Onwards to freedom!

edinburgher

That's actually quite a relatively conservative asset allocation for someone as young as you (well, if you include the value of your home equity).

I recently recalculated our asset allocation because it seemed logical to treat my small DB pension (nominal worth of £50k) as the bond proportion of our portfolio (a la Simple Living in Suffolk).

It meant that (rather than the aggressive position I thought we were taking), our portfolio was more like a 50/50 (equities vs. DB and home equity). This is far too safe for our current ages, so I have dialled up the risk a bit (VLS100 in the ISA, 100% equities in the DC pensions).

I'm torn on the 'it is what it is' argument re. housing. On the one hand, it would be nice to ignore our home in terms of wealth, but on the other hand it is too expensive relative to our salaries to do so. I have always thought that one of your FIRE USPs was the fact that you were able to buy a reasonably priced home that seems to meet your needs quite well for the moment

Unfortunately because Glasgow is quite a diverse city, we have fantastic schools and areas, but also a lot of quite deprived ones. We spent far more on housing than I'd have liked, it is a source of worry.

SuperSecretSquirrel

Thanks Ed :beer:

Our house is great, we were very lucky to have something like this available at such an affordable price when buying our first home. Definitely a wise choice on our part to have kept one eye on the future and bought what was a little bit too much house at the time. In theory there should be no reason to move for a good long while - 3 bedrooms, so the children can have one each (though one would have a smaller room than the other), in a great primary school catchment area, beautiful surroundings, etc. It's not entirely perfect, but it's plenty good enough. I imagine we may well end up moving at some point in the future, but of course it will be a balancing act between that and early retirement.

You helped me realise a flaw in my logic. "I'm happy to hold in cash anything that can beat inflation. Anything beyond that I try to move into S&S now." Why accept inflation or thereabouts returns on a whole heap of cash when some of it can be put to better use?

I've updated some standing orders and my monthly S&S automatic investment. From March onward, a nice round £1000pm to VLS80, no further investment in the other funds. I've been intending to do this for a while, but it was always a job for the future when current/savings accounts were maxed out and cash flow was better (no mortgage or childcare). I've now decided to increase the rate that I deplete cash in favour of S&S. Of the £1000pm only £350pm is new money, £650pm will be drawn down from cash savings. Any remaining money from month to month will top the cash accounts back up a little.

I should still have enough cash on hand to pay off mortgage and 0% cards when the time comes, but if there's a problem a fee free 0% balance transfer and continuing the stooze is an option (this is actually the sensible thing to do having built up a slow stooze pot over time!) as is keeping the mortgage hanging around a little while longer. I mustn't forget that paying the mortgage off in January won't actually save us a penny, so there's no loss in delaying.

Assuming all continues to go well regards employment etc, when the mortgage and childcare bills eventually stop, the cash reserves can stop being depleted, and the S&S monthly investment could hopefully be increased further.

I need to stop fixating on things like paying off all debt and maxing out current/savings accounts. Cold hard logic dictates that this is often a bad idea, debt at lower rates than can be earned on the borrowed capital, better returns available than what cash accounts offer. There's no denying the logic, but old habits die hard, and inherited wisdom regards debt and saving is hard to shake off!

edinburgher

I think it's ok if your portfolio is only 90% optimised - you have already won some of the biggest battles of the FI war. It would be a different story if you were one of those silly people who takes their foot off the gas and suddenly ends up 3 miles behind where they started, but that's not you :beer:

mrsp1987

Interesting re the comment about prepayment meters. However, without a warrant an energy supplier can't just switch you from credit meter to prepayment better without your permission. Although without the full details I could be missing something

SuperSecretSquirrel

March 1st net worth update is late, I hope to post it later today... Been a hectic couple of days, LO2 is here! :j :beer: :cool: :T
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I saved this post the other day, was waiting for cash back to track before posting:

TCB wanted to give me £20.20 for opening the best 0% BT card available. I was almost certainly going to be approved according to the MSE eligibility tool, so it seemed silly not to

That's an extra 20 months added to my older circa 4k stooze balance, freeing up some slack, and earning me around £220 over simply paying the balance off in the summer (assuming 3% interest can be achieved on the funds - not a safe assumption, especially in light of the BoS announcement).

