2020 Q2 Update: Long days, short weeks

Throwing away time at such a rapid pace (credit)

Has it really been 3 months already since the last update?! I think I’m finally understanding the phrase “The weeks are long but the years are short”. We have been in lock down for about 15 weeks now (tracked by our exercise regime) and it is frankly worrying how fast it feels those weeks have gone by.

I’ve personally been heading up a new rapid delivery project in which we had 6 weeks to deliver a MVP (Minimum Viable Product) and I have been doing some very long hours to ensure its success. Fortunately that came to a close last week and I have now taken a week off to try and recharge the batteries before I get chucked at a new one that starts next week.

In the meantime, a couple of my friends have been furloughed. They’re in different industries to mine, but it reminds me I am lucky to be in the position I am currently and I should make hay while the Sun shines. I’m not actually sure if there will be any redundancies or furloughs at my company anymore as there still seems to be an uptick in work which is great. On the other hand, having not had a proper break since Christmas – I’m running on fumes.

Much like weenie’s recent post on information overload, I got too stuck into tracking the Coronavirus and have since been trying to dramatically cut down my screen time and reading about world events. I have enough on my plate already!

Anyway, back to the post at hand, I promised myself I would write these updates quarterly to keep myself accountable with the plan (which I revisited recently) and to make myself reflect on my accomplishments over the year. So first of all, let’s bring back the list from Q1 of what I wanted to achieve:

  • Get fitter with Insanity and enjoy more time at home
  • Push as much money into my ISA as possible before being furloughed
  • Play more games with friends (online of course!) as I have more free time
  • Finish paying off the car loan (less than £3,000 to go)!

Update on the goals

Insanity and enjoying home time – PASS!

My wife and I are currently on Week #15 of our Insanity Workout, which is impressive considering it’s only a 9 week workout (we’re going through it again). I have trimmed down from a slightly worrying 84 KG to more svelte 80 KG, I can nearly see my abs again, and I’m finding the workouts a bit easier to get through. At some point I may move back into doing weight training – my garage home gym currently sits covered in cob-webs. However both my wife and I use our evening workouts as the hard cut-off time to stop working and do something together, so we may just keep going for the foreseeable future.

Fill up ISA – PASS!

Due to having a flexible ISA and not quite filling it up last tax year (car purchase *cough*), I have £24,000 to fill up this tax year and I have setup a Direct Debit to push £2,000 into it every month. So far I’ve hit every month, so I’m still on track for now. I may have a bit of a cash flow issue next month though. As it looks like I won’t be getting furloughed any time soon, I hope to hit the full amount by April next year.

Play games with friends – FAIL!

I have completely failed at this and they are (rightfully) giving me crap about it! My work hours, plus workout time plus getting some good home-cooked food in me has left me shattered. I really wish I could spare the time during the week but it’s just not happening right now. As the UK opens up a bit, I hope to be able to pop over and see them more in the coming months.

Pay off car loan – PASS!

As of last month, I am car loan free! My Tesla Model 3 is mine and mine alone haha!

Solar House Project

Unlimited power…!!! (credit)

We are well into the swing of a British summer and I don’t know if you noticed, but it’s been pretty hot the past few weeks! The solar panels have produced an additional 1,441 kW of electricity in the past 3 months(!) and July and August look set to be extremely sunny as well this year.

And as an interesting aside – since I’m not driving the car all that much, apart from the occasional long distance trip, I haven’t paid more than about £1 overall for the electricity to charge it in the past 3-4 months. Outstanding!

And a potential new addition to The Solar House Experiment

Ramping up the household electric transportation! (credit)

As we’re nearing (hopefully) the end of lock down, my wife has had a bit of a dilemma. She normally relies on the Tube and buses to get around to see her clients and visit her central London office space but she’s (rightfully I feel) concerned about using public transport. As a one car family, there’s no guarantee that my car will be available for her whenever she needs it and, frankly, she hates driving.

