“I’m focusing on the ‘financial independence’ part of FIRE - and less on ‘retire early’”

A reader tells us how he is using the FIRE  (Financial Independence, Retire Early) (opens in new tab) movement

David Scothern has tweaked FIRE principles to suit his annual income of £34,000. The 38-year-old says he is on track to achieve financial independence at 40 after building up a stocks and shares ISA and investing in buy-to-let properties - both alongside a pension and emergency savings.

“I can’t imagine downing tools completely,” says the 38-year-old mortgage adviser from Sheffield. “Meeting my financial targets means I have the power to say no to a job, or long hours. I want the freedom to choose to work or take a break, or travel for a few months.”

To achieve financial independence at 40, David says he will need to buy a further two buy-to-let properties next year to produce an £18,000 annual income. He bought his first buy-to-let property in 2020 with a friend. “We have gone into it 50-50 so share the risk and responsibility. We bought a three-bedroom terrace for £124,000 in a trendy up-and-coming area of Sheffield that we think will appeal to families as we want to attract long-term tenants. We suspect property prices will rise so hope to sell at a profit in the future. However, if that doesn’t happen we will continue to rent it out.”

Add to your workplace pension 

Meanwhile, he has £50,000 in his workplace pension (opens in new tab), £42,000 in his stocks and shares ISA and £5,000 in Premium Bonds. He makes an 8% contribution to his pension (opens in new tab) and saves around £1,200 a month between his ISA and Premium Bonds (opens in new tab). “It depends where I am with my goals. If I want to save extra for the deposit towards the second buy-to-let I put it in the Premium Bonds. If I want to ensure I am using up the maximum annual allowance for my ISA (currently £20,000) I transfer as much into that - that’s something I did recently.”

He currently prefers to invest as much as possible in his ISA rather than overpay his mortgage. “My current mortgage deal is 0.1% so it’s an incredibly cheap debt; there is no point overpaying it right now. I prefer to put my money into my stocks and shares ISA.”

He is a careful investor. “I have bought shares in the company I work for as I was able to buy them cheaply as part of an employee scheme. I also invest in funds that pay dividends but reinvest those dividends as I want to build up my ISA for many years beyond the age of 40.”

He recommends taking time out to financially educate yourself. “ A colleague told me about the book Rich Dad, Poor Dad [by Robert Kiyosaki] (opens in new tab) which blew my mind as it put into words issues I had been dwelling on. I started devouring finance books. Do not start investing until you understand what to do. Years ago I tried day trading and lost money because I didn’t know what I was doing.” 

Cut down on spending

He also advises cutting down on spending (opens in new tab) - rather than cutting out all spending. “I halved my utility bills and cut down on television packages five years ago. I now eat out at restaurants once a week rather than three times a week as I used to. You still have to live your life!”