10 financial habits of the FI RE community

Habits to be made

The key to Financial Independence Retire Early (FI RE) is adopting good habits and applying them consistently. I don’t want to sound like a Prudential advertisement, so bear with me. The problem is we don’t always know which habits we should keep and which to kick to the curb. Here are some of the financial habits that I have taken from the FI RE community.

1) The FI RE community saves first

Conventional wisdom says that we should spend our salaries as frugally as possible and save what is left. This implies no pumpkin spice lattes, letting your wife cut your hair (at your own risk of course) and whatever the latest financial guru advises. The problem is that I like my cappuccinos and you can pry it from my cold hands.

We switch this around and save what we predict will be left and spend the rest. This process can even be automated with debit orders into savings and investment accounts. You might have to transfer some money back every now and then, but you will find that you tend to survive with what is left.

This is known as Parkinson’s law. This law was derived from the ideal gas law, which states that gas will expand to fill its container. Similarly, our expenses will grow to match the available funds. An employer-provided retirement annuity is also a good way of achieving the savings first principle. Once that money has been saved, it’s like the ex that cheated on you, dead to you.

2) They have a budget

The first step is to note your income. Then you track each expense, categorise it and most importantly, analyse it. How does it compare to the previous month? Which expenses are you not happy with? Then change that. Speaking about not being happy with expenses, check out my latest monthly finance update for an example of how transport expenses can escalate.

A popular method of analysis is the 50/30/20 rule. This rule states that you should spend 50% of your after-tax salary on needs, 30% on wants (yes this is where all the cappuccinos are funded from) and save the remaining 20%. Elizabeth Warren popularised this principle in her book called All Your Worth: The Ultimate Lifetime Money Plan (affiliate).

A 20% savings rate will allow you to retire comfortably after about 36 years of saving. If you start investing at 24, after your drinking years like the rest of us, that will have you retiring at 60. To determine how long you will need to save at different savings rates, you can read my blog post how savings rate influences your retirement.

3) They spend less than they earn

We all know this rule, so I’m not going to bore you with details. Stealthy Wealth summarized it perfectly when he said: “Once you figure out how to spend less than you earn, personal finance becomes super easy!”

The problem with spending less than you earn is that if you are barely surviving on your salary as is, it can be impossible. However, as things stand you are surviving. Any salary increases or additional income must then be saved and not splurged. This will allow you to systematically increase your savings rate by keeping your living costs the same.

4) For FI RE you need to avoid debt

Interest on debt is usually higher than savings returns. Before you can save, you must pay down your short term, high-interest debt. Only when the interest rate of your remaining debt, is below the average return of the market, can you think about investing. Even then you can still split your contributions between your savings and debt. Being debt-free just makes you sleep better at night.

5) They don’t do impulse buys

Impulse buys happen for several reasons. We buy to feel better, we buy because we think that we might be missing out (everyone with a Macbook pro can’t be wrong) and we reward ourselves for achievements.

The most effective way is to shop with a goal in mind. I hate shopping lists and I hope my wife never reads this, but they are effective. Anything that is not on that list can only be bought 24 hours later. If it did not make the list, to begin with, not having it, did not make you miss it.

6) The FI RE community doesn’t know the Joneses

Every workplace has that guy who drives the latest Porsche, only to replace it with the latest BMW. Then revert back to another Porsche, because he did not like the BMW as much. If you think I pulled this example out of my ass, guess again. When evaluating your lifestyle choices against other people’s, remember that what is important to them is not necessarily important to you. Spend money on what you value.

7) They stick to a few hobbies

Some people enjoy getting up at 4 in the morning and going for a ride on their bicycles. Some people like going to music festivals to blow off steam. People base-jump from windmills for the thrill. Everybody has hobbies, and they make us feel alive. It’s an escape from the daily routine.

It’s OK to have hobbies and it’s even OK if it is an expensive hobby. The secret is to stick to one. Juggling hobbies are expensive and time-consuming. Most will get neglected and you will end up regretting the money you spent on them. I’m especially guilty of this. From growing mushrooms to breeding fish, I can’t help myself, I have a problem.

8) They have clearly defined goals

This applies to most areas of your life. You need to know where you are going and how to measure success. If you plan to retire at 65, you should know how much you require. A simple way of doing this is by using the 4% rule. This will allow you to calculate your savings rate every month and to track your investments. If you are saving for a new car, you should know your budget. You get the drift. To help you calculate your monthly contributions for retirement, you can check out some nifty sheets here.

9) Most people aiming for FI RE has a side hustle

This is the single biggest weapon of the financially independent. Earning an extra income can help you widen the gap between your income and expenses. The perfect side hustle does not require your involvement to make money and it is scalable. You cannot become rich with a side hustle exchanging time for money.

In other words, driving for Uber will make you money, but there is a limit to the number of trips you can do per hour. Starting a mobile app for ride-sharing, on the other hand, is scalable. Taking on Uber is probably not a good idea, but I’m trying to make a point. Not everyone can program, so find something you can do and expand it successfully until it becomes something that snowballs without you.

10) Their spending reflects what is important to them

At the end of the day, you need to decide what is important to you. When we spend money on things that we do not value, we feel like we aren’t spending any money on ourselves. If you value friendships, it is OK to spend money inviting friends over for dinner. You can maybe draw the line at flying to New York for dinner. I value travelling and spending quality time with my family and friends.

Financial habits

I firmly believe that you can afford anything you value and still have enough money left to save for FI RE. The trick is being selective in your spending and financial habits. Always make sure you are striking that balance between enjoying life now while saving for your future. Most people believe that a savings rate of 15% will get you there, but I estimate it closer to 20-25%. We are presently at about 30%, so let’s see where we end up.

Be safe out there,


Quote of the week

"Don't tell me what you value. Show me your budget, and I'll tell you what you value." – Joe Biden Click To Tweet


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  1. Pamela Rakhudu

    Good day Dr Brand, will you be so kind as to share your expertise on medical aid after retirement, whether to keep it or to opt for public hospitals. I’m in a municipal environment.

    1. Post
      Hendrik Brand

      Hey Pamela,

      In my opinion, it is better to have a medical aid than rely on our public hospitals. When you are in an emergency you don’t want any hurdles. If it is something you can afford, I would keep it. Unfortunately, I’m a different kind of doctor…

  2. Pingback: Financial independence - March 2019 - Tigers on a Golden Leash

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