As COVID-19 financial panic has gripped the globe over the past few months, over at Pearler we've had the privileged position of talking to many people in the FI community.
Through this process, we've got some incredible insights on the strength and resilience of our community that we thought are worth sharing.
So, we asked the Aussie FI community how COVID-19 is impacting their FI plans, and for their best tips for others who're also on the journey.
Here's what they had to say:
- Michelle from Frugality and Freedom
- Ms FireMum from A Family on FIRE
- Victor aka The Frugal Samurai
- Latestarterfire
- Serina Bird aka The Joyful Frugalista
- Aussie HIFIRE
- Ms. FieryIce of Two to FIRE
- Aussie Doc Freedom
- Kate Campbell, Founder & Host of How To Money
- Sarah & Laura from Keepin’ It Frugal
- Kara from The Flawed Consumer
- Miss Balance from All About Balance
- Steve from Value Investing for a Living
Enjoy! 🔥💸
Michelle from Frugality and Freedom
How has COVID-19 changed your plans for FI?
In the short-term, COVID-19 has upended my plans for another six months of international travel in 2020. I was in New Zealand nearing the end of a work contract when the pandemic hit the country in March. My housesitting for free accommodation dried up quickly as homeowners cancelled their own travel plans. With flight availability decreasing and borders threatening to close, I decided to return home to Australia to wait it out.
My events industry has been impacted heavily by cancellations, with uncertainty about when jobs will appear again. I’m fortunate that I have those six months of travel funds to hold me over, plus other emergency funds set aside. My future plans for FI will see me continuing to invest in ethical index ETFs, but increase my cash emergency funds to twelve months of living expenses for more peace of mind.
On a positive note, I’m pursuing more online project work and writing; a long-standing goal, which never quite had the right time to start. The current “great pause” has presented the opportunity for progressing goals like these and for reflecting on what a meaningful life looks like.
What is your top advice for the Australians pursuing FI right now?
Consider the idea of “multiple forms of capital” beyond financial wealth. For example, the “social capital” of relationships can boost your mental health through friendships and reduce financial needs by bartering or exchanging skills with acquaintances. Your depth of knowledge as “intellectual capital” can support you to get different jobs or solve problems in creative ways. Examples of “living capital” include an edible garden to reduce your food bill or nearby parks and hiking trails for fitness. Thinking more broadly than your financial assets often reveals that you’re wealthier in resources than you knew.
Read more from Michelle on her blog, Frugality and Freedom.
Ms FireMum from A Family on FIRE
How has COVID-19 changed your plans for FI?
We're still a fair few years away from our FI number, so in all honesty there's really no material change. What COVID-19 has highlighted to us is that we should probably have a bigger safety net than commonly prescribed; so the 6 month emergency fund should stretch to 9 or possibly 12 months. It also reaffirmed our desire to become financially independent. Although we are not affected financially now, there's no guarantee that we'll survive the next recession - and it's much better to ride out financial storms on our own terms.
What is your top advice for the Australians pursuing FI right now?
I personally feel that advice should be tailored for each person's circumstances - so top advice might mean different things to different people. Perhaps start with your personal hierarchy of needs. If you don't have an emergency stash, start one now. If you have one, start working on job security. If that's sorted, work on saving more, spending less. Keep investing but don't look at your portfolio too often. And as always, stay positive and carry on physical distancing.
Read more from Ms FireMum on her blog, A Family on FIRE.
Victor aka The Frugal Samurai
How has COVID-19 changed your plans for FI?
I am in the fortunate position (for the moment) of still being fully employed during this period. As a result, I am watching the financial markets like a hawk as I do have some spare funds available to invest. When the markets tumbled during March, I felt this was a time to make generational wealth and leap-frog our plans for FIRE at the end of this (whenever that is). I still do.
What is your top advice for the Australians pursuing FI right now?
Survival. Just being able to ride out this period is priority. If your income (eg. job) is looking shaky at the moment, is putting money into investing the best course of action? FI doesn’t have to occur overnight. On the other hand, if you have a rock-solid income source, now more than ever is the time to research and learn. And for those of us who have both a rock-solid income source AND are invested already, risk mitigation. The greatest investors were great not because of becoming overnight successes but through long-term outperformance. I think too many people (myself included) are obsessed with finding the next multi-bagger in the shortest period of time. This probably explains why I am still “pursuing FI” rather than achieving FI!