One potential solution we’re exploring is for both of us to get out CBT certificates and for her to try out an electric moped for herself. As a self-employed accountant / tax specialist she knows a few tricks to buy it as tax efficiently as possible (I don’t have a clue, don’t ask me) and will potentially be using that as her main mode of transport, at least while it’s not freezing cold outside.

We went shopping for all the gear last week and now have our own fitted helmets, armoured jackets and jeans and all that good stuff to help her be confident on the road. We will book our CBT courses, pass that and then start hunting for a suitable moped (or motorbike?) that she can comfortably ride. She would like an electric one (so would I) but we’ll have to see what’s available and how far she’s willing to stretch her budget – but exciting times!

Net Worth Updates

And finally, how has my net worth changed in the past 3 months?

For the most part, it has been business as usual, just topping up the contributions with monthly amounts. I’m trying to add £2,000 a month to my ISA to use up my limit (and a timely article over at Monevator about ISA amounts in the UK was a fun rabbit hole) as well as continuing to contribute the maximum amount my company will let me into their pension scheme. Obviously the gains look massive compared to last quarter but that’s because the stock market (not the economy) has bounced back with loads of government bailouts and stimulus to keep things going around the world. I am slightly fearful of a greater crash that is being delayed right now.

Since the beginning of April I have just been buying a Global Bonds ETF from Vanguard (VAGP) each month which is shoring up my position to buy if there is an oncoming crash. My bonds / equities split is near 33% and 66% respectively at the moment. I generally try and be more conservative with my ISA in case I would need some of it in the near (1-3 year) term. I am not holding a whole lot of cash right now due to having paid off my car loan and trying to max out the ISA each month.

The company pension is simply buying a 25 / 75 mix of Global Bonds and Global Equity trackers and I don’t intend to do much else but let it carry on as-is for now. I probably won’t be able to touch it for 30 years anyway! If a good buying opportunity comes along, I’ll switch some of the bonds to equities.

Here’s how the overall situation is looking right now:

March 2020 ended at around £220k, whereas June 2020 ended at around £261k
(Blue is non-pension stuff, Orange is pension stuff (SIPP / Company Pension))
Investment2020 Q1Contributions2020 Q2Difference
(minus Contributions)
A table showing the contributions made in the past 3 months (a nice recovery!)

Plans & Goals for Q3

I fear I’m going to have another quarter of long work hours, but hopefully a reduction in the lock down will allow me to get out and see people a bit more. So on that basis:

  • Continue with Insanity workout (for now)
  • Push another £6,000 into the ISA
  • See at least 1 friend a week in person!
  • Pass the CBT exam and see what happens afterwards
  • Have a proper holiday away from the house!

What are your own goals for the coming summer? Keep safe and have a good one!

Revisiting the race for FIRE

The never ending puzzle of forward planning, solved? (credit)

So some idiot started a blog and said in their first post that it was entirely possible for him to retire by 40 if he so wanted to. While he has detailed some of his story and financial history so far, he’s never really revisited that previous statement and tried to extrapolate out whether he’s actually likely or not to hit his targets. That original post was actually based on an old spreadsheet I’d devised a couple of years ago and have been adding monthly updates to – but I haven’t revisited the actual plan itself.

Having somewhat recently turned 31, I thought I should take a closer look of what my current position is, how things may continue (or not) and what obstacles or hurdles may stand in my way to the FIRE goal line.

The current situation

Having paid off my car loan now (woohoo!) my monthly essential expenses are down to around £1,200 a month or £14,400 a year. Essentials to me are defined as either “bad stuff will happen if I don’t pay them” (mortgage, council tax, utility bills, food) or “luxuries I am prepared to pay for in modern life” (broadband, mobile phone plan, Netflix, etc.). My wife and I split all household related bills 50/50 – so her monthly spend is actually less than mine as she’s not commuting right now, doesn’t own a car and doesn’t have expensive hobbies!

The first three levels of Maslow’s Pyramid should be covered by the above (credit)

At this level of spending (£28,000-ish for the two of us per year), my wife and myself could live quite happily day to day and not worry about the basics. I wouldn’t say it would be a life filled with with exotic adventures abroad and 5-star dining experiences – but we’d be okay if we never had to go to work again if we had a passive income equal to this amount. And we could still see our friends and family and have fun (tick for level three of the pyramid)!