Not bad for 5 minutes "work"

Once the transfer is sorted, the old card can be closed down, so no extra account added to the collection, it's more of a straight swap. Oh, and the BT and DD were all taken care of when applying online too, making my first ever balance transfer ridiculously straightforward to arrange

Will probably end up transferring over the balance from my other slow stooze card too, but keep it open for new spending. A shorter 0% extension in this case, but I may as well lock it in while the option is there at zero cost

SuperSecretSquirrel

I managed to record the figures yesterday, but not had the chance to post until today...

Net worth stats as of 2nd March 2017:

[SIZE=2][FONT=Courier New]               CURRENTVALUE       +/-MTH       +/-QTR
House Value:   [COLOR=Blue]+£125,000.00[/COLOR]        £0.00        £0.00
Cash:           [COLOR=Blue]+£45,303.57[/COLOR]     +£328.04   -£2,244.54
Pensions:       [COLOR=Blue]+£65,943.57[/COLOR]   +£3,419.73   +£7,728.79
Car Value:      [COLOR=Blue]+£16,600.00[/COLOR]     -£125.00   +£7,550.00
S&S:            [COLOR=Blue]+£15,193.59[/COLOR]   +£1,138.50   +£2,906.32
Mortgage:       [COLOR=DarkRed]-£21,644.55[/COLOR]     +£793.66   +£4,730.78
Due to HMRC:       [COLOR=DarkRed]-£469.86[/COLOR]      -£41.00     +£136.08
Student Loan:    [COLOR=DarkRed]-£1,995.29[/COLOR]      +£71.14     +£200.77
[B]Total:         +£243,931.03   +£5,585.07  +£21,008.20[/B][/FONT][/SIZE]

81.3% of the way to 300k net worth (2020 challenge), 17.3% mortgage ltv, £38,382.75 beyond mortgage neutral in liquid assets, 14.2% financially independent.
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An absolute belter of a month in the stock market! Pensions and S&S ISA making obscene paper gains. If it feels this good on the way up, I dread to think how it will feel on the way down :rotfl:

I revisited our SoA recently, and it seemed fairly accurate apart from the holiday and social budgets being way higher than we've spent in recent years. Now we have another addition to the family I guess some of the other spends will increase a little, so in the short term I'll keep the annual expenses estimate value steady at £28,800.

Our productive / interest accruing asset balance crossed the 100k mark this month The sum total of cash, pensions, s&s, and all debts is now £102,331.03 :j

The equivalent annual income from the net productive assets balance is currently £4,093.24 (i.e. 4% of £102,331.03). That covers 14.2% of our annual budget. Taking a tip from slowlyfading's blog, let's see what that covers in terms of budget lines - council tax, electricity, gas, water, phone, internet, mobile, home insurance, life assurance, tv license, amazon prime, dentist and haircuts all covered with £105pa to spare That leaves the biggies - mortgage, childcare, all car related costs, groceries, and the not quite so biggies - gifts, household/emergency, entertainment/social, holiday, and clothes spending.

Very happy with all that Now it's time to put the nerdiness away and get back to being a daddy :rotfl:

SuperSecretSquirrel

Love this article by Mr Free at 33 (aka Jason at Dividend Mantra): http://www.mrfreeat33.com/is-financial-independence-necessary/

His real life experience matches my gut feel - no need to achieve 100% FI before taking a leap of faith, getting part way there earns you a huge safety net that allows for some calculated risks to be taken ahead of time.

When we eventually reach 50% FI (I've had this figure in mind for quite some time, I'm not blindly following his example) it'll be a huge milestone, and the perfect time to come up with a solid plan of what we really want to do with our lives, and hopefully see it through.

