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Thursday, 28 February 2019

Interview With A Fellow FIRE-man

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This may or may not be an actual
picture of Mr. Content
For those of you who don’t know, FIRE stands for Financial Independence, Retire Early. The basic premise is that while you are working, you live within your means, invest your surplus cash every month, and then call it quits on your day job at a young age. This allows you to fill your time with projects/hobbies/interests that you are truly passionate about while you are still young enough to enjoy them.

The FIRE concept is quite well known and relatively widespread overseas. And while not nearly as popular in South Africa, there is a definite FIRE community starting to gain some traction locally. You might say that the FIRE is starting to ignite (Doh! I’m sorry - terrible!)

I have started to notice more coverage around the FIRE concept from the South African media, and have recently come across (and even been fortunate enough to contribute to) a number of articles around FIRE. And then Mr Personal Finance himself, Bruce Whitfield, had FIRE as his topic of conversation on the Money Show last year.

Interest is certainly picking up!

And then of course I have noticed more and more FIRE blogs popping up.
This is great – my kinda people! :)

One such blog, which I have enjoyed following, is Wealthy Content. He blogs once a week (with two kids, where does he find the time!) over at www.wealthycontent.com

It is easy to see that Mr. Content has a genuine passion for FIRE and the related principles, and as a result his blog posts have the really nice side effect of helping people think differently about and improve their financial situation (most of the principles of FIRE are really helpful, even for those with no plans of retiring early). And while my blog focuses a lot around the numbers, I really enjoy the way Mr Content writes around some of the softer issues.

So, for those reasons (and due to the fact that, as a fellow Tshwane resident, he shares the same hatred of 38 degree summers!), I really wanted to pick Mr Content’s brain and speak about his plans for FIRE, his approaches to some of the more fluffy aspects around personal finance, and extract some of his thoughts around money in general.

In the true giving spirit of the South African FIRE community, he was more than happy to offer up his brain for picking, and allowed me scratch away. I hope you enjoy the interview!

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1. Okay let's start with some background. Where are you from, your family, what do you do for work?

I was born, raised and schooled in Pretoria. Heck I still live in Pretoria although I have not always worked in Pretoria. At the moment I work more to the Jo'burg side. I studied engineering and completed my MBA a few years ago. In my career I have always been more in management type roles and am in a bit more of a specialist role at the moment. I am happily married with 2 great kids turning 3 and 6 this year. Family is my top priority.

2. Why FIRE? What got you started? Was there a distinct turning point where a switch flipped and you knew you didn't want to go down the same road everybody else was going? Or was it more like a number of events that made you realise you wanted to do the FIRE thing?

Let's first start off with the FIRE concept and some of the negativity that it attracts. Even in your recent interview on Moneyweb, it could be seen in the comments section. There is a perception that wanting to retire early is lazy and depriving, and in most cases this "retirement" is not the same as in the traditional sense.

Retirement is seen as silver haired people sitting on a bench. If I "retire" early one day it will not be in the traditional sense of sitting on the bench. The attractive part for me is the financial independence (FI) part. The first prize for me is to achieve FI due to all the options it creates and the potential control over your time it provides. I have not figured out what the RE portion might look like. I might just continue to do what I am doing. Retiring early is not that attractive to me yet, although I might be able to be more flexible in my current job.


How I got to intentionally pursuing FI was a process and sequence of events. We have lived below our means from day one and try to keep debt to a minimum by saving for large purchases upfront. Therefore, we have a good foundation, but it was never the intention to reach FI as defined by the 4% Rule. In my career I have had a couple of encounters with people who were not able to retire comfortably at retirement age, but had to retire due to company policy. In most cases these people had very little options as the companies wanted to revitalise the workforce which gave very little negotiating power. I told myself that I never wanted to be in such a position and I want to be in a financially independent position at age 55. Naturally the sooner the better.


3. Where did you learn about personal finance/investing? Was there an influential family member, a book, or was it more a case of Google is your friend?