I’ve actually decided to aim for around £12,000 a year as my half of the “essentials covered” passive income floor. There’s a couple of reasons for this:

  • Roughly £9,000 of that £14,400 is mortgage payments and that number will drop in 5 years (we’re on an aggressive repayment schedule)
  • We’ve invested money into bringing some of our costs down already and will do more in the future (petrol, electricity usage, gas usage)
  • My car insurance is very high at the moment (£1,000+) and this will drop as the car ages and electric cars become more mainstream (the cost of being on the cutting edge)

Based on much finger-in-the-air guessing and some reading at Monevator, I’ve settled (for now) on a 3.3% Safe Withdrawal Rate (SWR), meaning that for a passive income of about £12,000 a year I would need about £360,000 of capital invested. I think I will need more than that personally, but it’s a good starting point to try and calculate from.

So let’s dig a little deeper into the problems I’m going to face in the next 9 years.

Problem #1: I have an outstanding mortgage of about £150,000 (my half)

This isn’t as bad as it seems as just by making my mortgage payment every month, the capital amount owed drops by about £7,000 every year. Having also read the tale of the Ermine struggling to manage his money between silos, I also see the benefit in holding off paying a small amount, say £12,500, of my half of the mortgage in case we have liquidity problems in the future.

That does still mean I need to find an extra ((£150,000 – £12,500) – (£7,000 x 9 years)) = £74,500 to overpay the mortgage in the next 9 years. This is equal to an extra £8,300 a year or about £690 a month of additional payments I’ll have to fund. I could divert my ISA contributions for a few years and do this easily, but then I’m giving up a hell of a tax break with the growth the ISAs could have. I’m not sure both is possible for me right now so it’s the age old question of investing verses paying off your mortgage.

Problem #2: Are we going to have children? How many? And when?

Needless to say, this is a very personal decision and I won’t be delving into any details here beyond saying we don’t really know, but our house has room to spare for them if/when we decide. Also, kids are expensive I’m told.

Problem #3: I probably won’t be able to access my pension till I’m 60

It’s extremely hard to plan 30 years out as all the rules with tax, pensions and anything related to finance will probably have changed by then. So at a rough guess, if I continue my pension contributions as-is until I am 40 and then let it continue to compound until I am 60 with no further contributions (a stab in the dark guess of when I can access my private pensions) then I should have in the region of £1 million. This assumes a 4% after inflation yearly compounding. This would provide roughly £33,000 a year of pre-tax income which sounds like a lot of fun money to me!

My problem is bridging the gap between 40 and 60. With a wild assumption that my yearly costs will be in the £12,000 region and if I’m running down the ISA in those 20 years then I would need about £240,000 saved in my ISA when I turn 40. If the current ISA allowance stays the same, at £20,000 a year, then I can potentially still make this. All it requires is putting the £1,666 a month into my S&S ISA for the next 9 years and I’ve made it! I’ve managed to max it out the past 3 years – can I do this for another 9/10…?!

Putting this all together

Putting aside the children question, here’s what my monthly outgoings would have to look like to stand a chance of hitting all of the above:

Money SiloAmount to Contribute (Monthly)
Outgoings (inc. mortgage)£1,200
Mortgage Overpayment£690
ISA Contribution£1,666
Pension Contribution£1,800*
Total:£3,556 (exc. pension)*
A rough guide on how much it would take to reach the above goals
*The pension contributions will stay the same, that 40% tax break is too good to give up

I earn good money – but it’s not that good. I could contribute less to the pension but I’d find it very hard to give up the 40% tax break just to chuck the money at my low interest rate mortgage. If I stick with keeping the pension the same, keep my outgoings about the same and keep maxing the ISA I would probably owe about £80,000 on my half of the mortgage when I’m 40. Looking up how much a 2% mortgage for 20 years would cost on that amount gives me a monthly figure of £405 compared to my current £750 a month, so there’s some wiggle room in there!

