Onwards to freedom!

NorthernMonkey1

I do like how accurately you track all of these numbers. I've done a similar-ish adding up for the year. However, my savings are massively less liquid than yours, almost all locked up in Sharesave and Pensions. I'm going to try and make 2017 a year of extra liquidity, as right now, I'm fairly screwed if I lose my job or anything similar.

Having a number of years worth of liquid assets means you're so much better protected from anything that might happen than most

SuperSecretSquirrel

Thanks NorthernMonkey This whole journey has stemmed from me trying to ensure we would be ok if some external factor impacted us financially. I wouldnt say I'm a worrier, I don't really let things weigh on my mind, but I'm certainly a planner and try to have contingencies in place to handle common pitfalls.

First we bought a modest enough house with a large enough deposit that a single redundancy wouldn't threaten repossession in the short term. Next aim was to reduce mortgage and increase liquid savings to the point that repossession following double redundancy would be extremely unlikely. Next was to become mortgage neutral, so in a dire situation we could pay the mortgage off in full and scrape by on remaining savings for a while - in this situation a couple of minimum wage jobs would take us from scraping by back up to our accustomed lifestyle (just without the extra cash being saved/invested for the future) without having to drain the savings any further. This is part of why I consciously aim to keep our monthly nut small. Then we naturally progressed to aiming for FI, we like our lives as they stand (though we could both quite happily cut back our working hours), and have more coming in than we need to maintain our pleasant but totally unexgravagant lifestyle, so we may as well put that extra to good use for as long as it lasts!

I do find that the more we have stashed, the less we have to worry about things like redundancy. We're not quite masters of our own destiny in that decisions made by others can still hurt us, but the extent to which they can hurt us is reduced. Once upon a time redundancy would be like decapitating my financial avatar - fatal, now it's closer to maybe a broken leg - painful, inconvenient, and temporarily debilitating. I like to envision a future where it's akin to a paper cut or stubbed toe - initially a surprise shock of pain, but soon fading to an annoyance that is quickly forgotten

I heartily recommend increasing your liquid savings amount, I think it works wonders in terms of feeling secure, which has a huge impact on mental and to some extent physical health - being stress free is one of the things I value most in life. It has its minor downsides - we'd never qualify for out of work benefits for example, but that's a trade off we're happy with.

I guess when the sharesave matures you'll have a massive lump of liquid savings as a result and are just looking to bolster things in the short term? If something were to happen to your employment before it matured, would you not receive all your payments in back? I think that amount should tide you over a good long while? Not trying to dissuade you from further bolstering your position, just trying to point out that the current situation may be more secure than you think.

Watty1

I love your post explaining how you got where you are. Really motivating

NorthernMonkey1

If I was sacked, or just handed in my notice and left, then I'd get all my payments into the scheme back (currently about £11000) however if I was made redundant, then I would get a payment based on my option price/current share price, which would be nearer to £20,000.

The first matures this July, for about £14000ish, and I'm going to put that into a S&S ISA as my emergency fund. The second not until July 2020, which is too far away to even consider right now. I think of it in a similar way to my pension. Money that I wont get for bloody ages, so don't think about it.

I could probably clear my mortgage faster than I am, but I'm currently paying 30% of my wages into my pension (make hay while the sun shines) then just overpaying with whatever is left. My employer also pays in an extra 10%, so 40% in total, so currently my pension is going up a whole lot faster than the mortgage is going down.

SuperSecretSquirrel

Doesn't sound like you'd be "fairly screwed if you lost your job" to me - looks like you're in a great position, and it keeps getting better each month

Amazing pension contributions! I thought I was maybe saving too much in my pension (my 20% + employer 5% = total 25%) but you've put me to shame! Later down the line I'll start focusing more on accessible investments that I could access earlier than a pension, but for now I think I'll just leave things be. Do you have a pension value in mind that will trigger reduced payments in?

PS - Thanks for posting Watty! (and for reading along and thanking over time )

NorthernMonkey1

For the last 5 years, every pay rise has been put straight into my pension. Last year I doubly scored, getting a high yearly score which gave me a 4% raise, and a promotion for a further 9%. I piled this all into the pension, and then a few months ago, I had a mega sort on monthly payments, which meant getting rid of a motorbike, sky, everything, and I managed to push it up to 30%.

I've only done this for 3 months, and overtime has been really good so it's not yet been a challenge. Hopefully I can keep it up for a full year.

This years pay rise was only 2%, but that also got put in (why stop when something seems to be working) so next month will be 32+10%

If I maintain 25+10%, for 17 years (37 now) I should be OK to retire at 55

NorthernMonkey1

In terms of accessible funds, that's what sharesave is for. I pay in £500 a month, one is a 3 year scheme at £200, maturing in 6 months, the other a 5 year scheme at £300, but thats 42 months away.

The second one will give £18000 with no growth, currently tracking at £25000 with the current share price.

I'm aiming for mortgage neutral + £20k, just so I feel less stressed about the whole work thing. Knowing if I leave the job, I'm actually financially on a fairly sound footing

SuperSecretSquirrel

Sounds like an excellent plan

What kind of annual spending are you planning for in retirement? After the mortgage is gone and childcare no longer required, in today's money we should be quite happy with 18k-19k a year available to spend annually, any more would be a bonus.

Of course I may be underestimating the money required to help two growing children along in life, but have no plans to give them too much as I have seen the end result of too much well meaning generosity and it's not pretty!

NorthernMonkey1

I think somewhere around the same. About £15-1600 per month, which is about £19000 per year.

I worked out that the current savings rate and spending rate using 4% drawdown would give a retirement date of 15 years from now. As I'm 55 in 17 1/2 years time, it seems to roughly line up, but that is under the HUUUGEEEE assumption that I can continue to save at the same rate.

I'm aiming much shorter term right now. Ditch the mortgage, and get a years worth of cash in a semi liquid place, like a S&S isa, then I can go to work a lot more relaxed. See where I can go from there.

Secret_Saving_Squirrel

SSS, just wanted to wish you luck for the coming year, sounds as if you will be having some great family time. I do agree with you ideas about paying off the mortgage so that you can step away and do some more unusual stuff. We have not been particularly risky but are really enjoying being able to try different things, paid and voluntary, while waiting for the pensions to begin.
And I really envy your number crunching abilities!