what are our long term plans?
It’s been a while since we’ve focused on the long term picture around here, and it’s been noticed by commenter “Is_poss” in his (or her… could be a her) comment here:
Hey TFS, big fan of your work and have been reading your updates for a couple of years. Just wondering what your overall targets are? Do you have an amount at which you would consider yourself FI or where you would RE?
First of all, thank you for the nice comment Is_poss!
And secondly, yep! Just like a bunch of ravenous investment bankers, I’ve been far too relentlessly focusing on the short term stuff such as monthly updates and all of that jazz. This is fair enough because FI is a large and daunting task, so breaking it down into smaller chunks and not thinking too much about the overall goal is probably beneficial, but there is no denying that you must keep an eye on the bigger prize as well, lest it falls completely off the radar!
First of all, if you want to read how my plans/thoughts have changed over the years then you could do worse than following the links on the “welcome new readers” bit that comes at the top of the page, if you would like to read the whole thing just open the blog in an “Incognito Mode/Private Browsing” window (or clear your cookies). But here is the relevant bit with links to save you the bother:
My thoughts and plans have slightly changed in the few years since I set up the blog, you can learn a little bit more about me and the main points on what those plans were and how they’ve changed here, here, here, here and finally here.
Anyway even with that it is clear we are due a bit of an update, a check in to where my mind is at but more importantly where our finances are at in comparison to any long term goals.
So here is my reply to Is_poss with a bit of expansion where I felt it was needed to make this into a proper post rather than something I just wrote up in 5 minutes 🙂
OK, so my original plan was to quit corporate work within 5 years with £250K in the freedom fund to allow me to start my own business, do a bit of freelance/part time work or whatever I felt like doing really. I guess at that point I wouldn’t have been Financially Independent but I would have considered myself Financially Free and no longer a member of the rat race.
I’m not sure with our levels of spending that would have been possible anyway but A LOT has changed since then:
- Bought a new house with corresponding higher mortgage and more principle to pay off
- Started working part time (75% of normal FT hours)
- Had a kid
With all of that it is fair to say there is no way I will hit that original goal with only roughly 1.25 years left to go – yep, I’ve been running this blog nearly 4 years, would you believe it?! No I can’t either! How are we measuring up to the goal though? Here’s how:
Our current Net Worth is £219,000
Our current Freedom Fund is (Net Worth excluding house equity) is £140,000
Our current “Liquid Freedom (Money not stashed in private pensions/house/SIPP) is £65,000
I’d like to think that with a little over a year – the (totally arbitrary and non-significant in any way) final day will be July 3rd 2018 – we can make some in roads into that £250K figure, maybe get the freedom fund up to £200K with a real push and if markets remain strong, but that seems like the best case scenario and we’ll still fall short by £50K.
My thoughts on that are a huge mother f**king “so what?” right now, because of the following reasons:
- I’m already far more free than the average 9-5er, with 25% of the year off, plus 4 weeks holiday. This equates to around 17 weeks not working per year.
- The above means I’ve taken a pay cut in return and True Financial Independence as defined of never having to work again as long as the 4% rule holds true looks a lot longer away than it may have done if I’d remained in full time employment.
- I’m pretty OK with that! We are still saving for retirement and will still likely hit proper FI at the age of around 55 if we maintain our expenses at their current level and save around 35% of our income, which is not exactly an insurmountable task
- This sounds pretty damn good to me. I don’t know anyone else my age doing anything remotely like this and retiring at 55 is still very early for most people.
In answer to the question:
Do you have an amount at which you would consider yourself FI or where you would RE?
The answer is of course 25x spending so that would mean we need near enough 1 million “in the bank” as we spent near enough 40K last year and are on course to do the same this year. Of course 10K of that is the mortgage so once that is paid off the figure drops to “only” 750K. As you can see we are no where near that but as my main plan is and has always been to save up “some” FU money (250K original target), then work part time and freelance on fun projects to keep the stash topped up, there is no major rush now (and in reality there never was) to hit this “goal”. But if you want a scenario where we declare ourselves officially FI, then it is either of the following:
- £1,000,000 in the investment pot + still paying off mortgage
- £750,000 in the investment pot + paid off mortgage
As you can probably tell scenario two is far more likely as when we get anywhere near £750K in investments it is very likely the principle on our mortgage will be practically paid off by then anyway, so we can either just decide to pay the rest off and have done with it, or if inflation has eaten away at the payment amounts in real terms we could just leave it and call it official FI regardless.
the real goal: the good life
The key point in all of this is that when we do finally surmount the summit of the Everest that is Financial Independence, hopefully I am going to have 20 years of part time / fun work to look back on 1… this sounds like the definition of a good life to me and so if I can pull that off then I reckon I will be one happy TFS.
Of course my mindset may change and I may decide to go back to work FT and shoot for full FI earlier, or it may not. I’m not one to make a rigid plan and stick to it as you may well have noticed.
So I guess you’ll just have to stay tuned for the next 20 years to find out 🙂
- I’ll be 36 in June, in case anyone was wondering ↩