Based on all of the above I would estimate that it’s still doable for me to hit my “essentials FIRE” level by the time I’m 40, but I can make it easier on myself by overpaying the mortgage whenever possible if I have some spare cash sitting around. The gap from 40 to 60 would be the hardest, but once I hit 60 then it would be an easy ride through the remainder of my life. There’s a heck of a lot of assumptions in that sentence and I could get hit by a bus tomorrow, I know, but it’s better to have a rough plan than none at all!

The #1 reason most Daily Mail readers say they won’t bother saving for a rainy day (credit)

The happy unconsidered upsides

While those assumptions and figures up above are accurate for right now, there’s a few things that I haven’t taken into account that could swing things my way positively!

I’m still fairly young (so I tell myself) and am entering my prime earning years. If I’m still earning in 9 years time what I am right now, then something might have gone horribly wrong (or I cut my working days down to four or something, who knows). I have the technical certification to progress to the next level now and once I have some more experience I’ve already been told I’ll be put forward for promotion which is always nice to hear.

None of the above factors in any bonuses that I may (or may not) receive. The past few years I’ve been putting them straight into my pension but I may ease off and hit the mortgage more as it is by far my biggest monthly outgoing, dwarfing everything else. I never count on the bonuses though – they aren’t guaranteed.

And of course the big one is, I may not actually ever completely quit work. I like my job for the most part – the people are smart, funny and enjoyable to work with. The pay is pretty good and while there is a high amount of travel (less so at the moment), I do find it pretty nice to have a clear divide between “work time” and “home time”. Again though, the children question rears its head as I certainly wouldn’t want to miss them growing up by being away all the time. Then again, I could switch into a new job if I wanted to…!

So if I may give myself a small dose of optimism – I think I’ll be okay whatever happens when I hit the big 4-0. I hope that work becomes 100% optional, but I’m also okay if it’s merely 80% optional.

Any tips or suggestions from you, the reader?

The joy of creation

When’s the last time you made something? (credit)

I’ll let you in on a little secret.

I’m now officially in my ‘early 30s’. Yep, once again the spinning of the Earth around the Sun has crept up on me and I’ve been another year on this planet. And it’s the age where you start thinking “Holy crap I graduated from University a decade ago! Where’d the bloody time go in the middle?!”.

I knew this was coming of course, but in the past couple of months I’ve really been trying to reflect on my life and what it is I want to do with it. With the certain circumstances the world is in right now anyway, I wonder if more people are reflecting on exactly what they thought life would be like. A majority of us seem to have clawed back at least an hour or two in the day from the lack of a commute or more flexible working-from-home hours. Despite my expectation that I might be furloughed in the near-future it seems like the company I work for is busier than ever and needs more man power to chuck at the projects!

Remembering the future

Anyway, I got the idea to write this post when a few months ago I came across an old notebook I’d jotted notes and sketches in when I was about a third younger than I am today. It was fascinating to read and a whole bunch of memories came back about a bunch of ideas and plans I’d had.

For example, in these notes was a pretty well planned out and designed (if I do so say myself) side-scrolling hack and slash game with a bunch of different enemies, how I would program them and what cool special attacks they would have. Looking at it now, with some actual knowledge of game design and proper computer work under my belt, I can’t help but think “Aww bless, he thought it would be that easy to put in some animation and hit detection”.

There were also some notes about the “Ultimate Gaming PC” I would need to build to be able to properly design, develop, and test my amazing creations with such cutting edge features as:

  • Intel i5 2500K CPU (quad core obviously),
  • Nvidia GeForce GTX 470 (~£400 in 2010 money),
  • 8 GB of RAM, and a
  • 1TB 7200 RPM hard disk

Though of course back then this was merely a pipe dream. I didn’t have that amount of money to spend on something that would of probably been a fanciful but likely unfeasible past time. I spent a rather worrying amount of my time in my college and university days playing the incredibly popular MMO World of Warcraft. Having a top spec gaming PC would no doubt have lead me down the path of more time playing WoW (at fancier resolutions and settings of course) and boy am I glad I purposely dodged that bullet!

