I came across this FIRE (Financial Independence Early Retirement) movement inspired article today. It purports to show how some Australians are escaping the spend/debt cycle to set themselves up for a stress-free retirement.
Unfortunately, the author doesn’t quite grasp the basics…
Let’s start with what is happening to Australians spending habits:
“Australia’s ratio of household debt to income more than doubled between 1995 and 2017, rising from 95 per cent to 216 per cent, according to OECD Data. This means if the average person earns $80,000 net, they’re spending $169,600 per year.”
Saying the average person is spending double their income each year is a bonkers take on the data. Maybe people are taking on debt to buy a family home or investment properties? This does NOT mean the “average” person is spending double what they earn each year.
The author moves on to show some tips and tricks for saving money. You can’t write a FIRE story without mentioning coffee can you? Interviewee Peter offers this tip:
“We use a soda stream instead of buying bottles of mineral water and have a simple coffee machine at work and home, saving us $10 a day on coffee, or $10,000 a year,” he adds.”
I like the returns on that magical multiples savings strategy!*
The news media, social media and blogosphere are full of junk articles and junk financial math. Do yourself a favour and read this piece at Early Retirement Now, to make sure you aren’t making expensive or harmful mistakes when planning your financial affairs.
*I assume the journalist / copy editor butchered this quote, and Peter knows what he is doing.
Photo by Elvis Bekmanis on Unsplash