Finances

Financial Independence update: April 2020

Free stock photo of light, Light rays, ray of light
A case of illusion or timing?

This month saw my welcome return to the warmer climes of the £100k+ club! This was partly due to an over £2k improvement in my index funds (now at -7.03%) and partly due to my savings rate: 77% is out of all my non-tax income, or 81% of take-home pay. Woah!

If I seem overly self-satisfied, then hell yeah, probably I am! I gotta take what I can get at the moment. [In case I’m reading back in future: We are still in lockdown, but hi!]

See here for full net worth

Savings and refunds

My SR was high given that opportunities to spend are reduced dramatically during these times. My SR would’ve been even higher, skimming 80%, if my annual Amazon Prime fee hadn’t been taken, which is one of those legacy costs that didn’t move to the joint account when we opened it. Mr Firelite still pays for internet though, so I’ve got the better deal!

In fact, we are shovelling away that cash! The double whammy of birthdays this month (mine and Junior’s) barely touched the sides cost-wise. And beyond the FI piggybank, my £243 childcare vouchers remain unspent, and we have a bit left over in the joint account which we both put £300 into monthly for joint/family purchases. These are ‘banked’ for a later date. Our grocery shop which had some luxuries (in a two-notches-up sense) at the start of lockdown has settled down somewhat (we’re due a frugal post soon, right?), and take-aways are now a once weekly special event in Household Firelite. 🙂 Who’d have thunk it?

Our rebooked flight to France was cancelled, which had kinda been our hope when we rebooked. With a refund due (I hear there’s a long wait), my savings rate for Jan will be 72%! Also heard a local festival was cancelled yesterday but this will be just a small refund.

In all, I have reached an over 70% savings rate for 3 of 4 months this year! Compare with last year’s average of 54%.

Equities

As planned, I topped up my FTSE All Share and Pacific ex Japan funds by £1k, but I did this by selling some of my Global Bond Index fund. While I hadn’t considered doing that when I first wrote this post, I noticed others had been switching bonds to equities, and given the current situation of economic insecurity and lockdown possibly lasting a lot longer, I decided to do this myself. I’m still open to buying more further down the line (without selling bonds) if other funds sink down to bargain levels.

I haven’t made the precise calculations, but the recent purchases have decreased my average unit cost, since in the large scheme of things I’ve previously bought at a high, having invested only since July 2019. Despite the recent rebound, the 3 green dots on the graph (of the FTSE All Share) illustrate that I got these most recent units at a good price.

My concern now is rebalancing as I have 20% of my equities in the UK, when I really would like my equities to represent world market capitalisation only somewhat tilted to the UK (e.g. 10-15%). I’m sure that will come in good time though.

My main aim has been to save cash for a property deposit AND I’m not really looking at a 10 years+ time horizon for FI. That’s why I moved away from setting up a monthly contribution into my Vanguard ISA. For now.

But there’s now an added concern to maintain liquidity due to possible job insecurity. Eek. Yes, my University is expected to lose 20% of income, so I’m just waiting to see how that plays out. Ironically, I may end up having that ‘midlife gap year’ despite recently changing the tagline of my blog!

Having said that, I currently have my eye on topping up Developed Europe, as the Covid-19 curve is flattening in a number of European countries. It’s currently still -11% despite some rebound. However, I realise that anything I put in I must be willing to wait for the growth.

Avid followers (!) will have noticed I opened a Freetrade account. Just for a bit of fun really. Only putting in a max of £100 a month. B&M is doing pretty well (+4% in the last 7 days), a buy on the basis that we may hit a recession, a time when discount retail do well. B&M is my not-so-secret frugal indulgence (an oxymoron, I know)!

Other stuff

I’m excited to be updating my blog to give it a new lease of life. I’ve made a categories page to make my posts more easily searchable, and a ‘more about me‘ page for those interested in the person behind the blog, which I’m often interested in when I read FIRE blogs. I’ll be updating my other pages gradually, including my Life Design 2, my updated FI plan.

Like others, I’m getting into the swing of lockdown life, but I don’t know how others are managing to work full-time and look after little ones! While I catch myself getting jealous of others’ free time, I remind myself the grass is always greener on the other side.

I’m grateful for some things: (1) I’m saving loads! (2) I’ve not really put on any weight (not actually confirmed this, but my clothes fit fine); (3) I feel my relationship with Firelite Junior has got closer in these last weeks; (4) My personal income [for now] remains the same and I still have work tasks to do that I deem to be worthy and important; (5) We are making really good use of the house and all its contents, including our extension. I even planted my first new plants ever in the garden this week. And of course, we are healthy.

