My 5 years are up! How did I do?

Sep02
by TFS on September 2, 2018 at 8:10 pm
Posted In: Aspirations, Financial Independence Planning, Personal Finance, TFS Updates

Inspirational graffiti of the week

 

5 Years!

They say a picture paints a thousand words and I think that round yellow face pretty much sums it up for me. Post over I guess!

Haha, as if I’d let you off that easily… prepare for a 2000+ word slog on the epic 5 year journey of yours truly!

As a bit of a TL;DR – I am quite surprised reading back over some of my old posts that the main aim and underlying plan has actually been pretty consistent since day one, and I have largely achieved that initial goal. This is despite my personal circumstances changing massively and our expenses in all likelihood going up in that time.

The big storyline for me is about the development of side hustles, which although were part of the initial plan, have turned out in ways that even I could never have predicted when I started down this ol’ yellow brick road to FI.

In fact as is sometimes the case with my yearly updates, I think I’ll split this out over a couple of posts so it doesn’t get too long. In the next instalment, I’ll highlight some of the posts which provide an insight into how my thinking has changed along that way or have been important updates in general, as well as just some of my favourite posts in general that could be unrelated to much else, as well as some general rambling on 5 years of blogging and the FI life in general.

But first… it would be incredibly negligent of me not to go through some of the top line financial figures from the 5 years I’ve been in this game.

5 year financial round up

First of all, I’ll just keep this to the real important figures, otherwise we’ll be here all day, and secondly, apologies for the lack of figures from the start. I guess I had more enthusiasm for blogging about these FI ideas than actually getting a handle on our financial situation to begin with… d’oh!

First of all: Expenses, Income, and Savings Rate

A few notes on the above:

  • Figures in blue are estimates. In 2014 I tracked expenses/income in the last 7 months of the year, so I’ve just extrapolated that out for the rest of the year.
  • The July 2018 column is simply figures up to July of this year, as that is as far as we’ve gotten so far. I know August is basically over but I wanted to just get this post out and can’t be bothered to wait a few more days to include those figures 🙂
  • In the 2018 FC (Forecast) column I’ve used the figures up to July and done the same, with one exception which is the income. For income here, due to the massive outlier that was July (25K income!) I’ve taken the average from Jan-June, multiplied by 11, then added on the 25K from July. This seemed like a fair way of doing it, but still produced an eye popping figure of 87K income. To be fair, knowing what’s happened in August pretty much already, I know both the spending and income figures are going to be lowballed here (we bought a car for 3.5K for example, and on the income you will have to wait to find out 😉 ) but up until July this was a good estimate.

Now a few of my thoughts on the above:

  • It looks like our spending is gradually going up, which is a shame. Lifestyle inflation? Or just normal inflation? Or just the “costs of having a kid”? Probably a bit of all of the above I would imagine.
  • You can see where I went part time sometime early in 2016 really took a hit to the income side of things. Je regrette rien! Also Mrs T took a year off for maternity and then only went back to work part time as well. Considering all of the above, the hit doesn’t really look that bad at all. Side hustling really did help with this regard quite considerably.
  • Also, even not regarding the ~17K windfall we had in July 2018, we are on track for at least 70K income in 2018, which is pretty much amazing. We might even beat our highest figure of 71K in 2015 in fact. In fact I am going to make that my target to do so! Beat our old full time wages on part time working, that sounds good to me 🙂
  • We’ve never achieved that illustrious 50% savings rate which is a shame, but the reasons for this are obvious (PT work plus being a bit far too liberal on the expenses). There is a squeak of a chance of us doing it this year but it’s going to be tough and will rely on my side hustle income remaining strong.
  • I know it’s not an entirely accurate way of working it out, but just taking the average of those 5 yearly savings rate figures gives us an overall figure of 38.63%. Not too bad!
  • If we kept that savings rate up, I calculate we’d hit full FIRE in 18.6 Years, at which point I will be 55. It could theoretically be brought forward due to our mortgage being practically paid off at that stage so our expenses will drop by a large amount, our earnings went up (Mrs T could go back to full time work once TFS Jr is in school or I could quit my job to start a wildly successful business 🙂 for example), or get better than expected investment gains and/or other large windfalls. On the other hand this assumes we have no more children, don’t ever want to move house again, I don’t decide to quit my job and try something else (and fail miserably at it), and our yearly expenses don’t increase for whatever reason and/or we are hit with some unexpected really large one off expenses. So all in all, I am happy that this is a good estimate.

