Our Financial Independence Retire Early (FIRE) Journey – What I’d have done differently
The other day, I was discussing personal finance and financial independence retire early (FIRE) topics with someone that is starting his Financial Independence Retire Early (FIRE) journey and he asked:
If you were to start your Financial Independence Retire Early journey today. What would you have done differently?
Technically we started our FIRE journey when a teacher of ours gave us The Secret of the Millionaire Mind to read in 2011. Our interests in personal finance and a better financial being started after reading this book. Mrs. T and I then attended the Millionaire Mind Intensive course shortly after reading the book. Thanks to this 2-day intensive course, Mrs. T and I were able to get on the same wavelength financially.
But it didn’t mean that we had no disagreements nor that we didn’t make any mistakes along our FIRE journey.
Here are 5 things I would have done differently if we were to start our FIRE journey today.
1. Not asking for a higher salary earlier
I joined a high tech company shortly after graduating from university in 2006. In the first few years, I worked as a hardware engineer and integration engineer. I was very motivated and took on a lot of challenging tasks. When the company laid off ~15% of the workforce during the financial crisis, I saw an opportunity to become a project manager and took it. I knew that project managers usually have higher salaries than integration engineers and better career advancement path. Unfortunately, I didn’t ask for a salary adjustment until 2 or 3 years later.
At the time I was severely underpaid for what I was doing.
Before asking for a salary adjustment, I researched online to find project managers’ average salary. I then listed all the accomplishments I achieved in the past 3 years as a project manager.
I approached my manager and his manager about having a salary adjustment. I also implied that if nothing happened to my salary, I would be looking for a position elsewhere.
Because I was one of the top performing project managers, within about a month of asking for a higher salary, my salary was increased by over 30%. By keeping the same level of expenses, the increase in salary really helped us to increase our savings rate.
2. Investing in mutual funds and GIC’s
This mistake I have alluded several times in other posts. Back in 2011, we were holding a large number of investments in mutual funds and GIC’s. We didn’t hold many individual dividend paying stocks or index ETFs. Our investment returns were low due to the high mutual fund MERs and the low GIC interest rates.
When we realized this important fact, we started getting out of mutual funds and GIC’s, and transferred the money toward our self-managed investment portfolio. This was one of the reasons why our dividend income increased significantly in 2012 and 2013.
What we should have done was invest in dividend-paying stocks and index ETF’s earlier (like when I started working). This also meant I would have been able to take advantage of the financial crisis downturn by buying stocks and index ETFs at very discounted prices.
3. Having the SAVE SAVE SAVE mindset
When we started our FIRE journey, I was very much in the SAVE, SAVE, SAVE, then SAVE some more mindset. On the other hand, Mrs. T was about saving while enjoying the finer things of life, like going out to a cafe to enjoy a nice cup of hot chocolate, or going to a bakery and enjoy a nice cup of coffee with some delicious bakery. I struggled for a VERY long time about spending money on these “non-necessity” items. I just wanted to save as much money so we could become financially independent quicker.
Mrs. T felt frustrated due to my always save-more mindset. She often felt guilty if she purchased something to treat herself. The two of us also had many arguments over small purchases.
Over time, I realized that we needed to enjoy the present moment too. It was nice to go to a cafe, have a nice cup of coffee with Mrs. T, and talk. This was our way of hygge. We also enjoyed having a small amount of chocolates in the afternoon when we sat down together to have hygge. I began to adopt the “finding the right balance” mindset. I realized that it was silly to argue over little thing that we could both enjoy. I also realized that we shouldn’t deprive ourselves by going into extreme save mode; we needed to enjoy the finer things in life too! Spending money isn’t the enemy!
And this is why my motto of finding your personal balance between saving for the future and enjoying the present moment.
4. Chasing yield
Chasing yield is probably the number 1 mistake many dividend growth investors make when starting out. I certainly made this mistake starting out.
When we started investing in dividend-paying stocks, I knew very little about dividend stock fundamental analysis. I knew ratios like PE, debt to book, dividend yield, but one key ratio I failed to pay attention to was the dividend payout ratio. I wasn’t able to determine whether a company’s dividend payouts were safe or not.
Because of that, I purchased the likes of Liquor Store, Just Energy, Energy Plus, Superior Plus Corp, etc. Due to unsustainable dividend payouts, all of these company cut their dividends. To make matter worse, the stock price tumbled. When we closed out these positions, we ended up with big losses.
Lessons learned here? Understand stock fundamentals and the health of dividend payments. Construct your portfolio with a mix of high yield low growth stocks and low yield high growth stocks. What the right mix will depend on your investment timeline.
5. Trading too often based on technical analysis
Early on our FIRE journey, I had taken some investment courses to learn how to trade based on technical analysis. I was trading based on techniques like channel breaking, seasonality, trend analysis, support & resistance, etc.
Did technical analysis work? Yes and no. I made some money and I lost some money.
Overall, we came out positive, but we could have made way more money.
What I learned was that to properly execute technical analysis techniques, I needed to make a lot of short-term trades. I was trading in and out of stocks almost every other day. That meant I was paying a lot of money in commissions. Because we had a small portfolio, commission cost quickly ate into our profits.
I realized that to properly execute technical analysis, you needed to be playing with a large sum of money.
Too bad it wasn’t us.
Instead of trading in and out of stocks, I should have been buying and holding the stocks.
Want some concrete examples?
I was buying and selling Alexion Pharmaceuticals at $25-30 price range. Today ALXN trades around $130. Missed out on a 4 bagger here. I should have held onto the stock.
I was buying and selling Questcor Pharmaceuticals around $35-40 range. Instead, I should have held onto the stock and get paid nicely when it got acquired by Mallinckrodt Pharmaceuticals.
I was buying and selling Direxion Daily Semiconductor Bull 3X around $6-8 range (4:1 split adjusted price). Today SOXL trades around $150. If I had held on, I would have made almost a 20 bagger from this stock. Oops!
I was buying and selling Ulta Beauty Inc at $75-85 range. Today ULTA trades at around $250. If I had held onto this stock, I would have made 3x the money from this stock.
And so on.
You get the point.
Trading too often and wasting money on commissions doesn’t make any sense for retail investors. Buy and hold can go a long way if done properly.
Learning from mistakes on the FIRE journey
These 5 mistakes were hard learned lessons for us. If I were to start our FIRE journey today, I would have made entirely different decisions. I have no doubt not making these mistakes would have expedited our FIRE journey.
Would I change a thing if I could though?
No, I wouldn’t. Because we have learned valuable lessons from these financial mistakes. These mistakes shaped who we are today as investors and FIRE seekers. We are better off because of them. We also learned not to make the same mistakes again.
If we didn’t make these mistakes, I am convinced that we would have made some other mistakes.
Learn from your mistakes and move on. Don’t dwell on your mistakes.
Dear readers, what kind of mistakes have you made along your FIRE journey? Would you have changed them if you had the chance?