The Money Mustache Community

Learning, Sharing, and Teaching => Taxes => UK Tax Discussion => Topic started by: ChristmasTortoise on January 31, 2020, 09:50:09 AM

Title: FIRE on a low income
Post by: ChristmasTortoise on January 31, 2020, 09:50:09 AM
Do you think it's possible to FIRE on a low income if you make the right moves? We average around 30k joint income (plus side hussles) and just starting our FIRE journey but looking at posts on this forum it's starting to look completely impossible. Please give me some hope!
Title: Re: FIRE on a low income
Post by: Hirondelle on January 31, 2020, 09:56:00 AM
Hi ChristmasTortoise,

It's certainly possible to FIRE on a low income! The forum actually has a fair number of low income posters. You can find us in the somewhat quiet "Low income journal" and there's also a "below median income race to 100% FI" thread.

On top of that, if you're still young you may very likely increase your income over the years. Maybe not to 200k+, but a joint income of 40-50k would already help a great deal in your case.

For reference: I earn around 30k/year (single person, no kids, Europe) and save about 60% of my post-tax income.
Title: Re: FIRE on a low income
Post by: APowers on January 31, 2020, 10:25:04 AM
Absolutely. It's not always *easy*, but definitely possible. Definitely check out the low income journal and the below median income race to FI thread. Find some of the people who post in those threads and browse through their post history.

My income average has been below $30k on average over the last 8-10 years, and I'm almost there. Keeping your expenses low is even *more* effective when your income is low, and any boost to your income will make such a huge difference!
Title: Re: FIRE on a low income
Post by: Manchester on February 04, 2020, 08:16:36 AM
Of course it's possible, it's just harder.  Reducing unnecessary spending is the most important aspect of FIRE.  Having a higher income just increases that speed you get there. 

If you're young, you will have the ability to raise your income as well.  It depends a lot on your situation.
Title: Re: FIRE on a low income
Post by: vand on February 04, 2020, 08:35:56 AM
I'm reluctant to say "of course" but of course it's possible.

That said, I don't think it can be denied that if you were to study those actively pursuing FI/RE as a whole you would find that their incomes are considerably above mean/median levels, and for most of us it is still a fairly long and hard slog, so it can only be longer and harder still for those on average or below average incomes. I earn a well above "average" UK salary, but on these boards I quite often feel like an underachiever when I read how well others are doing.

Jakob Fisker claims (and I well believe him) to get by on $7k pa. That said, he is able to do so because he's a not only frugal, but intelligent and resourceful. These qualities can drive down your living cost to very low figures.

Personally with a paid off home and no dependents I could live on $7kpa. I suspect most people could if they were forced to, after a period of adjustment. But I would find it restricting, and the point of FI is the opposite of that, it's to enjoy financial freedom, not impose financial restraint.

IMO if you desire financial freedom then you should seek to increase your income once you have your spending habits sorted out. That may not be what you want to hear if you are stuck on a lower salary, but the market rewards hard work and productivity and there is no reason why if you do not work hard and apply yourself you can become productive enough to earn an above average wage. If you have above average goals then you should seek to be an above average employee. Personal development is the key.
Title: Re: FIRE on a low income
Post by: daverobev on February 05, 2020, 08:17:20 AM
Wonder if OP'll be back?

Anyway, yes, just use your ISA and pension room. It's all about %age savings. If you can save 10k a year, and I know that's hard, it will compound. You will be able to put all of it in a tax shelter either getting a big leg up by not paying tax on it now and having some access tax free when you're 58 (or whenever), OR putting after-tax money into an ISA where you'll never pay tax on it again.

The UK is hugely generous, and can be extremely low cost of living. Learn to eat cheaply, etc, etc and you're away.
Title: Re: FIRE on a low income
Post by: ChristmasTortoise on February 05, 2020, 02:55:22 PM
Hey! Sorry I didn't realise I wouldn't get any notifications for this... newbie mistake.

We are fairly frugal already but with 3 dependants (one is only a small babe and the other 2 home educated) we have their associated expenses.

