High risk, high reward: A pauper's dream of early retirement.

Shimrod

barnstar2077 said:

Also, I have created two new spreadsheets, one which is simply a list of any spend over £100 (listing if it was spent on house maintenance, entertainment etc.)  So I can predict with greater accuracy my needs in retirement.  With the other being a drawdown plan that takes the numbers from my combined ISA and pensions growth predictions and allows me to play around with scenarios (which has been very reassuring, so far :  )

It might be worth trying to track all spend, I think you might find £100 is too high a limit to give an accurate figure. When working through our retirement plans, I reviewed two years of spend across credit cards and bank accounts to understand what we spent and where it went. I did this again last year before we retired to see how things had changed.

Even working through a year's spend it only took a day or so as the cards and bank already categorise the spend. But it's surprising how many small transactions there are and how quickly they add up. The biggest change was the grocery shop, and we never spend near £100 in a supermarket in one go.

I'm now tracking on a monthly basis to see how we do now retired to see whether our retirement predictions were accurate - it takes only a hour or two once a month.

Bostonerimus1

You should always remember that "high risk, high loss" is an equally valid aphorism. Rather than taking on large amounts of risk in an attempt to reach a goal, it might be prudent to diversify your investments and add other strategies like budgeting and cost cutting...as they say "a penny saved.."

barnstar2077

Bostonerimus1 said:

You should always remember that "high risk, high loss" is an equally valid aphorism. Rather than taking on large amounts of risk in an attempt to reach a goal, it might be prudent to diversify your investments and add other strategies like budgeting and cost cutting...as they say "a penny saved.."

I have a good budget and shop around to get good deals etc.  My monthly expenses (excluding spending money) comes to less that £550 a month.  I can't cut costs any more than I have without living in a tent!

barnstar2077

Shimrod said:

barnstar2077 said:

Also, I have created two new spreadsheets, one which is simply a list of any spend over £100 (listing if it was spent on house maintenance, entertainment etc.)  So I can predict with greater accuracy my needs in retirement.  With the other being a drawdown plan that takes the numbers from my combined ISA and pensions growth predictions and allows me to play around with scenarios (which has been very reassuring, so far :  )

It might be worth trying to track all spend, I think you might find £100 is too high a limit to give an accurate figure. When working through our retirement plans, I reviewed two years of spend across credit cards and bank accounts to understand what we spent and where it went. I did this again last year before we retired to see how things had changed.

Even working through a year's spend it only took a day or so as the cards and bank already categorise the spend. But it's surprising how many small transactions there are and how quickly they add up. The biggest change was the grocery shop, and we never spend near £100 in a supermarket in one go.

I'm now tracking on a monthly basis to see how we do now retired to see whether our retirement predictions were accurate - it takes only a hour or two once a month.

I'm pretty happy with my monthly budget.  I just want to track those one off expensive items or services to help me predict which will continue on into my retirement, and which ones wont.

Hoenir

barnstar2077 said:

  In keeping with my high risk high reward philosophy I have also recently moved everything into US stocks only (As they were down over 10% and didn’t seem to be springing back up straight away.)  Without getting into politics, I believe this dip will be temporary.  Worse case scenario it will sort itself out in just under four years time :  )

American Exceptionalism is increasingly looking unexceptional. Takes seconds to beak something. Many decades to rebuild it, if at all. Throughout history empires have risen and fallen.  

Shimrod

barnstar2077 said:

Shimrod said:

barnstar2077 said:

Also, I have created two new spreadsheets, one which is simply a list of any spend over £100 (listing if it was spent on house maintenance, entertainment etc.)  So I can predict with greater accuracy my needs in retirement.  With the other being a drawdown plan that takes the numbers from my combined ISA and pensions growth predictions and allows me to play around with scenarios (which has been very reassuring, so far :  )

It might be worth trying to track all spend, I think you might find £100 is too high a limit to give an accurate figure. When working through our retirement plans, I reviewed two years of spend across credit cards and bank accounts to understand what we spent and where it went. I did this again last year before we retired to see how things had changed.

Even working through a year's spend it only took a day or so as the cards and bank already categorise the spend. But it's surprising how many small transactions there are and how quickly they add up. The biggest change was the grocery shop, and we never spend near £100 in a supermarket in one go.

I'm now tracking on a monthly basis to see how we do now retired to see whether our retirement predictions were accurate - it takes only a hour or two once a month.

I'm pretty happy with my monthly budget.  I just want to track those one off expensive items or services to help me predict which will continue on into my retirement, and which ones wont.

But ongoing items like house maintenance don't always cost over £100 but will add up over a year. Ignoring the small items will give you an inaccurate estimate. I've done a few small maintenance items recently, none of which exceeded £100 mark but when added up over the year become significant.