Someone reminded me of the importance of having something to look forward to. My previous goal of going to Asia before Junior starts school is no longer on the horizon. I’d been talking about that since Junior was born pretty much, so I’m not sure what to replace it with. I guess just having a day out in the local area with people milling about and without worrying about the virus sounds pretty good right now! Eating in a restaurant, seeing friends and family, browsing in non-food shops… *sigh* What risky fantasies!

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Thanks for reading. What recent tweaks have you done to your equities? Are you looking to decrease your average unit cost? Have you had to change your goals for this year now due to Covid or your financial situation?

11 thoughts on “Financial Independence update: April 2020”

  1. You’re the first other blogger I’ve seen who has achieved a SR of above 80%, well done! What does your full fund allocation look like (do you have a post detailing this?)

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    1. Oh, thanks!! Oops, I meant 81% of my take home pay which is clearer; will correct that. That figure doesn’t include my pension contribution taken at source (pay just under 400 in) or tax free childcare purchase also taken at source. If I recall rightly, you include your mortgage payment in your savings, right?

      Full equity fund allocation atm is: US equity index 44%, UK ftse all share 20%, Developed Europe ex UK 11%, Japan 7%, Pacific ex Japan 6%, Emerging markets 6%, Global small cap 5%. (I’ve oulined this before but may be a bit dated.) There’s a bit of duplication there in terms of markets covered. Looking to increase Europe gradually atm. My thoughts on fund allocation overlap very much with David Sawyer’s in his book, Reset, but with lower UK allocation. How does yours compare? What’s your shares:funds split?

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      1. Yes I do, although this is slowly being covered in the shadow of my other holdings as my mortgage payments are pretty low (under £250) so there isn’t too much gain on the Maths side to including it; other than to be accurate that my expenses should drop by roughly £250 in 20 years time.

        I like keeping my fund choices simple so I can focus on generating passive income with side-projects; I did have everything in LifeStrategy 100, but I’ve now shifted to Vanguard FTSE Global All Cap. The weighting probably isn’t much different to your own, although you probably pay a little less in fees in exchange for a little more time. Do you know what that time vs savings cost is? I don’t think David did that Maths in his book.

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      2. What a great low mortgage! That’s amazing.

        You may ask the time vs savings cost (which is a good question!), while I’d ask a different question: the savings vs lost learning opportunity and sense of control. 🙂 With time saving, well, it’s as much or as little time as you want to put in it, so that’s hard to measure. For me, I like to decide how much I’m investing into what market and be actively deciding my allocation. This is probably the same part of my personality that makes me go food shopping in person as I like to be there and select it myself rather than shop online, lol. Or preferring to backpack independently rather than go on an organised tour.

        But to attempt to slightly (!) answer your saving question in some way, for each £10k you have in the US fund (admittedly the lowest cost of all the Vanguard funds at 0.08% but also the biggest allocation) compared with say LifeStrategy 100 at 0.22%, the cost saving is only £14 a year. Say x 10 years = £140, but that assumes no further saving and no growth. So while it’s not a big saving by any stretch (especially if you place a high premium on your time), if you had £100k in there over decades while your fund increased, I can imagine the cost saving could go into four figures?! However, any cost saving IMO is just a bonus.

        I hear what you’re saying about preferring to put your time and focus on side projects. Whether you go for a ready blended fund or not is personal preference really. It doesn’t take a lot of time to rebalance separate funds. When I put in time into thinking about topping up a fund (as I don’t do a monthly contribution) or look at the way each market is ‘behaving’, I feel I am learning a little and understand more what I’m investing into. Whether that translates into anything concrete, I don’t know.

        I was curious so checked: The Global All Cap has almost 56% in the US, 4.5% in the UK and over 10% in emerging markets, so from my humble perspective, pretty different from my allocation! Their allocation roughly represents world market capitalisation much more than my funds.

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  2. 77% savings rate well done. Am still at 40% but have recalculated that if I use net salary rather than gross my savings rate is 50%, so have increased it without any effort! Am hoping for a couple of months of 10% increase but am hanging onto bit of cash as I am hoping to buy a new phone. Why can I ask do you keep, what I think anyway, is quite a lot in cash? I know you are saving for a BTL so appreciate it will be high. I have struggled to let my cash stash go down, I have c17k in cash and think it is too much.

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    1. Thanks, Squirreler! Well, a 50% savings rate sounds very healthy to me!

      Well, I have had cash savings building for a while, but used to put it in my/our offset mortgage (before it was paid off). So cash savings was my default! And perhaps yours too. 🙂 I’ve been gradually investing since July last year, so I’ve jumped from 0 to 23k-ish in equity funds/bond fund/peer lending. Some of the cash is also actually ‘owed’ to me by family which is being paid back gradually, so not accessible at present. I have £26k liquid so far for a buy-to-let deposit and hoping to build a bit more by the summer.