I will start with investing, where I have had various influences. I have a friend that is a successful trader which sparked my interest. I have always been fascinated by business in general (which lead me to do an MBA) and like to read about businesses and business leader biographies. One of the books, Good to Great by JL Collins, which is probably more classified as a leadership read, really sparked my interest in the markets. It looks at companies which constantly out performed their peers and this outperformance translated positively in their share price. I started reading more and more, got more interested and am still fascinated by investing and learning something new every day.

As for personal finance, my interest grew when I realised there are other people who have the same view on the subject. I started reading mostly US blogs on this and wanted to empower myself more on the subject.


4. What would you say has been your biggest mistake? Or put another way, if you could go back to when you were 21 again, what would you do differently?

Haha, there are so many. There are some basics like spending too much on cars. Then there was the time we invested into equity funds just before the 2008 recession and saw the funds decline massively. We cashed in when it was at the same levels three years later and used the money to pay off some of our home loan debt. Back then the JSE ALSI was around the mid-twenty thousand mark. If we just left it alone it would have had a great return. The biggest mistake is probably not living intentionally enough with our money by figuring out what we value and spending accordingly.

5. How do you balance experiences with saving - e.g. travelling, concerts etc? You have those that say experiences last forever and you should never miss out, and then you get those that say you can never get the money you spent back, so don't waste it.

I like to think we are rather in the middle on this, but spend more on experiences. We really love to travel which has declined a bit since having kids. Last year we went to Victoria Falls for our 10-year wedding anniversary and took the kids to Mozambique earlier in the year. Before the kids we travelled a bit abroad as well. For me this comes back to spending money on what you value, we believe travelling and getting the exposure to the world really widens your perception and perspective as a person. So, we save for travel and spend accordingly, with some hacking and doing everything yourself it can be a lot cheaper than people think, almost like investing.

6. Confession time. What do you spend way too much money on?

This is quite easy. As a car guy it has previously been cars. We are spending way less now (although they are still nice cars by FIRE community standards) and plan to drive our current vehicles for a long time. I am also a gamer which has its costs and finally the guilty pleasures of Woolies prepared meals for those days when work and kids becomes just too much.

7. Emotion affects finances more than most people will care to admit. How do you balance the emotional aspect and the numbers aspect to your finances?

I love this question. What really fascinates me is the correlation between emotions/psychology and financial decision making. As a side note my favourite article on this is over here. I try and take emotions out of the decision-making process by following the basics. Live below your means, having an emergency fund and only investing funds you do not intend to use any time soon. In my mind, invested money is not available money. The emotional aspect normally comes in when you want to buy something or see an investment value declining. By following this recipe, it forces us to save for what we want to buy and not touching the investments.

In downturns I do not tend to look at our portfolio. This is a bit of a head in the sand strategy but keeps me from doing stupid stuff. I also keep an investment journal and watchlist of stocks and ETF's I would like to buy. Going back to these and questioning the initial investment case helps a lot at rationalising thoughts when I become emotional.


8. How much harder is it to achieve FIRE when you factor children into the mix?

It is definitely a lot harder. It was never a financial decision for us, we always wanted kids and made sure we were in a decent financial position before starting a family. Expenses keep growing though. Our eldest went to grade R this year and although public schools are decently affordable, there are a lot of activities that go with it. The upside is that with a bit of luck we can raise financially astute kids which can hopefully FIRE one day in their own right and have more options. I would love for my kids to have an entrepreneurial outlook to earning an income and to create some inter-generational wealth.

9. Have you got an estimate of when you will be financially free, or do you take it one year at a time?

There is no set target. There is also a lot left that needs to be taken into consideration with the kids and us wanting to move at some stage. As mentioned previously I definitely want to make it before 55, although that is 20 years away. In recent months we have managed to save close to 50% of our net income (after tax, medical aid and provident contributions) so we should make it at some stage. The important thing for me is to track our net worth and to constantly make progress in both ZAR and USD terms. Since we want to be flexible it is important for me to maintain international buying power, hence tracking in USD as well.