Read more from Victor on his blog, The Frugal Samurai.
Latestarterfire
How has COVID-19 changed your plans for FI?
I wrote about my plan to retire at 55 (which is when I would reach FI) on my blog here. The first phase is to have enough savings to live on from 55 to 60 (or beyond). Then, the second phase kicks in at 60 when I can access my superannuation.
COVID-19 has not changed my plan for FI. I am very fortunate in that I still have my job. As a healthcare worker, I work in what is deemed an essential service. So my income has not been affected. In fact, I have worked more overtime hours in the last few weeks so my income has increased marginally.
However, my investment in superannuation and outside of superannuation has obviously been affected and suffered losses as part of the overall market volatility. I will continue to invest in both my super and share portfolio outside of super. I had planned to review my salary sacrifice in July (start of new financial year) with a view to reduce salary sacrificing as my super balance was tracking in the right direction to reach my target. But since it has dropped back to June 2019 levels, I will continue to salary sacrifice.
This pandemic has brought into focus for me again that an emergency fund is crucial for financial security. Even though I have not used it yet in this crisis, knowing it is there, readily available gives me peace of mind.
My timeline is 6 years but really it is flexible. I can always work part time at 55 and reassess the situation.
What is your top advice for the Australians pursuing FI right now?
Stay the course - don’t give up. Review your plan and re-adjust as necessary.
Read more from Latestarterfire.
Serina Bird aka The Joyful Frugalista
How has COVID-19 changed your plans for FI?
"Our spending hasn't changed much," I noted to hubby recently. Last November, I quit my secure job in foreign affairs to embark on the unthinkable: a new life dedicated to writing and podcasting about frugal living. Within weeks, my in-laws’ home was threatened by bushfires. Then the South Coast went up in flames before fires went on to burn 80% of the Namadgi National Park near us. For weeks, my kids and I hibernated indoors, unable to go out due to the toxic air. Then we had hail, and now, COVID-19. We were frugal and resilient before the pandemic, and we will be frugal and resilient afterwards.
Despite committing to supporting local businesses, we are spending less because my kids' extracurricular activities are on hold and we are not eating out with friends and family. Some of our investments have been affected; we had 14 AirBnB cancellations, superannuation values have gone down, and one tenant has asked for hardship relief. My husband's work has frozen pay rises and his overseas project is stalled; but his employment is secure. He is on track to retire in three years, and as my business grows, we are living comfortably within his income.
What is your top advice for the Australians pursuing FI right now?
We see this time as an opportunity for anyone pursuing FI to grow their portfolios by taking advantage of lower sharemarket values. This week we were excited to make our first investment with Pearler, buying a parcel of Vanguard ETFs. We had planned to do this in the first half of 2020, and the lower unit prices were a bonus.
Read more from Serina on her blog, The Joyful Frugalista.
Aussie HIFIRE
How has COVID-19 changed your plans for FI?
My FIRE plans hopefully haven’t changed much. Fortunately I’m still working so there’s no change to my employment income, our dividends will likely be down a bit this year but that’s life. Our spending as a family is a little lower but we already weren’t spending that much on discretionary stuff anyway. It might end up that the lower income is offset by lower spending in which case there may not be much change to our savings amount for the year. If there is, then so be it.
I’ve been continuing to invest as per usual throughout this time period, and there really haven’t been any changes to how I go about setting myself and my family up for FIRE, the plan is still to build up a diversified portfolio over time with plenty of passive income.
Having said that, the current situation has really reinforced to me the importance of preparing for setbacks and being flexible. Knowing that you don’t have to worry about your finances too much removes a lot of mental stress!
What is your top advice for the Australians pursuing FI right now?
The main piece of advice I would have for others pursuing FIRE right now is first of all to make sure you stay afloat first and foremost. This is not the time to be using your emergency fund to buy shares, because you may end up needing it. Right after that would be the importance of protecting yourself financially before starting to invest. So having an emergency fund, having personal insurance, reducing your debts etc should be what you aim to do first instead of getting straight into investing.
Read more from Aussie HIFIRE.
Ms. FieryIce from Two to FIRE
How has COVID-19 changed your plans for FI?
We started our FIRE journey only about a year ago. Since the beginning, we had been hearing a constant clamour around how the stockmarkets were overvalued and that a correction was due. However, never did we imagine that a biosecurity hazard such as COVID-19 would wreak havoc upon the world's economies and lead to millions becoming unemployed.