Oh God, they’ve brought back the original version I played… and I still remember my login details…

You can see where I invested my time and energy instead by reading through my financial history post. Despite a bumpy start, once I got going I decided to hit my career hard and spent long hours improving my skills and becoming known as a reliable deliverer of solid work, while taking a few steps into adulthood along the way – namely buying my first car, my first property and meeting and marrying the love of my life along the way. Oh and saving hard.

Perhaps a little too hard?

Being a child with the funds

This wasn’t in the notebook but I distinctly remember thinking back then that I wanted what I had right then: time to think, time to create, time to tinker, time to see friends and not worry about the next day – but with a bigger budget. A perfect mix of time, energy and money and the limitless possibilities that could be done with that.

I’ve got the money now. I’m still young and fit. The time had been missing element. It took a bloody pandemic to hit for me to slow down and realise, but I actually have just that bit more time than I once did. What did I always want to do in those younger days when time was so abundant and I wasn’t working late into the night to deliver to someone else’s deadline?

Learn. And then apply this knowledge to create.

I’ve had a lifelong fascination with the world of electronics, computers, software and coding. I like my job as it allows me a degree of flexibility to solve problems with computer code and software – but I don’t love it. The study and examinations I have to do to progress and stay relevant at my job feel far too much like work for me to enjoy the learning process.

Whereas something I choose to do, such as experimenting with electronics, originally through the excellent Lego Mindstorms kits (by the way have you seen all the kit you can get with them these days, wow!), and by proxy robotics and sensors and all that good stuff still captures my childhood-like imagination. And I honestly think there is no better time to dive into that pool of knowledge than right now!

Old habits die hard

But I have a problem. Much like The Saving Ninja, I’m allergic to spending money on things for myself. I don’t second guess blowing money for a nice meal out with friends. I’m more than happy to buy a round of drinks even if I’m the driver. I like to get people nice birthday gifts. But for myself I go through endless agonising trying to justify to myself that I can spend £15 on a new T-shirt (the old one was a bit ropey) or do I really want to spend that £3 on a sandwich when I could just make one at home.

I’ve been getting better at the spending aspect. We’re not talking about upping my lifestyle inflation to gourmet lunches out every day, ordering a massive £3,000 top sec computer and getting an Uber to travel 50 metres up the road every time, but I have decided to cut myself some slack. I’m doing well in life. I have enough savings that if I was fired tomorrow, for some reason, I could still make all my monthly payments for the next 6 years. Hell, a small part of why I bought my electric car was to prove I could spend the money (after going through the spreadsheet triage of justifications of course).

But what really drove me writing this post and reflect on just how much I had missed out on learning and creating new things was this post by Ermine. Both the post itself and the following discussion in the comments where he shared some knowledge on analogue thermistors (um, turns out I have a digital one, sorry Ermine) sparked something in me. I had been dabbling very lightly in some Python coding and I had an old Raspberry Pi 3 B from a few years ago I found under my bed and started tinkering with it again.

The joy of creation

Next thing I knew, I’d written web service calls, a text parser and was messing with a graphing API to deliver this majestic image of my house’s daily electricity consumption:

A Raspberry Pi calculating and displaying our household’s energy consumption for the day

And I can honestly say it was the best 4 hours of alone time I have enjoyed in these past few months of quarantine. I was immediately trying to work out how to add sensors, or a display, or would I be able to run it all off a battery or can I add a solid state drive to this or…

So I think, inadvertently, I have re-discovered some of the great joys of life that had seeped away unbeknown to me: curiosity of the unknown, the love of knowledge, experimentation and that feeling of success when all the different splayed out strands come together and your bloody code works exactly as you knew it (eventually) would!

And so over the past few weeks, I’ve dusted off some of my old discarded toys and purchased a whole load of new ones to play with:

I may have hit ‘peak’ Raspberry Pi accessories… still might get the new one though…

I’d like to think my past self is smiling, nodding, and saying “About damn time! Let’s get down to business!”.