10. What are your hobbies and interests? And I guess at the same time this is probably also going to be the answer to what you plan to do with your time once you are financially independent?

Both of these have been mentioned before. We love travelling and I am a bit of a gamer. But none of these will be my focus if I ever where to "retire". I really enjoy studying investing, writing about it and helping other people with their finances where I can. That is why I started my blog. Writing is very therapeutic and forms my thoughts. If I can continue on this path and actually generate an income from it in "retirement" it would be great.

The option to have a sort of laptop lifestyle sounds really appealing to me and I would love to continue to learn till the day I die. I am also interested in business and entrepreneurial at heart and therefore a side-line business venture can actually be fun. I have a couple of ideas to start online fulfilled businesses which are not working capital intensive, or if I am really a baller I'd get involved in private equity.


11. Where do you plan to "retire"?

Hmmm, difficult one. I have travelled quite a bit in my life and still love staying in Pretoria. It will probably be here, especially if it is a fake "retirement" where I am actually still working. Naturally South Africa has some great locations to retire in, the South Coast and George area comes to mind.

The nice thing of achieving FI and having liquidity in your finances is that you can almost do it anywhere. One thing I definitely have on the list though is to do a long road trip (6 months +) by train or RV in the USA & Canada. From that perspective a part of "retirement" might be in the USA & Canada 😉.


12. The readers of the blog know full well that there is no financial advice here - but what are you currently investing in?

We have quite a spread, but the majority of our investments are in ETF's. Naturally both our provident funds are in regulation 28 type funds with some of the big providers. Both our TFSA's are at Easy Equities and in a combination of around 75% Ashburton 1200 and 25% Coreshares Equally Weighted Top 40. We have been buying Sygnia S&P 500 and FTSE 100 for ages on a monthly debit order, almost since inception when it was DB Xtrackers.

We then have an international brokerage account in which we mostly own ETF's and some individual stocks. Purchasing individual stocks is seen as a sin in the FIRE community, but I believe an individual long-term investor has many advantages over institutional investors. There is a caveat, you must be passionate about it and do your work and research upfront. I really enjoy the philosophy used by The Motley Fool which is investing for quality companies you would never want to sell. Our split in the international brokerage account is probably around 60% ETFs and 40% stocks.


13. I hear sirens! Oh no, it's the ETF police! "Okay, these ETF's are getting out of hand, we are going to shut them all down except for one. Pick which one gets to stay"

Wow, difficult!

For local I will probably pick the Ashburton 1200. For international my favourites are S&P 500 trackers like IVV or VOO which run at TER's of 0.04%. The S&P 500 is an amazing index, with great diversification across industries and surprisingly in geographical revenue generation as well, while paying a decent dividend. 500 of the Ashburton 1200 is the S&P 500 so there is a lot of overlap and the 1200 captures 70% of the world's market capitalisation. Those would be my choices for local and offshore.


14. Your view on active versus passive investing?

As previously mentioned, I do like some form of active investing but only if you enjoy it and are interested in it. I would say this should be a small portion of your total investments.

There is also a big difference in active trading and active investing especially in terms of time-frames and risk. I have had many interactions with failed Forex & derivative trading individuals. There is a science to it and a career could be made from trading but it is not a get rich quick scheme. If I could only choose one way to invest it would definitely be passive ETFs.


15. Okay here comes some controversy... Should you contribute to your TFSA or RA first?

This one is still easy in my opinion, TFSA!

Just like you, I do not like RA's as they are so restrictive. My wife's previous provident is lying in a preservation fund with the scheme as I am refusing to convert it to an RA. If I can choose between tax deferred or tax now and nothing in the future, I will always choose the second. Over time compounding will work its magic and make the deferred tax look like peanuts compared to the capital gains you will be enjoying.


16. And then to throw you under the bus some more.......Is it better to Buy Or Rent?

This one is not so easy and definitely a throw deep under the bus.