OldScientist

barnstar2077 said:

According to my new drawdown spreadsheet I should still be on track to retire at 55 with just a modicum of growth (even just an average of 2% a year growth, plus my usual contributions, would see me hitting my target.)  I would like at least £330k+ at 55 (in seven years time) before I would consider pulling the trigger.  The earlier I can afford to go the better though.

It is not clear from your post whether the minimum growth rate of 2% needed to achieve your target is nominal or real. I note that since 10 year nominal gilts currently have yields of around 4.7% (this doesn't exactly correspond to a total return of 4.7%, but is close enough) or real yields of about 1.2% these could potentially form part of a 'take sufficient risk to achieve a goal' approach. I also note that over 10 year periods, UK equities have had annualised real returns as low -7% and the US (for US retirees) as low as -4%.

barnstar2077

Shimrod said:

barnstar2077 said:

Shimrod said:

barnstar2077 said:

Also, I have created two new spreadsheets, one which is simply a list of any spend over £100 (listing if it was spent on house maintenance, entertainment etc.)  So I can predict with greater accuracy my needs in retirement.  With the other being a drawdown plan that takes the numbers from my combined ISA and pensions growth predictions and allows me to play around with scenarios (which has been very reassuring, so far :  )

It might be worth trying to track all spend, I think you might find £100 is too high a limit to give an accurate figure. When working through our retirement plans, I reviewed two years of spend across credit cards and bank accounts to understand what we spent and where it went. I did this again last year before we retired to see how things had changed.

Even working through a year's spend it only took a day or so as the cards and bank already categorise the spend. But it's surprising how many small transactions there are and how quickly they add up. The biggest change was the grocery shop, and we never spend near £100 in a supermarket in one go.

I'm now tracking on a monthly basis to see how we do now retired to see whether our retirement predictions were accurate - it takes only a hour or two once a month.

I'm pretty happy with my monthly budget.  I just want to track those one off expensive items or services to help me predict which will continue on into my retirement, and which ones wont.

But ongoing items like house maintenance don't always cost over £100 but will add up over a year. Ignoring the small items will give you an inaccurate estimate. I've done a few small maintenance items recently, none of which exceeded £100 mark but when added up over the year become significant.

I'm happy paying out for smaller house maintenance costs from my spending allowance.  I don't want to start recording all my spending as I don't think it would be healthy for me personally to do so.  I can see how it might work well for others though. 

barnstar2077

OldScientist said:

barnstar2077 said:

According to my new drawdown spreadsheet I should still be on track to retire at 55 with just a modicum of growth (even just an average of 2% a year growth, plus my usual contributions, would see me hitting my target.)  I would like at least £330k+ at 55 (in seven years time) before I would consider pulling the trigger.  The earlier I can afford to go the better though.

It is not clear from your post whether the minimum growth rate of 2% needed to achieve your target is nominal or real. I note that since 10 year nominal gilts currently have yields of around 4.7% (this doesn't exactly correspond to a total return of 4.7%, but is close enough) or real yields of about 1.2% these could potentially form part of a 'take sufficient risk to achieve a goal' approach. I also note that over 10 year periods, UK equities have had annualised real returns as low -7% and the US (for US retirees) as low as -4%.

My prediction spreadsheet is set out in years, with each year taking last years amount, adding on x percent for growth, and then adds that years contributions.

I am aware of there being periods of zero growth, even losses, I am prepared to take the risk, as I can always just work till 57 if it doesn't work out.  He who dares, and all that! : ) 

kempiejon

barnstar2077 said:
My prediction spreadsheet is set out in years, with each year taking last years amount, adding on x percent for growth, then add that years contributions.

I am aware of there being periods of zero growth, even losses, I am prepared to take the risk, as I can always just work till 57 if it doesn't work out.  He who dares, and all that! : ) 

I love my spreadsheets but the numbers can get ridiculous at decades out, I am aware of their shortcomings. Have you looked at any of the Monte Carlo simulations? https://www.firecalc.com/ is one or https://www.cfiresim.com/ another, more are out there. I found them more useful than my own work to look at a series of outcomes over several decades.

I took a route of 100% equities, leverage and tax treatments to maximise my path to FI. You've got to hold your nerve to keep investing when the portfolio has lost 40% of its value and rub your hands with glee at the bargains available. The down side to your I can always just work until 57 you have to keep working. It might not be 57 either, how can anyone know? I didn't set a date but a target income. Itemised spending analysis showed me when my investments would just cover my basic needs  - after that work become optional, to acquire more things or experiences or add a larger income to my retirement phase.