Straighten out your family finances for a life on YOUR terms

If you’ve ever improved any area of your life, you’ve likely been motivated to improve another. But if straightening out your family finances seems overwhelming, then we’re here to simplify things.

Recently, I caught up with Leif Kristjansen of Five Year FIRE Escape. Leif was an overworked dad who straight-up retired in his thirties! In fact, he writes about all things FIRE (financial independence – retire early,) saving, and investing over on his blog and to his email list.

Here’s an overview of how he started and his advice for anyone who needs to straighten out their family finances before living the life of their dreams too.

What’s your favorite part of your new “FIRE” lifestyle and what drove you to adopt it?

Chasing this life is about taking control of your time. It’s not about having money, being smart or hating your job. It’s about valuing your time and spending it how you want to.

Most people spend most of their waking lives working or commuting while they have dreams they never get to live out. Like a desire to learn French or dedicate yourself to a cause that seems more meaningful than your job.

I wanted to give myself the freedom to live life the way I wanted. For me that meant spending more time with my kids while they were growing up. Work was taking me away from them so I put a lot of effort into finding a way to make that possible.

Now I can spend time how I want when I want and it’s great. I’m happier, I walk to school everyday with my kids and I’m not so tired when I’m with them so I don’t fall back on TV and other child distractors like I used to. That always made me feel guilty so I’m happy to have cut that out.

My favorite thing though, is I’m closer with my wife. We spend more time together but purposefully not too much. With our extra time we’ve come to care better for each other. For me it was hard to hear what was bugging her before it became an issue. It’s like we just have more time to talk so we are more in-tune which, believe it or not, stops a lot of fights before things boil over.

Women always say that men don’t listen but man it’s impossible to get straight answers out of you ladies. Now I have time to hear the whole story and try to dissect it to understand that I should really be cleaning the kitchen more often. 🙂

A lot of people are intimidated to change up their family finances. What can we do to get started?

Intimidated’! That’s insane. Only good things can happen if you try to get your family finances under control. If you try to retire when you are 30 and it happens when you are 40 it’s still pretty awesome. What are you missing out on’ A couple burritos or your satellite TV’ It’s worth it.

(Read: The easiest money-saving system and the end of budgets)

I think the most important thing you need to do to get started is to understand that family finances are actually really simple.

People make investing sound really complicated. The news folk are always concerned about the economy or something and what it means for some market metric but you can ignore all that complicated stuff. The most important thing by far is just how much money you save as a percentage of your income.

If your family brings in $1M and you save 5% of it you’re never going to retire. If you bring in $80K and you save 60% of it you’ll retire in no time. The actual amount doesn’t matter as much as you think – and anyone can work on that.

It might seem really simple or obvious but getting your saving under control is 100% more important than investing and taxes and all the other stuff you hear people talking about. Focus on it and you’ll do great.

(Read: The non-obvious reason that saving is so important)

You seem to be very excited about this do have any other recommendations for getting started?

Yeah totally, when you do manage to save up some money you should start investing but investing can be very simple too. I recommend investing in an index fund – which is a low-fee type of investment that just matches the overall market.

Standard and Poor’s tracks mutual fund managers performance then releases a report on it every year. The neat thing is that 84% of professionals do worse than the stock market average and basically none of the successful ones are successful consistently.  

They literally do this for a living so if they can’t pull it off it ain’t worth trying.

(Read: Can you beat the market? 6 reasons to not bother trying)

Know what’s amazing though? Buying something that will match the market average (an index fund) and beating those guys 84% of the time is incredibly easy and takes basically no thought.

So what does that mean? Do the easy thing. No one beats the average anyways with their zaney schemes so don’t get hung up on some weird complicated crap.

This is important because it removes the only real excuse you have, “it’s complicated and I don’t know  where to start”. If you save $10, put $10 in an index fund. There are a tonne of places that sell them. Exactly which one doesn’t really matter. Plus, setting up an account somewhere to buy them only takes an hour online.

Boom now you’ve started saving AND investing so you are most of the way to being free in a couple of years.

For someone who has always found saving difficult, what are some ways to make it a new habit?

How to make it a habit? Easy. I wouldn’t bother with budgets, books or complicated investments. You just need to start by thinking about saving and why you want to bother saving? Like have a motivating dream. Vision board kind of stuff.

Any time you buy anything, you need to give it a thought. Is it worth it to buy whatever is in front of you or is it better to donate that money to your dream?

It sounds simple but if you have a goal and you confront yourself constantly, you will start to save a lot? As long as you give a damn about your dream. If your dream is to spend 4 months in Thailand with your little ones but you are thinking of upgrading your car – you have to visualize yourself playing on the beach with them or sitting in your leather interior car.

This might pull on the heart strings a little too much, but it worked for me and I really like it because it’s so easy to get started. Just have a dream and think about it. I don’t know if you noticed but I really like simple things. It’s kind of my thing 🙂

(Read: Money Motivation and being the LeBron of FIRE)

And for people who are ready to try investing, where should they start?

I say start with index funds and basically stick with them forever. You can sign up at Questrade for free. It takes about an hour and you can buy index funds there. If you are American you can buy the american average by buying VBO on Questrade. If  you are Canadian buy the Canadian average which goes by the name VOO. Once you have an account setup, you stick money in it, search for the name above and buy it. It can’t be much simpler than that.

Are there ANY more advanced things you would recommend looking into?

Yeah I have one complicated thing that I think is worth it.

Real estate. Specifically rental houses. I think they are perfect for early retirement if you are willing to put in the up front work.

• The money that you get from them grows over time as rents go up.
• You can get mortgages so they are super lucrative.
• They mostly pay out in cash which is important to live off of.
• And most importantly once a house is all set up it’s super low effort. Especially if you hire a manager like I do.

The downside is that setting up a rental is painful.

• You have to pay lawyers, brokers, inspectors and realtors lots of money up front.
• Finding tenants is annoying and you will likely have to change a lot of things in your first year causing you to easily lose lots of money in year one.
• On top of that there is a lot of effort in getting a mortgage, buying a house and doing those repairs.

So one year in, it’s horrible. Five or ten years later it’s great. If you buy it at 30 and sell it at 90 its paying you back for 60 years of easy money. So I think they are great but over for those people like me who are in it for the long haul.

What’s next for you?

So now that I have more time I tend to blow a lot of it with my kids which is pretty ideal. My wife and I are planning a trip to Denmark to get away from things for a bit. We don’t have anything pressing to get away from but its still nice to get away from everything normal. You come back with kind of a reboot on your life’s points of view.

Where can people find you?

Ok so I’m pretty off the grid because I want to spend my new found time with my kids and my dreams not tweeting and stuff. The best place to find me is at www.fiveyearFIREescape.com. If you have a special question for me there is a submission thing or you can just respond to my mailing list mail to get messages directly to me.