Retire Early

Retire Early with a High Salary

How does working until you are 30 sound? Fantastic right? If you want to retire early with a high salary then read on.

What if you could get a high paying job at 18, work for just 12 years with good savings habits, invest wisely and retire early. You can achieve financial independence and retire early with a few simple steps.

This doesn’t just apply to mining but any high salary.

Worked Example

The average mining salary in Australia in 2021 is about $115,000. Let’s do some quick maths.

Example Assumptions

  • You start your career at 18 years old in the mining industry with ZERO savings
  • Average income of $115,000/year
  • After-tax take home pay of $85,000 (how good is mining)
  • Annual expenses of $35,000/year
  • Savings rate of $50,000/year
  • Each year invest the $50,000 of savings into low-cost index funds, such as ETF’s, which consistently return an average of 5% per year

Calculation

With the above assumptions, the data can be entered into my favourite FIRE calculator by Engaging Data.

With the 4% and 25x Rules of thumb applied, the above calculation will work out the FIRE age (date when you can retire), target portfolio size and safe withdrawal rate for retirement.

Result

In 12.4 years time, at the ripe old age of 30, you will be financially free with a portfolio worth approximately $936,000. You can then withdraw roughly $35,000 (4%) a year, adjusted for inflation, from the portfolio and retire.

  • 25x Rule investment portfolio required = $936,000 (adjusted for inflation)
  • 4% Rule withdrawal amount = $35,000

Congratulations, due to your high mining salary and a good saving rate you have hit your FIRE age and can stop throwing bolts for a busted-ass jumbo operator.

If your on the lookout for a high paying job then check out Jooble.

The Drawbacks

The above scenario and calculation will vary greatly on your savings rate, portfolio performance and other factors. There are also some other things to consider when using the 25x and 4% rules of thumb for a FIRE style early retirement:

  • The 4% Rule may need adjustments to ensure a safe withdrawal rate for a longer retirement period
  • If you want to leave an estate for your family then adjustments will need to be made
  • Varying allocations of portfolios will perform differently, you need to consider your portfolios bonds to share ratio

How do we offset the drawbacks?

Below are 4 options to help or negate the above drawbacks and put some more money in your pocket. You don’t need to follow all or any of them, but they do give you some alternative options once you have hit your FIRE number and are financially free. Maybe you do 1 of the options or a combination of a couple, you are only limited by your imagination.

1. Continue working?!

Yes, you heard me correctly. If you’re still enjoying your job and are not ready to retire then why not keep working? But, unlike most of your other co-workers, friends and even family you are choosing to work.

You are now financially free and can retire when you want, not when you are forced to. Assuming you have worked your way slowly up the ladder after 12 years of mining or working in a high-income role you may decide to continue compounding your investment portfolio and giving yourself some more “fat” in the system.

2. Side hustle

Startup a side hustle doing something that you are passionate about. You can start doing this while you are still working your main job and then slowly transition to or part-time work.

With the digital age we are in there are so many ways to make money online. Find something, or many things, you are good at and write them all down. I am sure there is some way you can turn something you love, into something that makes you money. Some ideas for a side hustles include:

  • Freelancer on Fiverr
  • Start a small business
  • Online surveys
  • Fulfilment by Amazon (FBA)
  • Flipping items
  • Create an online course
  • Matched betting

3. Barista FIRE

Barista FIRE is retiring early from your main job and adopting a semi-retired lifestyle supplemented with some part-time work. This part-time work can be anything you please. Something you enjoy. Something you choose. Some part-time work ideas:

  • Barista (Hence the name..)
  • Surf Coach
  • Uber Driver
  • Park Ranger
  • Airtasker jobs
  • Dog walker

4. Geographical arbitrage

The last option, and one a lot of people don’t consider, is geographical arbitrage. This is taking advantage of the difference in price in various locations both domestically and internationally. Think Sydney vs Cairns or Australia vs Thailand.

Geographical arbitrage can be used in retirement or during your working years to drastically reduce your living costs and in turn, increase that all-important savings rate.

There is lots of good information online about this topic and I have posted a couple of links below for you to have some fun with. Nomad List provides countless options of places to move to with a stack of useful information. Numbeo compares the cost of living between cities, very useful for working out what you can save. Have a look and let me know in the comments below where you would move to and how much you could save!

So what are you going to do?

I hope this article has opened your mind to some of the awesome possibilities of the FIRE Movement.

We ran a very simple scenario that can be completed in about 5 minutes. It showed a worker with a high mining salary starting his/her career, working for 12 years and retiring early at 30 years of age. The results speak for themself and show that you don’t need to work until you are 65 to retire.

You can become financially independent much earlier on in life if you are smart, strategic and have a good savings rate.

The FIRE Calculator from Engaging Data is fantastic. I recommend you bookmark it for future use. Why not plug in your current situation as best you can and see what your current FIRE age is? When can you retire and how much do you need to save? Let me know in the comments below or send me an email!

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