After my first post last week where I gave an end-of-2019 status report, it is now time to do first things first, and introduce myself.
Like the many other bloggers in the FIRE community, I have decided to adopt a somewhat unconventional lifestyle in order to achieve financial independence at an early age. I do not like the phrase early retirement. Right now, Mrs. Fireman and I are both around 30, and with our current habits and cash flow, we might achieve this sometime around our mid-forties. For us this means amassing enough sensibly-invested net worth to sustain a modest lifestyle a withdrawal rate of 2.5-3.0% (which currently seems to be a conservative figure).
Unlike the friends, family and colleagues around us there will be no flashy cars, prestigious accomodation or luxury holidays along the way. But there will also be no sleeping in the back of cars or sitting down at dinner to bowls of rice. Others choose these paths. What we’re after, however, is the via media of eschewing attractive but ultimately barren consumerism, while not allowing Excel to become the main fixation of our lives.
Of course, anybody starting a blog such as this finds personal finance an interesting topic, and I am no exception. It is also a hobby, complete with a community, regularly scheduled activities (primarily updating spreadsheets) and a metric for progress. There is also an element of seeing things as they really are, for example the simple relationship between saving rates and retirement age , or the surprisingly high cost of small regular expenses. Is this journey for fun or profit? Let’s see whether it can be both.
Where we are today
Helping us on our journey is my full-time job in a STEM field, where I expect to earn c.£100k this calendar year (gross — it’s much less net!) Mrs Fireman will earn c.£20k for a non-STEM job. We spent around £40k on all expenditure last year (including £12k in rent, which is pretty good for our area, where we must stay for my job). There is certainly scope to reduce this (including the controversial option of becoming home owners). We also transferred c.£50k to our savings/investment portfolio (maxing both ISA allowances, and contributing to a pension). Net worth stands at c.£115k.
Acording to projections, 2020 is shaping up to be roughly similar.
Where we go from here
In the short-to-medium term, I think there are a few high-impact areas we can focus on:
- Increasing my total compensation by performing well at work — even small percentage-wise improvements here could have a big effect on the savings bottom line. This might look obvious (working until the job is done), or non-obvious (putting in the effort to get along socially with my colleagues). I think this is an area that deserves regular and careful attention, lest I become complacent.
- Deciding whether it makes sense to contribute more into pension wrappers. This has the huge attraction of “undoing” a lot of income tax for the surplus left after filling the ISAs. But any money in such wrappers is locked away for a long time (I might be 70 before I can access it), excessively vulnerable to political tax law whims and subject to unknown future tax rates. Since I believe we might be financially independent long before we can access thse, there is a trade-off in how much to contribute. I think this trade-off can best be modelled as two distinct “retirement” periods (where the first one ends at pension access age). But this makes the calculations more complex than than simply drawing down a single pot. This is the topic of a future post.
- Thinking more about asset allocation. I have read a lot on this topic, but am not at all certain on the right answer. In the medium-to-long term I can imagine settling on somewhere between 60-80% equities, based on all the information absorbed from books and blog posts. Although I accept intellectually the mantra of not trying to time markets, some part inside me warns that it’s a bad time to jack up equity exposure.
- Investigating novel ways to make money: there are several tentative ideas in this area which might appear in future updates. I have set myself the (ambitious) goal of generating £3000 in non-job/non-investment income in 2020. The absence of any real plans might be mitigated to some degree by this public yardstick. We will see.
Over the next months and years I will be providing more information about our progress, both the hard financials and other more lofty insights. Some of the blogs I linked to above have inspired me in many ways, and my humble aspiration is that my effort might do likewise for those find themselves reading this account.