Is FIRE actually achievable? Can you retire early? (Financial Independence Retire Early)

Hey guys! Welcome back to the channel! In this video, we are going to be discussing one of my favorite topics to talk about, and that is, of course, financial independence and thus the ability to retire early. This is something that's become a full-on trend, especially over the past five to ten years, and I think that is absolutely awesome because I think more young people should be switched on to trying to achieve financial independence as soon as possible.

But of course, because it has become such a trend, there's now heaps of content that exists out there which is very confirmatory. It basically tells you just what you want to believe. So yeah, of course, you can retire at 30! You know, I didn't—look at me on my boat; you know, it's easy! All you have to do is subscribe to my newsletter and watch my videos, and you'll be a millionaire in no time.

So, in all honesty, in this video, I wanted to pull things back down to earth and actually look at some real numbers to see whether it is possible for most people to achieve financial independence, you know, years or decades earlier than their kind of predetermined retirement date. So with that said, leave a like on the video if you do enjoy, and let's get stuck into it.

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So firstly, I wanted to address something that gets thrown out there a lot. I see this in a lot of videos, and that is: Can you retire by the age of 30? And the answer to that is, of course, you can! In fact, I already know people that are in their early 20s that are already considering retirement, and yes, I'm looking right at you, Nate O'Brien!

But is it possible for most people to be retired by their 30s? Well, unfortunately, it's really not. And there's—if I'm being brutally honest with you guys—there's probably one way in which you're going to be able to retire by the time you're 30, and that's if you started a very successful business in your 20s. Maybe there's the odd stock market investor and the odd property investor in there as well, but they're the people that are just absolutely killing it. For most people, unfortunately, it's just not possible.

So why is that? Well, let's think about what is retirement. Retirement is the point at which all of your living expenses can be covered by reliable passive income. This is income that comes in without you working at all. So when we're thinking about retirement, putting the tools down, that income essentially has to come from investments.

And the problem—the reason why most people can't retire at 30—is because you need a really big nest egg to be able to generate enough income from that nest egg to not actually disrupt the size of that nest egg and not whittle it down too quickly. Yes, it can decrease in size over time, but you don't want that to happen too quickly. Be stuck at, you know, 70 years old with nothing left in the kitty.

So let's do some quick maths on this. For somebody to live a comfortable retirement here in Australia, it costs around $42,579 per year. That's a very, very precise estimate, isn't it? Um, but now to receive the healthiest dividend possible from a market tracking investment product here in Australia, without killing the principal—so without killing the size of that investment over time—well, really, the healthiest dividend you're going to get is between kind of three to four percent. So play around with three percent just to stay conservative.

So if you wanted to achieve whatever it was—$42,579 in income per year—and that is only going to be three percent of the size of your total portfolio, then overall, your nest egg needs to be $1.419 million. Now, of course, while these seem like pretty exact numbers, please don't put too much stock in them, but it would be reasonable to assume that if you had $1.4 million in just a market tracking investment product that's paying a three percent dividend yield, you would probably get your $42,000 in income per year, and the size of that nest egg wouldn't be depleted over time.

Now, of course, there is a massive asterisk there in this example. We're assuming things like the market doesn't really fluctuate at all; we're assuming that inflation kind of stays as it's always been. So there are many variables, but for an example, you get the point.

Now, the reason why most people generally can't retire by the age of 30 is simply because they are unable to make $1.4 million in around about 10 years. I mean, if you think about it, if you started working when you were 20, you need to be pushing your net worth forward by $140,000 per year, every year. And that's including everything—so that's income, and also expenses, and also chuck in investment returns in there as well.

And that's why most people that are able to retire at 30 are typically just people that have started extremely successful businesses. As I said earlier, it's either business owners or the exceptional stock market investor or the exceptional property investor. But for most people, because of the numbers involved, it's just really not possible.

But don't let that get you down because you can still definitely retire early. It might just not be the sweetest deal like what you're led to believe by other content creators out there. But with smart financial planning and solid execution, you can still cut literally years, if not—and I'm serious here—if not decades off of your retirement date of, you know, whatever it is at the moment. 65 is probably going to be 70 by the time we're older.

But then the question is, well, how do you do it? And of course, it's a function of a few different things, but really, there are three key pillars to think about: how much you make, then how much you spend, and then how much you're investing.

Point number one: It's no secret; if you're making more money, then you're going to be able to build up towards that nest egg faster.

Point number two: Saving money—it makes sense if you are able to live more frugally and save more of what you earn; you're also going to get there faster.

