Reader Case Study: High Income, Low Net Worth

It is time for another FIRE case study! Today’s case is from a reader from country NSW who contacted me a few weeks ago. I found his story so compelling that I asked him if he would let me use it for a case study. I’m sure you will find today’s case really interesting, there are plenty of lessons we can learn from this story!

Note to readers: If you would like your own case study, please get in touch with me! * 

Now let’s get straight into the case study!

“I felt as if I was never getting ahead”

Meet CashFlowRich, a 31-year-old divorcee and dad of two young kids who stay with him on the weekends. CashFlowRich lives in regional NSW and has worked in the commodity sector for over a decade. The salaries in his industry are high and CashFlowRich always thought of himself as “financially independent” – until he found the FI community. Once he started learning about FIRE, he quickly realised that he was cash flow rich but asset poor.

I felt as if I was never getting ahead. I have always been good with numbers, yet I knew there was more to this ‘journey’ we all find ourselves on. I’ve followed the very traditional approach to the middle-class life, worked hard, have secured a great paying job and up until recently, figured this was just ‘what you do’.” CashFlowRich says that he has made plenty of mistakes over the years. He lost $100k in the stock market (before the GFC!) and $50k in real estate. He also names lifestyle creep and buying new cars as contributing factors.

When CashFlowRich discovered the FI community, everything changed for him. He turned his focus on his savings rate and his investment strategy. Since the start of last year, he has paid off over $80k in debt and built a small ETF portfolio. Have a look at the screenshot he sent me (Note: this does not include his Super balance):

Impressive, right?

CashFlowRich wants to reach Flamingo FI as quickly as possible. He wants to be able to spend more quality time with his kids and friends. He doesn’t see himself not working at all, but he wants to be able to work by choice from time to time. In addition, CashFlowRich wants to have time to travel, meet new people and incorporate music into his life. Eventually, he wants to reach FIRE and draw an annual income of $50,000 from his investments.

When will CashFlowRich hit Flamingo FI and FIRE?

The numbers

Let’s have a look at CashFlowRich’s numbers:

Annual Salary: $205,000 (gross) = $135,600 (net)
Annual Bonus (net): Approx. $15,000
Annual employer Super contributions: $19,440 (gross) = $16,524 net (after Super tax – 15%)
Total after-tax income (incl. Super) per year: $167,124

ETFs (Vanguard index funds): $38,700
P2P lending: $4,100
Super: $192,000
Cash: $12,000
Total: $246,800



Well, first of all, I have to say that CashFlowRich has done really well for himself by paying off his debt! Well done, this is a great accomplishment! He is also in a great position to progress towards FI quickly now that he is debt-free. His income is more than twice the national average and his overheads are low. Let’s get to work!

Let’s start with CashFlowRich’s expenses. Looking at his monthly spending, there is nothing too crazy for me to point out. It looks like he has already optimised most of his spending. There are three areas for potential budget improvements (CashFlowRich pointed out most of these himself before I even got a chance to do so – he really is on top of his game!):

  • One thing that does jump out at me is CashFlowRich’s rent, which seems pretty high considering he lives in a regional area. He currently pays $435 for a 3 bedroom house with 2 bathrooms. He is exploring the idea of moving into a 2 bed, 1 bath unit for $300 per week. I think this is a smart idea and he should definitely move to a smaller place as soon as possible.** He only has his children over on the weekends, so a 2 bedroom unit would likely be sufficient for his and his children’s needs.
  • Groceries: CashFlowRich currently spends $600 per month on groceries. This seems quite high to me considering he only has to provide food for his children on the weekends. I suggest that he tries to cut this down to $500 a month. As a comparison: Mr. Flamingo and I spend about $400 a month on groceries and I would say that we eat very well.
  • Private health insurance: CashFlowRich is considering dropping his extras cover as he hardly ever uses any extras. This would drop the price of his cover to $225 per month. I agree that this is probably the best course of action. On his income, he can easily afford to pay for dental treatments and other extras himself if needed.

These three budget improvements bring CashFlowRich’s monthly spending down to $5,490 a month ($65,880 annually):

This leaves a whopping $101,244 per annum (including Super) that he can save and invest. This is a fantastic number!

A word on CashFlowRich’s investments:
I suggest that he moves the $12,000 he currently holds in cash into his ETF portfolio. I am not sure why he invests in P2P lending, I assume he wants to diversify his investments. The downside of this approach is that he will have to pay income tax on the P2P lending returns each year while he is still in the highest tax bracket. I would suggest moving the money that is currently invested in P2P lending over into his ETF portfolio.
I don’t know how his Super is invested, but he should make sure it is invested in a low-fee fund. Since he is so young still, the growth option his fund offers might be a good choice (as long as it is low-cost).

CashFlowRich’s path to FIRE

CashFlowRich wants to withdraw $50,000 per year from his portfolio. According to the 4% rule, this FI number is $1,250,000 ($50,000 x 25). Now let’s have a look at his path to FIRE. Note: All the calculations below assume a 7% inflation-adjusted return per annum.

So how long will it take him to reach FIRE the traditional way?

7 years! Not bad at all!

In this scenario, CashFlowRich would jump from his very high income to zero:


But it might not be necessary for him to continue working full-time until he reaches FIRE. CashFlowRich doesn’t want to retire from all work, he just wants more flexibility and more free time to follow his passions and spend time with his children. So Flamingo FI might be the perfect choice for him.

