's the number I sort of have rather than the quality it'd be sort of heard that around the traps.

Aussie Firebug: I haven't. And I'd probably say that like 80% of the five movement go down, the passive index share portfolio style of investing. There is not many property investors in the Ozzy fire discussion Facebook group. I think we're up to like 12,000 members and Chris, if you're not in there, I'd definitely encourage you to join us and start this conversation because it is a good one. I'm like, I'm definitely hearing what you guys are saying for sure. It's just that for whatever reason, the passive index style approach of investing speaks and appeals to the majority of people trying to pursue fire. And I have seen stories written in that group from property investors that obliterate a passive index style, investing returned and, and a lot at some people saying like, you know, is that really possible? And I'll chime in and say, yes, it is like property is an incredible wealth building tool.

Aussie Firebug: It is, it's just completely different to passive index style investing. One is active that you have to treat it almost like a business. It's like a side hustle it's completely different. And the other is 100% passive. You're not doing anything to improve it. So there are so many pros and cons with each style. If you're a go getter, you've got certain skillsets, you can add value to a deal, a transaction to the property itself. You're a builder, a Sparky, whatever property could be incredible. It could be amazing for you and with all the tax benefits that you guys speak about. But if you're someone that doesn't want to do the extra work, maybe you're time poor. Maybe you want to put, you want to invest in yourself and build more income through your job, which I actually think is a good way to do it.

Aussie Firebug: Because then, then passive is probably the best way for you because you don't want to have weekends where you're, you know, going down there, you're dealing with, with staffing issues that happen. Like they just, they just try different things. I really, I want to, you know, make sure that everyone understands that fire is definitely not Andy property at all. I think it's incredible. I just think it's not suited for majority of Australian investors, to be honest, I think they think they are property investors, but once they start dealing with all the hassles, they're probably way better off doing a passive style, putting more money in their super and concentrated on other things. And yeah, that's, that's how I feel about that. I agree with you, by the way,

Chris Bates: The going path per se, passive over sort of active. I mean, that's the big thing. A hundred percent it is, is a lot of people don't understand the markets do move in cycles active over passive passive, generally better over picking fund managers, paying fees and not trying to time markets and focusing on compounding and regular investing and dollar cost averaging people.

Aussie Firebug: So people are in camps and I actually hate this. It's something that the fire community is terrible about doing they stick to their camp and it's like, guys probably investing is node better than shares. Shares is not better than property. They're just different. You've got to figure out what's gonna work best for you. They're incredible tools. I love both asset classes.

Veronica Morgan: I think, I think what is really important is for an individual investor to consider and have assets in all different classes, you know, and this is the thing, a lot of property people will not talk about the share market. Yeah. And, and in fact, I think most property investors should not be investing in property personally because they haven't bought good assets and they've got no idea what they're doing

Aussie Firebug: Exactly. Right. You have to know what you do when he probably has always echo. This point is people I'm like, you can't stop her. It like, it's such a big risk if you don't know what you're doing in property, but because your returns exactly the returns are more lucrative, but you need to know what you're doing, but, and that's, that's the biggest pro I think one of the biggest pros of passive index investing in the share market that you don't need to be Warren buffet, you don't need to know about anything. I'd encourage you to understand, read a few books as to why an index passive investing approach works. Why ETS work? Because when the market craps itself, you gonna, like, if you don't know what you're doing, and then you're going to sell low and that's the worst thing you can do. But like that is the biggest benefit. You don't need to know what you're doing in chairs. Like you don't need to pick stocks is what I'm saying, but property, you need to know what you're doing, but if you have a skillset or experience to bring to the table, you can clean up.

Veronica Morgan: Well, I think the reality with property, you have to pick stock. You have to pick the stock.

Aussie Firebug: Yeah. You're exactly right. You need to be an expert yeah.

Veronica Morgan: In the bond index, in the property market.

Aussie Firebug: Well, you can buy rats with it. Yeah. It's not the same. Yeah, no, it is property exposure, but it's not an, I agree with it. It's not the same as

Chris Bates: We forgot to ask you at the start mat. So we do something called a property Dumbo where it's just a story or something that you've heard around property that, you know, it's good learning for us.

Aussie Firebug: Yeah. I actually wrote a few down depending on how much time we got, but the biggest, like the most obvious one that I can think of. And I've got a personal experience with this, just because we, we have been through buying our first home lately, crazy that people are not getting building and pest inspections when buying a home like

Chris Bates: The market situation. So in

Aussie Firebug: Your situation, first of all, the market in where I live is just bananas, which I think is happening all over the country. It's just boggles my mind, how property properties are worth so much at the moment. Like we're in London last year and this sounds terrible, but when COVID hit, I was secretly like, yes, I know we're going to buy next year. And property has got to be rock bottom. There's going to, you know, I was like, this is going to be great. Holy crap. Do you have the complete opposite happen? Like who could have ever predicted this was going to happen? It's just insane. So basically what you've got to do in my hometown at the moment is you've just got to go over asking price and hope that you secure the property within like the first week. Just because there was so many people from Alvin coming down and everything was getting snapped up.