I am on maternity leave at the moment and my husband's hours/days/useless management make me returning rather tricky for the time being so I am making money through MB and LR casino (going rather well actually.  We don't count this income as certain by any means but use it as surplus for saving.

We are currently renting but hoping to buy soon - paying someone else's mortgage really sucks!

I've been looking at SIPPs (vanguard fees sound good) and husband already has a NEST thing started and we've opened up a S&S ISA to play with too. Any other tips very much appreciated :)
Title: Re: FIRE on a low income
Post by: Manchester on February 06, 2020, 02:40:22 AM
Perhaps you could post a Case Study?  That way you'll get tons of advice on how you could cut costs etc. 

I definitely think saving to buy a house is a good step.  If you've never owned a house before there are loads of really good government initiatives to help you on your way and boost the money you have to put towards a deposit.  I moved into my house around 4 years ago.  Since then, it's appreciated in value by around 80-100k.  Brilliant for my N/W, especially if you're happy to look into equity releases.
Title: Re: FIRE on a low income
Post by: TacheTastic on February 06, 2020, 02:13:40 PM
I agree it will be possible, but probably not as early as for someone on a higher income.

I just started in a job earning over 20k for the first time in nearly 8 years. I think the thing I have learned so far about this journey is that you have to have quality of life if you are going to stick to it. Cutting things so tight that you are scared to ever spend money can really wear you down and you stop enjoying your life. If your journey to FI is going to take 25 years, don't put off your life until RE. Prioritise where your money can really bring you enjoyment, but do go on the camping holiday, do spend the money to get to the park or the beach, buy a box of ice creams to keep in the freezer for summer. Don't deny yourself everything with a plan that you will make it up to yourself when you retire.

Title: Re: FIRE on a low income
Post by: shelivesthedream on February 06, 2020, 04:05:26 PM
I doubt we're going to FIRE, really. We just don't make enough, don't have great employment prospects, and don't have the sense of hustle that a lot of people on this forum seem to have. We're doing well at expenses, but suck at income.

However, there's so much middle ground between retiring at thirty with a million bucks in the bank and working eighty hours a week until you die. Frugality gives you choices, and it sounds like you're making some of those choices right now: to have one of you stay home, to homeschool... You're downshifting now rather than front-loading your working life.

It's hard to FIRE on a low income. Not impossible, no, but unlikely to be easy and unlikely to be really early. But it is possible to be financially secure on a low income and to give yourself the financial space to make choices about your lifestyle. Our years of diligent saving thus far mean I can afford to take a long maternity leave, my husband quit his job last year (my journal from then is a doozy!) with nothing lined up, we don't have any debt hanging over us... You can get a lot of value out of Mustachianism well before you can afford to go full FIRE.
Title: Re: FIRE on a low income
Post by: vand on February 07, 2020, 02:26:55 AM
The maths is fairly simple. If you can save 33% of your income you can become FI in 25 years. If you save 25% of you income you can become FI in about 33 years (I like the palindromic nature of those number btw).

So.. on 30k.. can you save 25%-33% of your income? It's still a very long hard slog if you do.

Say you are managing to live on 24k andsquirrel away 6k/pa for a 20% savings rate.. that will mean you reach FI in 40 years. (20% should be the minimum saving rate for just about everybody, not just those pursuing FI/RE).

If you can't reach those savings rates then the obvious solution is to increase your household income by having 2 incomes. If you can add a 2nd income of 25k then your household income jumps to 55k. You living expenses might jump to 30k, but now you have a 45% saving rate. Your journey time just got cut in half. Add in a bit of career progression while keeping a firm lid on lifestyle inflation and you could be staring at a 15 year journey...

So IMO if you are serious about FI then you need to have either one substaintally above-average income or two incomes, and unless OH is a high flyer you can't be a stay at home parent. That's the choice that people pursuing this sort of thing face.