A quick recap of Flamingo FI for new readers: With Flamingo FI, you can cut your accumulation phase short. You get to quit your full-time job after just a few years of saving hard – when you have about half your desired FIRE nest egg. You can then semi-retire while your nest egg keeps growing in the background. Once it has doubled (which should be after around 10 years if you manage to achieve 7% inflation-adjusted returns), you have reached FIRE and can stop working altogether. You can read all about Flamingo FI here and here.

Let’s have a look at his path to FIRE with Flamingo FI:

Wow! 3 years! CashFlowRich is able to semi-retire at the ripe old age of 34! He would then have to keep working part-time for 10 years. Considering his high income potential, he only needs to earn 1/4 of his previous full-time income during this phase. By the end of the semi-retirement phase, his Flamingo FI nest egg should have grown into his FIRE nest egg. Now, part-time work becomes optional for him. Notes: 1. The $4,038 under “Savings” in his semi-retirement phase are after-tax Super contributions from his $50,000 job. 2. I used the pre-tax number for his income in semi-retirement.

This is what his path with Flamingo FI would look like from an income perspective:

With Flamingo FI, CashFlowRich could casually stroll down the income ladder.

And we’re done! CashFlowRich has two great choices to choose from. Should he keep working full-time until he reaches FIRE or downshift in just 3 short years and take the Flamingo FI route? Only he can answer this questions. No matter what he does, he will be able to quit his full-time job in his 30s! This case really shows that, even if you make a lot of mistakes, it is always possible to turn things around! Of course, CashFlowRich is on a spectacular income, but the math is the same for everyone (it might just take a few years longer on a lower income).

Congratulations CashFlowRich, you’ll be able to retire in no time at all! ?


* Please keep in mind that we are not financial advisors and do not offer financial advice. Anything we write about or recommend on this site should be seen as a suggestion, not advice. If you decide to implement any suggestions we make, you are responsible for this decision and the results. 

** Since I started preparing this case study, CashFlowRich has actually moved into a smaller unit. Well done!


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8 thoughts on “Reader Case Study: High Income, Low Net Worth”

  1. I love a good case study. Well done CFR with all that you have achieved.
    Quick question; why do you suggest he moves the $12k cash into the share market? What if he became ill and needed 3 months off work? I’d like to personally have a small cash buffer behind me for those uncertain times. I’m interested to hear why you don’t suggest this?

    • Great question, Miss Balance! There are two reasons:
      1) Something I didn’t mention in the case study: CFR has worked in his industry for a long time and can get his long service leave paid out if needed. This is a substantial amount of money that would cover his living expenses for a long time.
      2) His cash flow is great. Each paycheck equals about 2 months of living expenses. It is unlikely that he would put his money in ETFs each month to avoid paying brokerage fees each time. He would probably invest it as a lump sum every few months, so he would almost always have some cash in his checking account that he could use if he is unable to work.

  2. Great article! I was going to write to you to see if you would like to do a case study on me and my wife but our situation is pretty similar to CFR except that I am not divorced (yet) haha. But we both live and work in a WA mining town and we have 2 young daughters.

    Just a quick question though. CFR has the bulk of his money in SUPER. $192k I believe. Now since he is the same age as me, his SUPER would be little use to him within those 3-7 years if he chose to retire in that period as he wouldn’t be able to access his SUPER or the returns from it. Sure it would compound and he would have a great little nest egg by traditional retirement age, which for him would be 70 I believe. Nice little plan B.

    Wouldn’t it be more accurate to start the calculations with the assets (ETF) he can access now? So wouldn’t his starting base be $37500 + $12000 cash to go into the ETFs or possibly LICs +$101000 he can save during the year (which I would purchase monthly not quarterly personally). Is there something I am missing as to why it wasn’t worked out this way? Thanks.

    Love the posts and following your journey.

    • Hi Ben,

      Thanks for your comment, glad to hear you enjoyed the article. Feel free to get in touch via the contact page and maybe describe your situation in a little more detail and we can discuss if your situation is “different enough” to create a case study!

      To answer your question:
      There are basically two ways to look at the whole Super question when it comes to FI
      a) you look at Super as a second nest egg that is only relevant in the traditional retirement stage of FI
      b) you see Super as a part of your nest egg

      In CFR’s case, I actually ran the numbers using both scenarios and the result was…. pretty much the same! While theoretically it does, of course, make sense to look at Super as a separate lump sum that will be added to the nest egg at some point in the future, it doesn’t make much of a difference (and things a lot more complicated math-wise) as long Super only makes up a smaller part of our overall nest egg.

      Say you accumulate $1,000,000 – your FI nest egg – and $200,000 sits in Super. You now use the 4% rule and withdraw $40,000 per year. It really doesn’t matter that the $200,000 in Super is locked away for now, does it?

      This is also how we look at our own nest egg by the way. It just keeps things simple. Of course, this only works if the majority of your funds are outside of Super.

      If you would like to run your numbers with Super as a separate lump sum that is added to your FI nest egg later on, I recommend this article by Millennial Revolution: It shows you how to use FIRECalc to run your own numbers.

      Hope this helps!

  3. Hi mrsflamingo, thanks for the time you put into the blog, it is very helpful! Would you be happy to share the spreadsheet template you have used to create the scenarios above. Cheers!


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