Onwards to freedom!

SuperSecretSquirrel

NorthernMonkey1 wrote: »

Do you mind me asking how old you are?

Not at all, I'm 31. Why do you ask?

I just re-read my first post on here:

If we were to follow this plan, at the end of the fixed period (August 2020) our mortgage balance would be around about 20k which we could pay off with a lump sum from savings. Mortgage free fifteen years early, at age 36, sounds awesome, and what's incredible is that it also sounds very realistic.

Somewhere along the line in the past three years the aim has shifted from mortgage free at 36, to having 25x our annual base expenditure in net worth at 36

NorthernMonkey1

SuperSecretSquirrel wrote: »

Not at all, I'm 31. Why do you ask?

I just re-read my first post on here:



Somewhere along the line in the past three years the aim has shifted from mortgage free at 36, to having 25x our annual base expenditure in net worth at 36

Well there is a big difference between mortgage free at 31, and mortgage free at 65

Now you have a chunk of cash to fall back on, do you have a plan for in your 40s?

Once my house is paid for and got a few quid spare, I'd like to spend 6 months riding to africa on my motorbike.

Is there an endgame for a plan of such intense saving?

SuperSecretSquirrel

The funny thing is this doesn't feel particularly intense to us. We are fortunate that we earn enough to cover our modest needs with a fair amount left over. We have always been savers, and it's a hard habit to break As our incomes have increased our needs haven't, so the excess just gets saved and invested. We don't really want for anything so there's no sense of sacrifice, this is just what we do.

I like the idea of eventually scaling back work to maybe a three day week and a four day weekend. That would do me until I was well into my seventies I read an interesting article recently http://affordanything.com/2013/09/10/4-types-retirement/ permanent semi retirement sounds good, though a mini retirement or two along the way wouldn't be bad either There's something to be said about being your own boss too, so taking the plunge going full time self employed could be an option.

Over time I hope that more and more of our income will come from passive sources, freeing up time to do the stuff we really want to do with our time. Some of that time will be spent on things that cost little, reading a book on the beach, going for woodland walks, etc, but some will be spent on more expensive activities too I think in general we'd just like to live carefree laid back simple lives. If I had been around in the 70's I'd probably have been a bit of a hippy

Your planned bike trip sounds great! I'd be more interested in taking a camper van coast to coast across the US myself

edinburgher

SSS,

So sorry to start a discussion and then b**ger off into the background, I'm sure you can forgive me considering the circumstances

Your plans sound realistic and there's a level of detail that should give you as much confidence as any of us can have about our plans. Your musings remind me a lot of the chap who writes Retirement Investing Today, he is another conservative investor who makes quite pessimistic assumptions. I am incredibly impressed that you're ignoring so many variables that will hopefully deliver on the upside.

The pension/ISA/other debate is one that requires careful deliberation. Your scenarios are all based on 10 years, there was probably a reason for that, but I missed it! Another alternative might be to build your buffer until there's 5 years of basic living expenses in the S&S ISA and to throw everything at the pension after that? In the short term, I probably wouldn't bother with anything other than your employer pension.

£1k/mth expenditure is amazing, you put me to shame mate :beer:

SuperSecretSquirrel

Hi Ed, no problem at all, I've been there quite recently myself! Kicking off a discussion is helpful in itself, sets the cogs whirring and investigations start happening

I tend to err on the side of caution in general. It's nice to set a realistic goal, then surpass it. That said, every once in a while I set myself an "impossible" target, and more often than not it actually ends up being met! Maybe I should do it more often

You didn't miss anything regards the 10 year period in the ISA/pension examples, it was just a sufficiently long amount of time to show the differences between the various options. When I started looking into setting a proper target I felt 10 years was too long a stretch - better to have something to aim for in 5 years time, then set another target for the following 5 years nearer that time

As for the 1k per month I'm working with, it was a finger in the air estimate, and I'll have to hang my head in shame for getting it wrong... If we exclude mortgage and childcare costs, our annual spending should be around £15,800 a year (arriving at this figure involves a little guesswork, we don't budget as such, we just save/invest first then spend from what is left). If we were to drop the holidays and pinch the purse strings here and there we could probably get it down to 1k per month. This doesn't factor in big stuff like replacing cars or boilers etc though, and the chances of us sacrificing luxuries like holidays, generous gift giving, and a second car are low unless we're in an emergency "batten down the hatches" type situation, or in the case of the car if it becomes surplus to requirements. It seems I've been fooling myself, 1k per month is too low, but it's a nice round number to work with for now I'm still going to aim for 300k in 2020, I won't actually retire at that point, so no big deal, maybe getting a realistic retirement pot together could be the plan for the following 5 years Even then we'll still need to work part time for a number of years to qualify for our state pensions (optimistically assuming such a thing will still exist in 40 years time), so it should work out fine in the end :cool:

edinburgher

I find myself a wee bit contrary at times. I err on the side of caution when it comes to investing (regular payments, 70% equities, well diversified). In other areas of my life, however, I will take a few risks (for example, I will have an occasional flutter, I have been known to have a hangover).

Reviewing your fantastic achievements at such a young age (well, younger than me, anyway), I can't help but feel whether a little bit more caution might serve me well. So thank you for that :beer:

That's not a backhanded compliment, I admire the way that you are working methodically towards your goal and attempting to make few assumptions. While I stick to the plan re. savings and investments, I have definitely been guilty of assuming too much upside potential

Your pot size sounds like a great target (very close to SF's), I doubt £1k/mth is realistic based on your current lifestyle though.