COVID-19 has not really led to a change in our plans for FI. Perhaps because we were prepared for something like this happening sooner or later and also because we have been very lucky that we still continue to hold our jobs. We are currently looking at this as an opportunity to buy into ETFs at a discount, while also evaluating further diversifications such as into real estate, P2P lending, etc.
What is your top advice for the Australians pursuing FI right now?
Our top advice would be - Keep at it. If your employment circumstances have not changed, don't let the deep crimson of your portfolio returns spook you. Keep investing like you were doing pre-crisis. If, unfortunately, your employment circumstances have changed, concentrate on getting back on your feet and then get back to investing as much as you can.
Our second top advice would be - Maintain an appropriate Emergency Fund. It's for crises like these that an Emergency Fund is important. The thumb rule for an Emergency Fund has been '3 months' expenses'. With the COVID -19 crisis, there is a strong case that the Emergency Fund should be higher. '6 months' expenses' would give you a lot more peace of mind.
Read more from Ms FieryIce on her blog, Two to FIRE.
Aussie Doc Freedom
How has COVID-19 changed your plans for FI?
The Aussie Doc family is still a decade from financial independence so no changes to our long-term plan were considered.
There have been a couple of changes to my behaviour as a result of COVID-19 - apart from obsessive hand washing! I actively avoided checking my superannuation balance, for fear of freaking out and doing something stupid (like changing my allocation). I dared take a peek recently (after a slight recovery) and it wasn’t as bad as expected.
I am lucky enough to be securely employed, in fact being asked to do extra shifts to help out an understaffed department. Using the extra income to buy shares at bargain basement prices has softened the blow of missing out on some time with my young family.
COVID-19 has removed the need for will power to curb discretionary spending on meals out and takeaway coffee! My journey to FI has likely sped up a little as a result.
What is your top advice for the Australians pursuing FI right now?
COVID-19 has reinforced the necessity of an emergency fund for everyone. It probably needs to be bigger than you think. Medicine is practically the definition of a secure income career – and yet many of my colleagues in other specialties have had a dramatic cut to their income due to COVID-19. Emergencies can be unforeseeable, so emergency preparedness should go above and beyond the likely (and even imaginable) scenarios.
Read more from Aussie Doc Freedom.
Kate Campbell, Founder & Host of How To Money
How has COVID-19 changed your plans for FI?
COVID-19 has really demonstrated to me just how uncertain the future is and the importance of being flexible. The current situation has also reinforced my goals to be financially secure, so I can deal with whatever challenges that life throws at me. The extra time generated from being inside during COVID-19 has led me to invest more time and money in my education. I’ve slowed down my investing goals for the year, as I think having a larger emergency fund is really important right now. I’m happy to keep more money sitting on the sidelines in cash for my own peace of mind - a safety net of sorts.
What is your top advice for the Australians pursuing FI right now?
I’ve also learnt over the past year that it’s important not to let your FIRE goals overtake your life; they should stay in the back of your mind, but make sure you don't lose sight of what's happening in your life right now. My main advice right now is don’t rush in and invest your emergency fund just because you think you’ll miss out on opportunities - you put that cash aside for a reason! Lastly, your FIRE goals shouldn't be making you miserable, and if they are, it might be time to take a step back and work out a better plan.
Read more from Kate on her blog, How to Money.
Sarah & Laura from Keepin’ It Frugal
How has COVID-19 changed your plans for FI?
To be honest, we haven’t made many changes at all.
For us, the most important thing we wanted to do was continue to invest in Index Funds on a regular monthly basis. The amount has been kept as regular as possible, with a couple of months slightly lower than our regular contributions so we can build some extra padding in our business accounts due to the uncertainty of the current climate (as we are self-employed, we are higher risk).
We aren’t timing the market when it comes to purchasing our shares, keeping everything going like clockwork and purchasing on the same day at the beginning of each month. We also make a point to not check our shares too regularly or read news headlines as we are buy and hold investors.
As work for us is a little quieter and with more time at home, we’re also using this time to focus on building up our passive income in our blogs, as this is our other stream of income to support us once we hit FI.
What is your top advice for the Australians pursuing FI right now?
Stay the course and invest as usual, if you can. Avoid news headlines and stick to your plan. If you’re still feeling uncertain, get involved in the FI community on social media or forums and ask questions, be curious and educate yourself.
