Saturday 31 October 2015

FIRE takes Determination

So that’s October 2015 pretty much done.  Another month where spending has been kept firmly in check with spending excluding rent and work costs weighing in at a hefty £529.

RIT October 2015 Spending
Click to enlarge, RIT October 2015 Spending

This week has been a killer work wise.  One where I'm not even brave enough to add up the hours worked and energy expended for fear of even embarrassing myself.  This week has also reminded me of one of the key unspoken elements required to FIRE (financially independence retired early) – DETERMINATION.  Let me explain.  Most of the themes that I'm using to FIRE are quite formulistic – Earn more, Live below your means to spend less, Invest tax efficiently, Minimise investment expenses, A diversified investment portfolio, Rebalance etc.  The one formula that I'm not using is that of an easy get rich quick scheme.  Instead my path requires commitment and dedication every day, every week, every month and every year until FIRE is reached.  For me that’s likely to be a bit less than 10 years.  For others it could of course be more or less time but still a relatively short time compared to those who intend to retire at State Pension Age.

As the ermine has pointed out the pace of that journey is also likely to be largely influenced by how much you save rather than that miracle called compound interest.  To demonstrate that my journey thus far has seen 69% of my wealth growth coming from savings while only 31% has come from investment return.  Living below your means (and Earning more where possible) is therefore a key to FIRE.  It means that at the end of a tough week, unlike many, you don’t head to the local shopping centre or High Street for a bit of retail therapy.  In my chart above you can clearly see how much I've spent on clothes and entertainment to buy gratification this month.  That said I do get gratification in many other ways just not from spending.

Now let’s take that all in the context of this week.  I update my financial position every week on a Saturday morning with a fresh brew.  Last week that position was £833,024.  This week, excluding pension contributions, I've added additional savings of £3,500, the result of a hard month’s graft which has taken its toll.  I awaken this morning, still exhausted from the week and update my wealth position to find I'm now worth £831,853.  Despite contributing £3,500 from blood, sweat and tears I've gone backwards to the tune of £1,172.

It’s made me even take a second to rethink am I doing the right thing.  The answer is a resounding yes but just how many others would think the same thing?


  1. I'm not sure it would bother me too much, although I only do my networth monthly I do go through some of my accounts on a more regular basis. But then I'm not killing myself on queening a ridiculous amount of hours, and neither is Mr TV. For us, it's not with it. We want to be present in our son's life on a daily basis as well as enjoying life every day. Because of this decision, or FIRE journey will take 16/17 years instead of the 8-9 it would take according to our aggressive plan. We've literally doubled our years to FIRE, but it IS worth it even MORE now...

    1. Sounds like you've made the right decision. Back in March I also spent a lot of time reassessing if I was doing the right thing pace wise. I thought about slowing my current field of work down or even changing careers. In the end I decided that my now high earnings meant I was close enough to not burn out before the finish line. 8 months on I'm glad I stayed with it. We've both made different decisions but yet both made the right decisions for us. That's what makes the world an interesting place IMHO.

  2. As I started my FI journey less than two years ago, the pace at which my pot of money is growing is tediously slow and it will take a huge amount of determination and focus to continue - much as you have done so in the last 8 years.

    However, my earning power is limited, there's little scope for career progression for me so I'm counting on staying where I am (or at a similar level) for as long as possible, therefore the spending less factor is bigger for me, rather than earning more.

    I have a good work/life balance - I don't take work home with me and I work mostly to my usual hours, nothing excessive except in an emergency.

    What keeps me going is that in my first year of saving properly, I was able to save the same amount that I had saved in total in the previous five years, back when I had no plan and no focus.

    Seeing your wealth position go backwards can be disheartening but expected due to the nature of equities.

    1. Firstly, many congratulations on saving in one year what you normally would have in five. That is an achievement that anyone would be proud of.

      I've had very good success in increasing earnings in recent years but I must say it's taken its toll physically. Monday to Friday is now full-time work and on the weekends I'm becoming pretty reclusive as I need some down time to recharge the batteries. I can still see more earnings potential but I'm starting to think I've reached peak earnings personally because I'm physically (not mentally) not capable. Only time will tell I guess.