Title: Re: FIRE on a low income
Post by: Playing with Fire UK on February 07, 2020, 03:00:13 AM
You can FIRE fairly quickly starting on a low income if you are open to working/moving to increase your income. You can also live really well doing work that you love and be financially secure on a low income. If you are on a low income doing time-consuming work that you dislike with no ability or inclination to get higher paid work then you have a problem.

Have a steady wage from work that doesn't Dementor the life and energy out of you gives you a real advantage in side hussling.
Title: Re: FIRE on a low income
Post by: vand on February 07, 2020, 03:45:24 AM
I've been looking at SIPPs (vanguard fees sound good) and husband already has a NEST thing started and we've opened up a S&S ISA to play with too. Any other tips very much appreciated :)

In your situation I'm going to say: Forget about the regular ISA for now and concentrate on pension, which will be far more tax efficient and get you where you want to be that little bit sooner. Unless you forsee a situtation where you are comfortably retired before 57 then there is no reason to think about ISA. You might want to look at a Lifetime ISA though, but be aware of the downsides too.
Title: Re: FIRE on a low income
Post by: ChristmasTortoise on February 13, 2020, 05:18:24 AM
Hi again!

I've just seen the suggestion to post a Case Study and I think I'll do just that once I get an extra 5 mins of peace!

TacheTastic me and DH are natural savers so cutting corners to spend less is definitely our forte but we're also happy to spend enough to get us by comfortably! We don't eat out a lot and have a very modest takeaway/eating out budget of 25 a month - my cooking is way better anyway :) Our rent is below market value (though we pay for it in not having fancy decor etc) and we keep the house fairly cool because we get too sweaty otherwise but everything else like nice days out during term time which are cheaper we still do plenty of.

shelivesthedream Yes I understand - we don't panic too much about changing jobs, redundancy etc etc because we know how to watch our spending and have a little cushion to get us by for a few months if it all goes tits up. Being on maternity leave and not wanting to put the kids in childcare is of course my downfall but things change so quick I won't get myself tied up about it just now. Regarding home education its a double edged sword I think... like I say it restricts my earning potential for now but brings us so much joy being able to be around much more with the little ones and affords us opportunities to learn stuff outside the scope of 'normal' which of course is restricted for most kids spending a lot of time is classrooms. Also term time holidays and days out! (sorry went off somewhere)

Vand It's only been a couple of months since I started really tracking cashflow but I think not including side hussles we are saving minimum of 700pcm out of a possible 3100ish so over 20%. I have made around 4k since end of September through MB and casino so an average of 1k per month. including those figures it is more like 40% but I don't take that into account as it is not certain by any means.

Unfortunately paid childcare is not something we're willing to consider. I have nothing against it but it's not something that would work for our lifestyle. As I explained above, my husband's job does not make it easy to fit my work in - I work as a care assistant doing nights and he spends 3 and a half hours commuting each day for a pretty standard job with not extraordinary pay. We are currently looking into him changing his job for something closer with lower pay which will allow me to go to work and have time to learn new skills for something better paid.



Title: Re: FIRE on a low income
Post by: TacheTastic on February 13, 2020, 09:48:01 AM

Unfortunately paid childcare is not something we're willing to consider. I have nothing against it but it's not something that would work for our lifestyle. As I explained above, my husband's job does not make it easy to fit my work in - I work as a care assistant doing nights and he spends 3 and a half hours commuting each day for a pretty standard job with not extraordinary pay. We are currently looking into him changing his job for something closer with lower pay which will allow me to go to work and have time to learn new skills for something better paid.

Does it make more sense to move nearer to your husband's job? What is the housing situation near his work?

Does it make sense for you to upskill for work now? If you will be homeschooling for the next decade, is this the right financial decision? (I am taking the personal out of this right now, I know how rewarding and beneficial education can be.) The world may change a lot in 10 years and you may want a different path. I work in healthcare so I know that you will be better rewarded by picking the right employer over becoming a more skilled carer.

Can your husband get a better job? If he is the one currently in the work-market, does it make sense for him to up-skill? Would it make sense for you to swap and him stay home while you work?

