#6 The Meaning of FIRE!

fire getting started six figure guitar teacher Aug 18, 2021
By The Six Figure Guitar Teacher
I love the concept of “Financial Independence’, a topic that should be taught in school but sadly isn’t. Usually the only place to learn more about Financial Independence (sometimes called Financial Freedom or Early Retirement) is by doing your own research in books. Luckily for you the Six Figure Guitar Teacher is going to share all of his wisdom with you.
For older generations the idea of retirement usually followed a stereotypical path of turning 65, leaving the workforce to buy a caravan and doing a lap of Australia before settling into a motor home or retirement village to see out their days. The richer ones might have got a golf club membership or retire to a country farm but the vast majority of people get stuck in nursing homes just waiting out the rest of their days instead of truly enjoying the retirement they worked for.

While the idea of working until you’re 65 and then retiring on a government pension seemed like the dream, the stark reality is that our government here in Australia moved the goal posts and changed the rules about pensions so that many people worked their whole life and put little into their savings only to find themselves a few years out of retirement knowing they'll only have enough money to last a few years.

Now I don’t know about you but my idea of retirement doesn’t include eating dry cat food because I can’t afford a to buy proper food. 

It's a real shame because once the reality of the situation sits in people just give up on life. You can’t even blame the workers either. How motivated would you be if you worked 9-5 for five days a week, 48 weeks a year for a period of 45 years only to discover al you have is a government pension and need to live off of a bare minimum. It’s a psychological grind just as much as it can be physically delibatating, and it’s no wonder they let themselves go as soon as they hit retirement age.

But as Six Figure Guitar Teachers we want to reject this definition of retirement (and the sad situation it puts the majority of the population in) and put forward our own definition: Retirement is earning the freedom to enjoy a balanced lifestyle of our own choosing without being a slave to the 9-5 grind. You don’t have to quit working all together, in fact most of us will keep working to some capacity. Instead we get to choose our own hours and indeed, our own schedule, doing what we love and enjoy so that it never feels like work.

It basically boils down to this:

  • True Financial Freedom is having enough money in your Superannuation/401k and Investment Portfolio to provide you with a return greater than your living expenses so you can stop working right now and still be set for the rest of your life.
  • Financial Independence (and early retirement) is where your investments might have you covered for a good percentage (if not all) of your living expenses so that you can work a more casual schedule doing specific work you enjoy (or taking hobbies like playing guitar or doing YouTube) and working just the hours you need to break even or go into a surplus that keeps feeding your investment accounts.

When I was earning $120,000 from teaching guitar (I was single back then) I was only teaching for around 20 hours a week and able to put a significant amount of it in the bank. I did a calculation where If I kept earning $120,000 and was able to put $60,000 a year into investments (that's over $5K a month) that I would be able to buy a house outright in less than 10 years with no assistance from the bank.

If I earn $120,000 a year as a single:

  • Less $29,467 on Tax ($90,533)
  • Less $6,000 on Groceries ($84,533)
  • Less $3500 Fuel and Car Expenses ($81,033)
  • Gym Memberships $300 ($80,733)
  • Entertainment $2000 ($78,733)
  • Music Equipment & Band Expenses $2000 ($76,733)
  • Travel and Holiday $5,000 ($71,733)
  • $5000 Misc Expenses  $5000 - like clothing, eating out, birthday presents ($66,733)

I still have $66,733 left over. Now I could easily spend a lot more money on my lifestyle but I am focussed on my goal of Financial Freedom and don’t spend money on anything unnecessary.

So If I had $71,733 and put that into my investment account (instead of a bank account with a lower interest rate) without even worrying about the compound interest I would only have to work 5 years to by a single bedroom unit outright without any form of loan from the bank. I would only have to work 7.5 years to buy a decent sized family home outright or to have it paid off should I get help from a bank. 

By turning up the income and cutting the spending You can start doing things like buying houses and paying them off in less than a decade instead of the conventional means of a 40 year mortgage.

Now at this point I could have just kept teaching 5 days a week for 4 hours each (or 3 days a week for around 6-8 hours each) and enjoyed having my entire day free, making every weekend a 4 day weekend and just playing guitar, video games, reading books, travelling the wilderness or whatever the hell I wanted. But I am way too ambitious and decided to keep working 40 hour weeks so that I could grow my business. That $120,000 quickly became $200,000, and then kept on going up by $100,000 or so every year as I hired more teachers, kept growing my business and expanded my empire. 

I'll make a quick side note that when I was earning $200,000 there was a lot less profit because the Tax Man (the arch nemesis of The Six Figure Guitar Teacher) took quite a significant chunk out of it. Which means I had the option of scaling back down to $100,000 in order to not get bent over the barrel, or to keep working harder and building the machine bigger so that the Tax Man having his way with my money against my consent was worth it.

If I wanted to today I could just focus on running my teaching business and get away with only working 20 hours or less. All the other projects I’m involved in like Guitar Ninjas, this Six Figure Guitar Teacher program, Topmusic Guitar make up another 20-40 hours per week are just things I do because I enjoy them.

We havn’t even accounted for the money and income coming in from my partner into any of the equations. If you have a two income family (with our without kids) and you are both on the same page with the FIRE movement, you can make and save some serious cheddar and get very far in life fincancially very quickly!

Anyway, I digress.

The idea behind FIRE (Financial Independence, Retire Early) is that you trim down your living expenses so that you are only living on 25% of your income.

  • You build an investment portfolio that covers 75% of the salary you were making on the 9-5 treadmill.
  • Your savings and some optional part time work or side hustles continue to generate the other 25% you need to live reliably...forever.

So what do you do with all that free time? It’s entirely up to you to spend it how you want to and to do the things that you enjoy doing. This is what I do.

  • Use the time to write books and create course materials
  • Use the time to create content for my YouTube channels and social media
  • Play guitar whenever I want
  • Go on month long holidays overseas (at least pre covid we did)
  • Spend time with my family
  • Spending time on whatever I wanted to like fishing, hiking, camping, playing lots of video games or whatever the hell I wanted to do.

There are lots of benefits to retiring early, but the biggest one is getting to live in the now and experience life where you’re at. You don’t need to wait until 65 to do that big trip around the country holiday where your body is too old to make the most of it, or have to compromise on what you can afford because it doesn’t fit the budget. Instead we get to experience the best years of our lives while our minds and bodies are at their best, and keep doing all the fun stuff forever.

You can grind away for another 20-40 years and have nothing to show for it, or you can put your foot down, say enough is enough and start working towards Financial Independence so that you can retire in 7-10 years and have the rest of your life to do what you want...

I know what I’d be doing.

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