Budgeting/recording spends is probably the final frontier for those of us who have started the FI journey, but want to optimise it/prove it to ourselves.

Have a good weekend.

SuperSecretSquirrel

As a young single man I would record all my spending, I had a perpetual spending diary spreadsheet and each spend was categorised - it was a thing of beauty :rotfl: My SOA back then was absolutely accurate down to the penny :whistle: I know this makes me sound extremely dull, but honestly it took less than a minute a day to keep on top of it, and I found it quite interesting at the time

As we are now a family, a detailed spending diary would have to be a team effort. I doubt OH would play along right now, she's happy to simply be heading in the right direction and wastes little thought on financial stuff (I am lucky that she's not a big spender and is also a saver by nature, otherwise this carefree attitude could end up being expensive!). The diary would be incomplete as she would forget to note things down, and a partial diary is worse than useless! There's also the fact that we both prefer to have some slush money that gets spent without full visibility - I don't really want to see what OH has spent/ordered for my birthday or christmas or fathers day gifts for example. That said, I do know exactly what our bills cost us, and when reviewing our SOA we discuss everything in detail, so it should be fairly close to reality for current spending - some categories may be subject to a little unintentional error margin as it's easy to under/over estimate some of these things, but we shouldn't be massively far off the mark overall.

On the face of it it seems we could work out our total uncategorised annual spending as a function of what the balances were on all our accounts a year ago, the total as it stands today, and all income earned in that time. It gets messy though when considering complications like expense claims, peaks and troughs in self employed earnings, tax return stuff, variable childcare costs, mortgage overpayments, interest earned, pensions, stock market performance, etc. Not worth the effort. I'm convinced a regular and complete spending diary is the only reliable way of capturing household spending data!

In a few years time we should probably do the household spending diary thing, account for every penny so we know exactly what our cost of living is so we can plan accordingly. For now though, net worth goes up monthly, neither of us are particularly spendy, we're on the same page regards finances and aims for the future, so we're not going to change anything just yet It doesn't really help me today to know how much to the penny I spent on groceries for the whole of 2004, all I need to know is that I currently spend between £40 and £50 a week, OH spends an additional £10 to £20 a week on extra bits and pieces, and this average of £60 a month may go up or down a bit in the future. In ten years time knowing exactly what we spend today won't be of much practical use either. A spending diary can certainly make for interesting reading though - I'm not knocking them!

I think I'll keep SF company on the road to 300k over the next 5 years. Then I might slow down on the pension contributions and put more away in ISAs, run a spending diary to get an up to date and accurate 25x magic number, and maybe even be daring enough to exclude house value from the calculations! Basically boils down to putting off making a proper plan until later on, and since I have a mental block on imagining anything too far in the future this is probably for the best

edinburgher

As a young single man

Imagines wizened old squirrel of 31 sitting squinting through milk bottle glasses in a dusty but refined red velvet smoking jacket while clutching his can and doling out wisdom in the squirrel retirement home :rotfl:

I take your point about the value of a complete spending diary and agree that there's no way to capture all spends without a team effort. I had hoped to manage that particular aspect by holding certain types of personal spends 'off sheet' under the dead grown up 'Pocket Money' category

Not convinced that will work, however, as I capture *my* pocket money spends, just not Mrs E's.

I don't agree that knowing your grocery spends for 2015 won't be useful in 2020. As you will appreciate with a family's houshold budget, things very much are as they are to a certain extent. It would still strike me as highly valuable to be able to call out the categories where spending has spiralled out of control and this is unreasonable. For example, if you have a family with two 15 year olds and spend £100/week, 0% inflation for 5 years, but then find yourself spending £200/week, something has gone wrong!

Like you, I tend to manage with minimal budgeting at this point, but life changes have got me thinking about the topic quite a lot

SuperSecretSquirrel

Today's standard mortgage repayment takes the balance sub-£42k, it now stands at £41,578.47

Accessible cash and S&S balance is now £47,315.58, so we are currently £5,737.11 ahead of neutral, and on course to meet the MN+12k target by the end of the year.

We'd be in a slightly better position had Mr Market played along, but I'll happily remind myself that cheaper shares means my fixed monthly investment amount will buy slightly bigger slices of businesses this month

I've just reviewed my past and planned mortgage repayments. Here's an annual summary:
2010 £2,958.03
2011 £6,279.96
2012 £13,459.97
2013 £15,056.94
2014 £16,339.67
2015 £14,980.66
2016 £13,707.69
2017 £12,499.71
2018 £4,980.12
2019 £3,681.60
2020 £6,625.17

Total payments over the reduced life of the mortgage £110,569.52. Had we stuck to the original 25 year repayment schedule the total payment amount would have been £155,983.39. £45,413.87 saved. That's quite a chunk of change!

Not only that, but the overpayment money is money we never let ourselves get used to having, so once the mortgage is officially gone, diverting those funds to savings and investments will be 100% painless

bexster1975

Hi SSS

I confess to having read along with your diary for some considerable amount of time. This was mainly because our mortgage neutral target was similar ( I am currently £5000 off neutral). At several years younger than me I wanted to say that your dedication to the cause is inspirational. I am not so eager to have net assets of 25 times annual expenditure, however I am keen to do my own thing work wise so that I can have more time rather than more money.

I wondered if you found that people in real life don't really understand what you are trying to do - or even if you discuss it in real life?

congratulations on mortgage neutral, I wpill continue to lurk with interest

Bexster