But then the third key point is you've got to try and get as much of what you make over into investments because you have to get that compounding machine running in the early days if you want to achieve FIRE as quickly as possible. Don't start—don't worry about, you know, what income you're generating off of your investment. Don't worry about what sort of dividend I'm getting paid every year from this investment. It's really not about that. It is about getting the compounding machine running as hard as you possibly can, and the more money that you can put towards fueling that compounding machine earlier in life, the better! The faster you're going to get to FIRE, and that's quite simply because of the exponential nature of compound interest.

So with that said, let's now play out a few examples and mess around and see what can get us to our magic $1.4 million fastest.

So I do want to do a variety of different examples. We're going to start, first of all, I make $60,000 a year, and I'm either going to be able to save and invest 10% of that or 30% of that or 50% of that. And if we're able to achieve just the average market return every year of seven percent, then if we save and invest 10% of our income, then we're going to hit FIRE in 43 years. If we save 30% and invested it, we will hit FIRE in 28 years. And if we save 50%, we're going to hit FIRE in 22 years.

But then what if we now bump up our income, and we're now making 80 grand per year? And again, we're still going to look at what if we saved and invested 10% versus 30% versus 50%. So at 10%, we're going to achieve FIRE in 39 years, 30 gets us there in 25 years, and 50 gets us there in 19 years.

But then finally, what if we made a hundred thousand dollars per year? We really did well and focused on boosting our income up! So we make a hundred grand a year. 10, 30, 50—what are those examples? Well, if we save and invest 10%, we're going to hit FIRE in 36 years. But if we save and invest 30%, we get there in 22 years, and 50%, we get there in just 17 years.

Now, as I said before, of course, we've got to put that asterisk next to all of these examples of saying this is assuming that the general trends keep happening; nothing weird and wacky happens. You can bet your bottom dollar that something weird or wonderful will happen!

So of course, we are assuming that we do get that seven percent average return every single year. We're assuming that the market doesn't fluctuate; we're assuming that inflation stays the same. But just as an example, hopefully, this does prove that achieving FIRE is possible, and you can do it fairly quickly. While you may not be able to, you know, tools down retire at 30, if you started working when you're 20, maybe you could retire at 50 or 45. I mean, that's still a massive win because if you say you're going to retire at 65, you're still knocking like 15, 20, 25 years off of your retirement.

Now, of course, everyone is going to be different, so the scenario that you could achieve for you personally is going to be totally different to what your neighbor can achieve, what your friends can achieve. You know, you might be 25 years old, already have three kids and a mortgage, earning 60,000 a year—that's a particular scenario. You know, you might be 45, have no kids, have a house fully paid off, and you're on 100 grand a year. Everyone's situation is different, but hopefully, by showing you all of these different examples where we're messing around, you know, how much we make, how much we're able to save and invest, you can kind of line yourself up with one of those examples and see, well, just how possible it is that I can cut X amount of years off of my retirement.

And I think that is the key message out of this video is that while you may not be able to retire in five years, as much as we would love that, okay? Just through some smart financial planning and actually solid execution—actually focused on executing this plan—we may not be able to do it, you know, achieve FIRE in five years, but we could achieve it in 20 years or 25 years. And that is still vastly sooner than what the majority of people achieve it—if the majority of people ever truly achieve FIRE, which is a debate for another video.

So it's definitely not a get quick rich scheme, but I hope this video shows you that FIRE is possible, and you can seriously cut years, if not decades, off of your retirement if you just stick to a strategy, you work hard, and you just keep going.

So anyway, guys, that is it for this video. I hope you enjoyed it! Leave a like on the video if you did. Subscribe to the channel if you're new around here and want to see similar content to this. And I didn't want to make this video a plug about my own business sort of stuff, but I will mention it at the end. If you are interested in how to get this average market return, this passive investing style, you want to get that up and running for yourself, then you can check out—I’ve made a four-hour course; it's linked down in the description—it's called Stock Market Investing for Beginners. It's hosted on my own business's website, which is Profitable. So if you wanted to learn a little bit more, you can check that out, but again, didn't want this to be like this video to be an ad. So you can check it out if you want to, but if not, all good!

Anyway, guys, that is it for this video. Hope you enjoyed it! Leave a like on it if you did. Thanks very much for watching, guys! I'll see you guys in the next video.

Hey guys, thanks for watching the video, and thanks to Hypercharts for sponsoring this video! If you're a stock market investor and you are not using Hypercharts, I would seriously recommend you check them out. Essentially, what Hypercharts does is it takes all those nitty-gritty numbers out of the company's financial statements and it puts it into really nice, easy-to-understand charts, and they do that quarter after quarter after quarter, year after year after year.

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