Zero debt by 2021 then FIRE

samdk

Hello,

I've been following the MSE forum for about 10yrs but have never put any of the lessons into
practice. I've been living frivolously and thus have almost nothing to show for my 10yrs of working. I've had a baby, a failed business and jointly bought my first property in the past 12months so need to get myself in gear to make sure the little one has a stable home and the best childhood possible.

My goals are zero debt by 2021, a 6month emergency fund and then to consistently save until retirement. I've set myself some short and long term goals which I track on Google Keep to encourage good habits.
As of January 2019 I'm out of my overdraft.
Last month was the one of the first times I've managed to stick to my budget.
I've gotten rid of my cars, cut my expenses by £200pm, bought life/health/dental/accident insurance and opened up a savings account. My pension is quite healthy and I'm saving 18% of my wage.

FIRE stands for Financial Independence Retire Early.
The aim is to save up enough to live off just the interest of your investments which is ~25 times your yearly expenses.

Yearly expenses x25 = £480K

What are my yearly costs
-£28.8k
I spend per month
-£2400
I need to spend per month
-£1600

What's my net worth

---

-£118k mortgage
-£9.2k loan 1
-£5.0k loan 2
-£1.55k credit card

---

+£135k property
+£36k pension 1
+£7k pension 2

Previous Wage Milestones:
Age 21, £15k
Age 23, £22k
Age 24, £27k + £2k
Age 25, £35k
Age 26, £37k
Age 27, £38k + £4.5k
Age 28, £40k + £5k
Age 29, £41.4k + £5k
Age 30, £47.4k

Wage targets by age:
✓ Age 30, £46k
Age 32, £52k
Age 35, £65k
Age 40, £70k
Age 45, £80k
Age 50, £90k

Goals:
Age 31, emergency fund 1m
Age 32, debt free
Age 34, emergency fund 6m
Age 35, passive income £100pm
Age 40, passive income £250pm
Age 40, emergency fund 12m
Age 45, mortgage free
Age 50, £400k pension pot
Age 55, retire

Savings total [+per month]:
Age 30, -£15k [500pm]
Age 31, -£9k [700pm]
Age 32, £0 [800pm]
Age 35, £30k (£12k emergency, £18k invest, 800pm)
Age 40, £75k (£24k emergency, £51k invest, 1000pm)
Age 45, £135k (£25k emergency, £110k invest, 1000pm)
Age 50, £235k (£50k emergency, £185k invest, 1650pm)
Age 55, £335k (£50k emergency, £285k invest, 1650pm)

Short term milestones/targets:
✓ Feb 2019 - get rid of 1 car
✓ Feb 2019 - use bonus to pay overdraft
× Feb 2019 - stop paying personal loan
✓ Mar 2019 - walk to work
✓ Mar 2019 - apply for 2 jobs
✓ Mar 2019 - 0% balance transfer card
Mar 2019 - current account switch £100
Jun 2019 - apply for 2 jobs
Jul 2019 - partner's pay down to £0
Jul 2019 - account switch £100
Aug 2019 - matched betting £200
Oct 2019 - nursery and partner back at work
Nov 2019 - account switch £130
Dec 2019 - £500 side money
Feb 2020 - phone contract ends!!! (never again...)
Mar 2020 - pay off credit card

samdk

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 0
Partners monthly income after tax....... 2675
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2675

Monthly Expense Details
Mortgage................................ 736
Secured/HP loan repayments.............. 0
Rent.................................... 915
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 51
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 50
Clothing................................ 20
Petrol/diesel........................... 20
Road tax................................ 2
Car Insurance........................... 21.6
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 20
Entertainment........................... 100
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1955.6


Assets
Cash.................................... 500
House value (Gross)..................... 135000
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 0
Total Assets............................ 136000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 118500...(736)......2.59
Total secured & HP debts...... 118500....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Loan 1.........................9200......280.......7.9
Loan 2.........................5000......300.......0
Credit card....................1580......100.......19
Total unsecured debts..........15780.....680.......-


Monthly Budget Summary
Total monthly income.................... 2,675
Expenses (including HP & secured debts). 1,955.6
Available for debt repayments........... 719.4
Monthly UNsecured debt repayments....... 680
Amount left after debt repayments....... 39.4

Personal Balance Sheet Summary
Total assets (things you own)........... 136,000
Total HP & Secured debt................. -118,500
Total Unsecured debt.................... -15,780
Net Assets.............................. 1,720

Created using the SOA calculator
Reproduced on Moneysavingexpert with permission, using other browser.