 

Now… onto Net Worth

Notes/thoughts on the above:

  • The first line, July 2013, is very much an estimate, which was gleaned from my post here. I guessed that my work pension value was £26,000 around that time which comprised the large bulk of Net Worth when we stared out, along with house equity. As you can see any other savings/cash amounted to a mere £4000!
  • The July 2014 figures are also somewhat estimated (due to me not including pension in my figures yet again… d’oh. I don’t know why I didn’t think to include this as it is obviously a large part of anyone’s NW even if they are quite young!). Anyway I estimated that it was £33,000 this year.
  • Even though our savings rate was pretty meagre during 2016/17 the net worth increases were still pretty good all round. Compound interest doing it’s thang!

 

Did I complete my goal(s)?

My goal was a bit wishy washy, almost deliberately so, because there were so many unknown variables when I started out. I had no idea about investing and what sort of performance I might get, and also what our expenses actually were – although it seems I deluded myself into thinking 10K/year/person was possible for us… oh young FIREStarter… how naive you were 1! And the main thing was I had no idea how our income would evolve or how my side hustles would pan out (or even what they would be at that point).

Nonetheless let’s just remind us of the main tenets of my plan/goal, from here:

Part I:

  • Live well below your means
  • Save aggresively (50%+ of net income)
  • Invest the savings in passive income producing stocks, bonds and property

Part II

  • Side Hustles: Develop alternative passive income streams

I would say apart from hitting a 50% savings rate, I did really well on these overarching goals!

 

From the same post, here is the table which shows actually what I thought I was aiming for, the green highlighted line was the “target”:

post-ii-spreadsheet

Now aside from this being wildly inaccurate planning 🙂 – I did actually pretty much hit this goal.

Hah!

Yes that even surprised me. I always had the figure of £250K Net Worth in my head all this time as that was obviously mentioned in that original post (£250K at 4% SWR = £10k spending/year), but I didn’t actually realise I had *cleverly* offset this with “alternate passive income”. Maybe I should have gone back and read my plans a bit more often.

So in any case, our “liquid freedom” pot which is really what we’re talking about here, because anything in Pensions is no good for producing income until we are 67 or whatever is it now. And that stood at £99,768 which I am going to call a “hit” on this goal!

However, there are a few of other factors here which make all of the above outright nonsense, such as:

  • This plan was clearly for me only, whereas there are 2 adults in our house and our Net Worth is combined. I’m not sure I knew or even asked Mrs T what she thought about any of this at the stage I posted those original goals! So the 100K in Liquid Freedom is really only 50K… wwaaah waaah waaaaaaaah 2
  • Another negative is that we clearly do not spend 10K/person/year. Oops. Pretty much out on that one by a factor of 100%. Double (literally) oops.
  • I’ve actually smashed the back doors off the side hustle income in the last few years! I have “Alternative Passive Income” down as £500/month but I’m currently averaging over £3K/month with the each way sniping, and even before that I was averaging just over £600/month on the matched betting front over 2016/17. Not sure how long the mega EW profits will continue, but it doesn’t seem to be showing any signs of slowing down right now, although clearly I cannot rely on this forever.
  • Finally, if I invested the 100K fully to produce 4% SWR, plus 3K per month each way sniping, I could probably in theory just give up work right now as that would be around 40K/year to spend, and that is roughly what we are spending, and if push came to shove we could easily cut some fat out of our, admittedly, very spendy life (by FIRE crowd standards at least).
  • However I’m clearly not going to do that! It would make things really tight, and not allow us to save any further money, which is not ideal, but if I did quit I would definitely start to look at other business ideas. It would just make things a little too stressful I think to make it palatable right now. And besides, let’s not forget…

I already hit my “goal” of quitting full time work ages ago anyway!

Again, from the post reference above:

… there are a multitude of things you may want to do once you’ve hit your target savings plus passive/side hustle income goals:

  • Slow Travel The World knowing you have a nest egg to fall back on
  • Spend more time with friends and family
  • Work part time and enjoy the extra free time to pursue other non income producing interests

OK, so this was not a specific goal from the very second I started the blog (as I said, I’d kept things vague deliberately to start with) but it very quickly became a viable and desirable option as time went on, and I transitioned to this working arrangement in September 2015.

So anyway, all told I feel I’ve done pretty well. We saved up a bunch of money, I could in theory quit my job tomorrow and cover our expenses with an (admittedly risky) side hustle, and all of the while mainly working part time, moving to a more expensive house, and having a kid.

I know I’m tooting my own horn here but I don’t care, for once I’m just going to not be modest and just say… well done TFS 🙂

 

And thanks to all the readers who have followed me along the way, I couldn’t have stuck this out without you!

 

Cheers to another 5 years 🙂

 

Look out for part 2 coming up soon which will be mainly more rambling from my good self!

 

Notes:

  1. Although it must be said it clearly is possible. Evidence from new blog on the scene The Savings Ninja, for example! ↩
  2. That’s the funny trombone “fail” noise by the way, not a “wah” cry/moan. Just in case anyone wanted clarification ↩