I am not playing devil's advocate, I honestly want you to consider these options. They aren't meant unkindly, more as a reminder as we often can't see the wood for the trees when we are caught up in our day-to-day life.
Title: Re: FIRE on a low income
Post by: ChristmasTortoise on February 13, 2020, 12:23:33 PM
Thank you for making me consider things from a practical standpoint!

Believe it or not husband's work is only 15 miles away but as he does not currently drive he relies on public transport which is not only extortionate but also unreliable and slow! Housing wise the prices are similar to where we are now so if we were paying market rent could set us back an extra 300-400 per month. It would also mean more driving for me as the little ones have lots of activities local to us.

Home educating is not as restrictive as that and I was in paid work until just before the birth of the smallest one. My plan is not to upskill in the healthcare industry but something more techy ( I am self teaching software design and programming currently- this is very slow though because of the little time I have around caring for the children).

Husband has worked in a few jobs but is cobbler/key cutter/ phone fixer for a rather well known high street chain.  There are other issues as well as the commute that are making him really miserable there so I think a move will be on the cards sooner rather than later - just need to find a suitable job.

Unfortunately due to the not currently driving situation it would make life difficult for husband to stay at home with little ones - especially the smallest who will be feeding for the (rather long) foreseeable future.
Title: Re: FIRE on a low income
Post by: Playing with Fire UK on February 14, 2020, 12:56:11 AM
Would a bike (maybe an electric bike) help with the commute? Three and a half hours a day for 15 miles is just obscene. Think about the average hourly wage including commuting when looking at other job or housing situation.
Title: Re: FIRE on a low income
Post by: shelivesthedream on February 14, 2020, 01:01:52 AM
That is an absolutely bananacrackers commute for such a job. Are you SURE the driving would really be a problem if he were a SAHD? Surely you could have an activity reshuffle to go for things which are local/easily accessible.
Title: Re: FIRE on a low income
Post by: vand on February 14, 2020, 07:25:37 AM
Well my impression is that you have backed yourselves into a rather unhappy corner because of your acceptance of the way things are and your unwillingless to change things. I don't think you need financial advice as much as some life advice which is this: things for you aren't going to change - ever - until *you* make the change.

With this mindset, you may as well jus forget about FI. It's a pipedream. You need to have a more expansive mindset. Do what needs doing. Commit to making the hard choices. Make investments, not just financially, but in yourselves.

Husband doesnt drive? Thats not a random accident, but it is not unsolvable wither; get driving lessons. Nothing complicated about that, it just takes the investment in yourselves.

Need extra cash to pay for that? Get a secondary income.

I am not trying to be discouraging, but the world is full of people who won't help themselves, yet feel resentful when they don't get ahead in life. Life doesn't owe you anything; it is what you make of it.  Most people even on above average earnings will never reach FI. That is how not-conventional it is, so if you want FI you have to be willing to do what it takes to reach FI.  A more positive way to frame your question is not "now can I reach FI on low income" but "how can I change what needs changing, including income, to reach FI."
Title: Re: FIRE on a low income
Post by: PhilB on February 14, 2020, 12:10:25 PM
Husband doesnt drive? Thats not a random accident, but it is not unsolvable wither; get driving lessons. Nothing complicated about that, it just takes the investment in yourselves.

Perhaps a little harsh.  It may be a medical issue currently preventing him from drive, or he may have lost his license (rather less worthy of sympathy).

As far as the overall thrust of vand's message though, I do agree that FIRE isn't generally easily come by for anyone, particularly if you are starting from a low income.  Like Keyser Soze you need the will to do what others won't.
Title: Re: FIRE on a low income
Post by: Kwill on February 14, 2020, 12:33:18 PM
With the commute, I wonder if there might be ways of shortening it by using a bicycle for part of the way, for example if it is so long because there's an awkward connection between a bus and a train or between two buses.

It sounds like a difficult situation. You're sure to get some good advice here, though. Even if FIRE itself turns out not to be attainable in the near future, the techniques and habits that are aimed at FIRE will also help you to build a financial safety cushion that will allow you more stability and more freedom to navigate challenges and opportunities in the future. Good luck!
Title: Re: FIRE on a low income
Post by: Anette on February 14, 2020, 02:06:45 PM
You sound like you are doing really well with the money you earn/ have.