It's a long road ahead, but not that long to 50%... We've gone from -1.2% to 14.2% in three and a quarter years. When 15k-ish is eventually shuffled from savings to the mortgage account (could be as soon as January), we'll become officially mortgage free, and the monthly repayments will disappear from our expenses - our outgoings will dive and FI% will soar. I can see some messing with spreadsheets in my immediate future, I want a clearer idea of how soon we might hit 50% FI

edinburgher

I thought that article was dreck if I'm honest - the key messages could have been written in a sentence or two.

From what I can see, Jason transitioned from a full-time job working in a car dealership to a full-time job blogging when he was 50% FI?

We'll not quibble over a % here or there, but the reason that the FI? Y/N decision seems so binary in the internetosphere is that a lot of the proponents of FIRE come from STEM backgrounds and it's a logical assessment of whether or not the numbers work.

I felt that it was blogger lifestyle boosterism coupled with a bit of self-justification. There's no need to make a 'leap of faith' if you have solid numbers, sometimes the devil you know is the best way to get to FI?

Ps. Not a dig at you in any way SSS - your ideas are always a source of inspiration

SuperSecretSquirrel

I've posted links in the past to articles advocating flexibility, and that's the underlying message I took from this recent article (which could have been a lot shorter, I agree) - it's ok to change the plan part way through (or even factor that planned changed into the plan from the outset), you'll still reach your destination. It's so important to enjoy the journey, and sticking to the devil you know until that elusive 100% is achieved might be something you'll eventually regret - life is what happens when you're busy making other plans...

I've spoken with people that left work as soon as they hit mortgage neutral to go full time self employed. I've spoken to others that have made the leap when up to their eyeballs in debt. Cautious creature that I am, I'd rather wait until half our living expenses are handled passively before making that kind of leap. To me, waiting til 100% is too late, I mean, what would be the point then?

The numbers stack up at 50% if you're happy to continue working in some capacity to make up the shortfall and keep on saving/investing, you just need to earn enough "extra" when you're semi retired from your original career / day job

So long as you don't go around saying you're "retired" at 50% FI I don't see the problem. Of course, I doubt I'll be fully retired even at 100% FI - I'll still earn money as a side effect of having fun, I just won't earn money for the simple trade off of my time spent doing something dull and uninspiring for an employer. Not a million miles from your thinking regards retraining and career change I guess?

PS - I'm using the self employed idea as an example. I don't really know what I want to do yet. Maybe go SE. Maybe retrain and do something more worthwhile as an employee. Maybe continue with what I do now but with reduced hours to spend more time as a family... I feel the need for change in the not too distant future, but in the short term I want to rock the boat as little as possible to keep earning, saving, and investing at a reasonable pace. Promising myself I'll do something at 50% FI gets me off the hook in the short term and I'll keep my nose to the grindstone. Having to hold out until 100% FI could well be depressing enough a prospect to see me hand in my notice the first day back from paternity leave which would likely be disastrous!

PPS - Didn't see it as a dig

Karmacat

I like the thinking - haven't read the article, I'm just reading what you're writing about 50%, SSS. I went self employed when I was 33 or so - never regretted that in itself, even though I found a whole world of crazy. I was single, I sold my flat in London, promised myself I'd keep at least 90% of the capital for the purchase of another property, resigned my job, and went temping while retraining, renting a room from a friend. I worked in a warehouse, as a cleaner, and as a typist in various places part time. Plus I worked for American Express for about 3 weeks, but a 4am start killed me. Then Eagle Star as an admin person, for about 6 months - surrounded by smokers, it was horrible.

Bought my house with a 20% deposit and not enough income (the therapy centre where I was training lied for me about my income) so I took in lodgers for about 3 years. When the centre imploded with news of the mistreatment of clients, my business partner and I went into business on our own, and my profits soared, and kept soaring for a long time.

I suppose what I'm saying is that you have to be flexible. 50% FI is good (I wasn't nearly at FI, but at least I didn't have children depending on me), multiple income streams are good (I had my therapy work and my lodgers, until I started working from home, rather than from the therapy centre or my business partner's room).

You know about flexibility, but I can't emphasize enough about doing your research these days - I've just written on my diary about not doing my research for the French apartment I bought, and its been really negative for my savings and income. Even so - I'm glad I took the original route to self employment Sorry about the length of the post!