In South Africa, it is probably mathematically better to rent. This can be seen in property capitalisation rates (annual rental income/property value). In my experience in SA this comes to around 6% to 8% while in the US people consider 10% a good investment. This means that in South Africa rent vs the cost of the property is relatively cheap compared to the US. Not even taking into consideration the high interest rates on mortgages.


But now for the important psychological part. Do you want to buy and have a place to call home or do you enjoy the flexibility of renting or maybe even a more nomadic approach to life? I like to have a place to call home, this feeling is amplified once it is paid off (otherwise it is really the bank that calls it home). For this reason I prefer buying. Not because it makes more financial sense but because it provides me with more comfort, security, stability and overall happiness.


17. For someone whose finances are a total mess, what should they do first up?

In my opinion you must know where your money is going. Understanding your expenses can have a far greater impact especially in the short-term compared to trying to increase your income. Once you know that, the standard game plan of living below your means, paying off debt and building an emergency fund is a recipe for success.

18. What are your top three saving tips?

My first is purely automating. Automate some of your savings and pay yourself first. This will become the norm and you will adapt to live without that money if it has already been transferred somewhere.

Secondly, track your savings rate. This will "gamify" your savings and provide perspective on where you are and where you want to be. The goal is to make you aware of your savings rate and to motivate improvement of this rate. Saving does not come naturally and requires active decision making, especially if you are chasing a percentage.


Thirdly, challenge the norm. We have such a picture in our minds of what the norm should be. As a middle-class family, you think you need a certain house, 2 cars, certain appliances etc. You are a great example Stealthy of scaling down to having only one car in the family. Kudos! Some critical thinking goes a long way to improve your outlook to spending and therefore saving.


19. What do you think is the single one thing that people waste their money on?

Perceived status derived from buying stuff. People love to show off. Rather strive to derive status from your integrity and values.

20. Do you think people try to spend their way to happiness?

Definitely, most of the people I know do so actively. I even try to convince myself from time to time that you can. Have you ever gone to a braai or for a beer where not at least one of the conversations was about how financially successful someone was and how that directly correlated to the happiness of that someone?

21. In your view why do so many South African's struggle with their finances?

I think there are various aspects that contribute to this. Firstly, there is no financial education in schools. Once you have matriculated you can do algebra but cannot complete a tax form or even understand how to manage your personal finances. Secondly, it has never been in our culture. At a previous job I travelled to Japan quite extensively and the culture of saving there is extraordinary. This can only change one household at a time by parents providing a good example and not treating finances as a taboo subject. The third is probably the macro-economic environment and unemployment rate. If you cannot make ends meet it is impossible to be financially prudent. But that is a whole debate on its own.

22. Looking a little bit ahead, what are your plans for the next 1-3 years?

This mostly involves being there as much as possible for my kids in these critical moulding years. I enjoy my job and have relative flexibility to make time for important events. Therefore, a career change is not on the cards at this time.

We are also looking at moving to our "forever" house which will set us back financially due to all the taxes, transfer costs and commissions involved but, in our minds, worth it. We have been saving to pay all the costs upfront but will need to bond a portion of the property again as we do not want to liquidate any investments for this.

Finally, in 3 years' time our youngest might be at the brink of where an overseas holiday is something worthwhile. He will actually be able to remember and enjoy it. It is a goal worth saving for only time will tell if we will reach that goal.


23. And finally, where can people find you? Give us the URL's the socials etc.

I have been blogging for a bit more than a year at www.wealthycontent.com, you can email me at wealthycontented[at]gmail[dot]com or find me on twitter @WealthyContent.

Thanks for having me, this site is an amazing resource and an inspiration to me.


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I really hope you enjoyed reading this interview as much as I did putting it together! Mr Content is a regular commenter on this blog, so, if you have any questions for him, drop them in the comments section below – he has told me he would be happy to answer them. 





Till next time, Stay Stealthy!
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