I transfer £1650 every month to my partner to cover mortgage, bills, food and baby stuff.
Partner iOS on maternity leave and will be on zero income very shortly.
The £300 for Loan 2 is in my name but owed by someone else who pays the full amount inconsistently.
Phone contract is way too much but I'm locked in until next year.
I get bonuses and wage rises in January, normally £3500 net bonus. Every time I've had one it's all gone towards my overdraft.

Starmummy

Good luck. That is one meticulous plan. I am really impressed.

samdk

Opened a new current account last month to make the most of account switching. Set up 2 direct debits last week.
Should be switching to first direct for £125 in early April.

Balance transfer for credit card has also started. This will save approx £20 per month.

Fixed the indicator on my car myself, would have cost approx. £200 and half a day of holiday had I taken it to the garage. Small feeling of accomplishment.

Made some changes to my CV and applied for 2 jobs. Will completely rewrite it this week.
Not much going on in my area of the job market. Need to ensure I get a promotion if I don't move. Would be nice to stay in one place but it pays to switch every 2yrs.

enthusiasticsaver

Is that £915 to cover your share of the bills and £736 the mortgage? I presume you are not paying rent as well as a mortgage?

I think you have made a really good start and have great objectives. One thing I would say having done the journey you are embarked on there are a few tips I would give you.

Don't waste money. Decide what is important to you and focus your spending on those areas. Keep a spending diary initially at least. What we decided was important was making memories with our children by taking them on days out, holidays and cutting out waste by taking lunches to work and not getting coffees etc when out.

Settle on a percentage to overpay your pension and I see you have already done that so that is a great start. We got into investing later than you so it is good you are thinking about that as well now. Now we are early retired (aged 58) it is helpful having more than one strand of income and if you are planning on retiring at 55 some pensions may not be accessible as there is some talk of increasing the age people can access them so it is 10 years earlier than state pension age. Stocks and shares ISAs are a great way of bridging the early retirement years until you draw on your pensions.

Avoid debt if at all possible. Why waste money paying for things you used a few years ago rather than focusing on the now and the future? Getting the interest down is a great first start but focusing on living within your means not only means no debt(apart from mortgage) but also means the costs you need to cover in retirement are lower.

Save as well as invest. Save for holidays, home improvements, cars and home improvements. Get used to tight budgeting and focusing your money in the right areas. Don't forget to live for today too though. Time spent with family and friends is important. I have known some people who were so focused on their end goal of early retirement they forgot to enjoy the journey. You have 25 years ahead of you so find ways to make your job rewarding and hopefully enjoy better pay, set time aside for your partner and baby and by saving and living within your means money worries will hopefully be a thing of the past.

Finally be flexible. We were always focused on age 60 as our retirement date as pensions were not accessible at 55 until relatively recently without taking a financial hit. We focused on clearing our mortgage then embarked on investing. I wish we had done that earlier. We helped our daughters with house deposits, university and weddings, grandchildren etc so that can sometimes delay retirement plans.

Good luck with your plan.

samdk

Thanks for the well thought out response.
£1650 includes the whole mortgage and all of our bills. The reason behind this is that my other half has a far better track record with spending. This arrangement will change once she's back to work.
She's managed to save £2,500 emergency cash and £500 for our son in 6 months so not doing too badly.

Current account switch is in progress. New account open and direct debits switching in April.
Balance transfer complete, new card open and activated.
I've only managed to save £250 this month due to a lack of discipline with food.
Spending ~£450 on food per month so need to get that in order. I'm a very big guy and eat quite a lot but £450 is a bit wild.

Other half's credit card bill ends next month. £100 less per month.