Read more from Sarah & Laura on their blog, Keepin' It Frugal.
Kara from The Flawed Consumer
How has COVID-19 changed your plans for FI?
COVID-19 has pointed out to me just how fragile our economic and social systems are; and how important it is to be self-reliant and resilient. As a result, I feel more strongly about the importance of being financially independent than I ever have. Being reliant on an income during an economic downturn can be disastrous. However, this is reality for most of us.
As a result of this pandemic, I'm more determined than ever to become Financially Independent. Over the coming months, I'll be ramping up my saving and investing efforts in order to pursue our long-term dreams of Financial Independence and Early Retirement earlier than we had previously planned for. After all, life's too short to be forever reliant on someone else to pay the bills.
What is your top advice for the Australians pursuing FI right now?
Stick to your plans. Don't let the current economic environment scare you, especially when it comes to investments. FI is a long-term plan, just like investing. There are ups and downs in every journey, but if you ride out the lows by sticking to your plans, you'll reap the rewards of your efforts in the long-term. So, take a deep breath, relax and stop checking your investments for losses each day! In fact, focus on the positives and embrace the downturn for the profit-making opportunity it is.
Lastly… Trust in yourself and your long-term plan… You've got this.
Read more from Kara on her blog, The Flawed Consumer.
Miss Balance from All About Balance
How has COVID-19 changed your plans for FI?
The short answer is - it hasn’t.
The reasons why I am pursuing financial independence haven’t changed. My aim is to still build up enough of a portfolio of dividend paying shares and some other income streams so that I can take time out of the workforce to start a family and only ever return part time when I want to (I genuinely enjoy helping people), not because I have to. If anything, the pandemic has confirmed that what I am doing is the right thing for me.
Financially, I am one of the lucky people who have been able to keep my income at the same level (even increasing slightly in April) due to working in an essential service. This means the steps for how I plan to reach FI are still on track.
Being on the path to FI has meant I already have systems in place to save and invest wisely to get me through the ups and downs of life. If this pandemic would have happened 10 years ago it would have been very different for me.
What is your top advice for the Australians pursuing FI right now?
- Revisit your ‘why’
- Double check your numbers
- Keep on going
Read more from Miss B on her blog, All About Balance.
Steve from Value Investing for a Living
How has COVID-19 changed your plans for FI?
I haven’t changed my investing approach. The fact that markets plunged over 30% is not surprising in the context of the decade prior experiencing no huge falls.
In terms of unexpected events in life in general, I am more open minded. To some extent I was using “geographical arbitrage” in my lifestyle. My family had plenty of travel plans in 2020 that now are not possible. I now think about whether to scale back the extent of travel when we get to the “other side”. It could become more of a hassle logistically.
I now expect the unexpected with all sorts of things!
What is your top advice for the Australians pursuing FI right now?
I think how investors felt around March 23rd offers a good insight as to how suitable their investment plans were. If they felt they came close to panic selling equities that day it might be a sign they need to consider a more defensive or diversified approach. Making such a tweak now after markets have rebounded 20% plus sounds better. For example even having plenty of unhedged global exposure helped cushion some of the falls at the time.
If you found yourself excited about buying more stocks that day you are probably on the right track.
The shock we have had in 2020 though is perhaps a reminder not to make inflexible life plans around assumed market returns. Definitely set goals but don’t beat yourself up if markets don’t deliver the same historical returns in the future. Life must be enjoyed no matter what!
Read more from Steve on his blog, Value Investing for a Living.
Our take
As COVID-19 financial panic grips the globe, the Financial Independence community remains strong and steady - a stark contrast.
We wrote this article in March, and our Key Takeaway still hasn't changed:
Try to stick to your plan, automate and forget about it. COVID-19 has triggered a crash, but that's no reason to change your strategy.
Obviously, for those who've been laid off or furloughed, this advice is impractical. But if you're one of the lucky ones and your life circumstances haven't changed that much, do your best to increase your savings and investing rate to take advantage of the rock-bottom prices!
Happy Investing and Happy FI-ing 🔥
Kurt
At Pearler, we pride ourselves on the quality of the general financial advice we give. Please note though, that this advice has not been tailored for you. You have unique financial goals, circumstances and needs which may make this advice inappropriate, and it is important that you know whether it applies to you. If you are unsure we urge you to speak to someone you trust who is competent with money and understands your individual needs, whether they be a trusted friend or accredited professional.