Aussie Firebug: So we did the bill. We put an offer on he got accepted, did a building inspection and there was a massive structural issue. That was a potential issue, but they couldn't tell me it was a hundred percent kind of happened. It basically could have been nothing or could have been everything in the next 10 years. And when you're spending half a million dollars on a house, I wasn't prepared to take that risk. And because the market was so hot, the sellers were just happy to basically, you know, like not even negotiate with us because they're like, now you guys are too much work. We'll just pay it. We'll take the next offer for, you know, $3,000, less $5,000, less, whatever it was. And we'll just sell it and move on. So like, it really sucked that we had no negotiating power and no, like they weren't playing ball at all. So that was really bad. But that would be my number one. Like you have to get a building and pest inspection. It's crazy. All the stories I'm hearing about people were just buying unconditional, no building and pest like insanity. Yeah, sure.

Chris Bates: Is absolutely. I mean, you if you're paying 500,000, probably 200,000 that's for the house that you haven't even done any, you know, just small checks on not even if you haven't done any building experience but got even lots of building experience. She'd still be getting it done. Also, Matt, I really appreciate your time today. It's been very interesting. And I think if I move in is there's lots to it. I think, I think what I like about it is that sort of mindfulness side to it and being conscious of your decisions financially and how you spend your money and you know, the importance of work, et cetera. So yeah. Thanks, bye.

Aussie Firebug: No worries. It's been a pleasure guys. Thanks so much for having me on appreciate your time.

Chris Bates: You're a better elephant rider and this week's elephant rider training is

Veronica Morgan: The thing that occurred to me. His conversation with Matt, which is really interesting was I wonder whether in the frugality mindset, there's a bias against paying for advice. Now we didn't talk about this with Matt. So I'm making an assumption here, but I think there's a lot of money to be saved by paying for good advice. Now it's obviously difficult to find good advisors, but you know, like even just accounting advice to understand if you're going to buy an investment property, setting up the ownership entities, or, you know, if you're going to buy an investment live in first or, you know, rented out, then live in it, what are the impacts on your future? So our price and tax liabilities, et cetera, et cetera. So, I mean, that's just one example of paying for advice. And I would imagine that even in this fire movement, you know, there's a lot of talk about the difference between saving eight inside, super outside, super, and the tax rates and the pay downs, all of that sort of stuff.

Veronica Morgan: It actually is very, very complicated. And I guess this that's what this boot camp really is just about. Just don't forget to pay for advice to think, okay. I need to get particularly with super, for instance, the, the, the rules change all the time. So I need to make sure on hand, I've got somebody that can actually give me guidance that I trust so that I can make those good decisions and timely decisions because you know, it was mentioned there, you know, if you're close to the age that we can get your, you know, if you're in the accumulation phase, you're going to do different things than if you're actually close to the age where you're actually going to be able to draw down your super you're going to do different things with, with money and to not know that and to make mistakes. It's so easy to make mistakes is super I'm and I've got a self managed super fund. And I theory almost made a mistake, even though I thought I knew what I was doing and my accountant jumped onto me and went, ah, before you do that, you need to understand this. And so he would sort of went through this. So I've got an accountant on tap, but I almost made that mistake without actually checking. Cause I actually did think I knew that the answer, you know, and I didn't, so this stuff's really complicated, whether you're trying to live frugally or

Chris Bates: Not. Well, I think the problem with this is that the advice is free online, whether it's through, you know, they say they've got thousands on the Facebook group. It's not just them. You know, Scott pipe's Facebook groups have got a hundred thousand on millennial money. You've got even in the broken community, we've got finding out Facebook groups and I've looked at these groups and I look at them very often and you know, whether it's in a broken community or whether it's in these financial groups, the advice that people who have not qualified, who don't know what they're doing. And the quality of that advice is really average out. I've got brokers who are telling you as banks, that you wouldn't get prove the loan. And unfortunately if you've got time to sit there and write these replies on Facebook, you know, ultimately they're basing it on their experience and property. It would definitely be happening. You'd have people assigned bodies, property regionally. I did this. People love to base what they do on hindsight and anecdotal advice, really. And so you got to be really careful when you're educating yourself is you don't get in this sort of echo chamber of confirmation bias and surrounding people that don't know much more than you. So everywhere you get your advice from

Veronica Morgan: Actually on that you know, in the, my millennial money group. And I mean, it really, because I want to, as part of research through homebuyer academy, I really do want to get in there, understand what questions are plaguing first home buyers, et cetera, et cetera. And, and every now and then I'll make a comment cause I can't help myself, but some of the staff us, and this is the problem with all of these groups is that if the people, if the community's providing answers, that's a bit scary because you know, a lot of the community in our read some of this stuff. And I think these people just have no idea what they're doing and saying, and, and hopefully nobody's taking the advice, but there's a lot of free advice out there. And yeah, so that's these bootcamp.