I like Kwills ideas about the commute. My husband basically has a four hour commute each work day, no home office days allowed. It's 50km and two times to switch ( pretty unreliable) trains. At least two thirds of the year he takes the bike for the first stretch (12 km). This is mainly for exercise though, and it saves a little money.

We are not even considering a second car as a car is very expensive per km, there are always tons of Staus (traffic jams) and my husband enjoys reading of dozing on the train.
His earnings make the commute worth while and we are considering moving closer to his work now we only have one child left at home.
Having five children myself it sounds like you are doing this very well. We lived mostly on one income ( me working part time as a nurse, my husband doing random jobs) for the first years of our marriage until we had three children.
Experiences with each other were always a priority for us and we didn't become financially wiser until about 10 years ago ( our youngest being 6 at that time). I found this website three years ago and we started saving more. We are not low income now but because we started so late you will likely be way ahead of us by the time you turn 50 as we will this year.
I think people shouldn't underestimate how much time and energy three little kids cost :)
Also since you are in the UK your healthcare should be excellent and unlike Americans you will not have to worry about that. That is huge.
We are in Germany and for health care it is almost the same. So we are considering downshifting latest in five years to working very part time which is another advantage in Europe: I can work as little or as much as I'd like and still have all the benefits. 
One diadvantage is earning less than in the States, though.
Title: Re: FIRE on a low income
Post by: shelivesthedream on February 14, 2020, 03:11:30 PM
Like many others, I think vand is being harsh but with a good point. Mustachianism is substantially about agency - recognising that you have the power to make choices and that you're not helpless in the face of life happening to you. Every so often I have a bit of a tantrum about how unfaaaaaiiiiir it is that we can't save more money but in reality I know it's because we've chosen not to work towards higher-paid careers so that we can live a lower key life now. We've made our (comfortable!) bed and we will lie in it. The ley to Mustachian success on a low income is to either recognise that you are choosing to have that low income for the other immediate benefits it offers you, or to decide that's not for you and to take concrete actions to change your situation. Either is fine, but it's your choice and your responsibility.
Title: Re: FIRE on a low income
Post by: Playing with Fire UK on February 15, 2020, 12:09:39 AM
With the commute, I wonder if there might be ways of shortening it by using a bicycle for part of the way, for example if it is so long because there's an awkward connection between a bus and a train or between two buses.

This is really clever. It'll probably take some time to work out but overall could be a great time saver with less investment in fitness than cycling the whole way.
Title: Re: FIRE on a low income
Post by: TacheTastic on February 15, 2020, 05:17:37 AM
Wow, thanks for the extra info ChristmasTortoise. I think what you actually have is some great opportunities ahead of you.

It sounds like husband isn't in a fantastically financially-rewarding job. (I may be wrong, but I never imagined key-cutting paid as well as stock-broking?) This is an opportunity as there is only one direction for his hourly-rate, and that's up! Can he up-skill himself? Maybe night school? Maybe he takes a year off to re-train? Maybe he uses his bus/train time to study? So many opportunities! :)

Your idea for teaching yourself software design sounds great, especially if you can fit this around the littlies. I have no idea how much time/energy home-schooling takes. I have none of my own but find babysitting for my friend's 3 completely exhausting! If you do care work, can you take agency night shifts in a hospital? I know quite a few mums who do this and then have the days free with the kids after a nap, and the money is pretty good.

15 miles by electric bike is easily less than an hour. Even by regular bike this should be easy to do in an hour. My commute is about that, and I often take the train most of the way and then do the last 3 miles by bike.

I appreciate that there has been some very frank advice in this thread, but I think the advice can still be valid if you can see to the care that is behind it. I backed myself into a much worse corner a few years back, but I chose to work my butt off with an access course followed by a degree while working full time the whole 4 years, and I have dug myself a whole new (much more financially viable) direction. You guys are survivors and you can do it too.