      Also, as I’d been strongly considering taking a year or two out of working this year, I had been reluctant to invest too much in case I needed the cash to live on. But I’m not doing that anymore! Unless I so happen to lose my job or have reduced hours given the current situation, which is entirely possible. So my situation is in some flux at the moment.

      While it’s attractive given the pitiful savings rate to invest more in equities (and I have added money into Vanguard waiting to invest a bit more), putting most savings into index funds only really works well if you don’t need the money for a long time (as I’m sure you know), whereas I need to build a bridging fund to draw on perhaps in the next 7-15 years. After that, I think my work pension and downsizing combined would give me sufficient income. I feel it would be a mistake for me to put all my cash into the stock market if I need to withdraw in 7 years’ time when it’s not outside of the realms of reality that we would be coming out out a recession still then (though obviously I hope not!). There’s only so much I’m willing to lose!

      Back in January, I calculated my net worth to be £442k (https://pathtolife2.com/2020/01/25/six-months-of-blogging-reflections-and-goals/), a lot of it being my work pension, and once I’ve bought a BTL property (-26k), I’ll be holding about 6% of my net worth in accessible cash.

      Besides, while I will effectively lose money to inflation by holding cash and I count it as my FI stash, I tend to think I could use it for anything I wanted to at any time if I wanted! I don’t like to be too tied in, if I’m honest. 🙂 It gives me a sense of freedom. If you are tending to think your 17k cash is too high, then I understand if you want to put it to work. I’m still feeling my way through to work out how best to diversify my assets and what I’m comfortable with.

      Hm, I bet you weren’t expecting such a thorough answer, lol! Thanks for your comment!

      Liked by 1 person

      1. Hi Firelite thanks so much for taking the time to reply to me – interesting and helpful- you made me think about not looking at numbers as absolutes but cash as a % of total net worth. Will def go and have a poke around in your networth – I think understand your strategy – to build
        Up a cash fund to bridge between now and works pension as opposed to building an investment pot and live off / draw down from.

        It’s hard isn’t it when circumstances change and impact your plans – so hope
        Things work out ok in your job and you make your own choices.

        It’s also interesting for me to reflect on you keeping cash when needed in 7 years – I think I am comfortable taking to investment volatility for 7 years – but let’s see !! Good luck

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      2. Thanks, Squirreler! Well, atm, it’s worth noting that virtually all my accessible cash not assigned to my BTL deposit is in index funds! The fixed rate savings will mature over the next months and years, as I opened those a while back, not since considering early retirement in a concrete sense.

        I’d like to eventually make a pie chart with so much in cash, equities, property, defined benefit pension, peer lending and bonds. 🙂

        Liked by 1 person

  3. Congrats on the £100k + club and the awesome savings rate! I would have loved to have saved a bit more myself but I think our groceries bills have been higher than usual (so much more comfort food and alcohol!).

    And thanks for the reminder that we need to have something to look forward to. I can’t wait to meet up my friends, although can’t see myself being comfortable in a crowded bar or pub for a long time. Really miss eating in a restaurant!

    I understand why you’re holding so much cash as you may have plans for it in the short term. With what’s happened globally and in particular the cut in dividends, I’m thinking now that I may end up holding more cash in the future too.

    Hope all goes well with your job – no idea myself how safe mine is, so we’re all in the same boat sadly.

    Stay safe!

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    1. Thanks for the comment, Weenie!

      Hm, we are definitely spending more on groceries but this is from the joint account I put a set amount into where we’ve saved especially on days out and eating out!

      One thing I’m surprised about is not drinking more, but that’s one of the few good things that have come out of being so busy! And not socialising. I’m really a social drinker. So lockdown is saving me money there haha. Definitely more comfort food hanging about though!

      Yeah, I miss these things too… I was out the last full weekend before lockdown and I kept thinking then that this may be the last time for a long time! But others I was with seemed to just make a joke of it. Was fairly quiet though! Many students had gone home already, but still plenty on the dancefloor..!! Some celebrated St Patricks early.

      Restaurants, definitely. Maybe these will open within the next weeks with a 2m rule?! I actually can’t wait to go shopping in the browsing way! Like combined with a daytime drink in the sun. Also miss playgrounds and play centres for Junior Firelite!! Just so we can enjoy seeing him run about (and all be in a different place for a few hours).

      Thanks for the supportive words! You too, I hope your job is safe and you get to FIRE around your current loose plans. Take care.

      Liked by 1 person

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