      On the Determination front I'd say two things as someone who is 7 years ahead of your good self:
      - don't give up on the earnings potential. Always keep your eye open for that better paying opportunity as they can appear from anywhere. For example two of the roles I've taken on thus far in my career didn't exist when I started at the company.
      - all the effort has been 100% totally worth it. Even now (and I'm not there yet) I'm starting to act like a kid in a candy store with my better half. Where are we going to live, what type of home do we want, is our priority to get somewhere that's cycle or sea kayak friendly! Nowhere are we asking ourselves is it close to the job. We're also not asking ourselves is the job secure enough to take on a mortgage.

    2. Sea kayak: doesn't that imply either the seas around the Hebrides or the Aegean? And the latter might have too many corsairs quite soon.

    3. @RIT

      > it's taken its toll physically.

      Y'know in a car there's a little light with an oil can that shouldn't come on?

      It's on in your FI/RE vehicle... Now I can't criticise because I took the same chance in my journey along the mental health axis, knowingly, to take flyer on working another couple of years in an adverse environment rather than a decade working minimum wage at Tesco. I was lucky and got away with it.

      But I'm still not sure whether that really was a wise thing to do. Look after yourself. That vehicle's the only one you have, and it looks like the road is rough.

  3. Love reading your posts RIT.

    "I update my financial position every week on a Saturday morning with a fresh brew" I do mine every week as well, it's strangely therapeutic. It's good to think that there are a few of us out there doing this regularly. Hopefully we are all synchronised too, the NetWorth Cult.

    Although I have done some posts to the contrary, I tend to work fairly hard, even if not long hours at work I was up in the morning getting some revision done. Exams are nearly done for me, the retraining nearly complete. The plan is to transfer those hours of study into work to keep on moving up. Like you say, it's long hours, but it's long hours that have a purpose. The money, the promotions etc are the means of fulfilling another goal, not something to be used to compare yourself to others with. Will it be worth it? Time will tell, but I can only imagine yes it will be. What I can't understand is people at work, grinding out hours with, seemingly, no real purpose to it, other than aiming for the next promotion. It takes all-sorts I suppose (I'd quite like some liquorice actually).

    That is some monk-like spending you have going on there, but it's working. FIRE is close. Keep it up.


    1. I agree Mr Z. I've actually stepped away from some family and friends for whom life was a competition. Today, they clearly have more stuff than me but it's no longer important to me and I actually became bored of hearing about the consumerism. There is just so much more to life. I guess it takes all kinds.

      As for grinding out the hours for no purpose. I honestly don't think I could do my job if I believed I'd be at it another 25 or so years until State Pension Age. I actually think it gives me an unfair advantage in the workplace as I know I only have a short time left to run. I guess in this dog eat dog world we have to take any advantage we can.

      Great to hear the studies are nearly over and good luck with the next higher paying job.

  4. You're a braver man than me, RIT. Once, maybe twice a year, is as much potential disappointment as I can take when I check my current position. Unfortunately those losses always sting more than those gains (see Kahneman and Tversky for the science behind it). Just do the right think, and let the bottom line take care of itself, is my motto.

  5. This is one of the reasons why I invest for dividend income. If I have saved and invested (the very respectable sum of) £3,500, then to me the only metric that counts is that I have increased my monthly passive income by £11.66. That's £3,500*.04/12. Of course, that assumes the yield of the investment is 4%.

    That way you have a very clear monthly income target to head for, and you can see through the noise of the fluctuating capital value. A further advantage is that each day at work has a specific long term value. For example, at my current savings rate, each day I turn up at the office increases my dividend income by £1.

    At the end of the week I congratulate myself for creating an additional £5/month! at the end of a month of work that's around an extra £20/month. It really adds up. To me that's real motivation.

  6. As your pot increases, the instant value will be dominated by the vagaries of the market rather than your contribution. If you are a passive investor, checking too often is a bad idea, as due to market vagaries you might find its gone down 23 times in a year, up 29. If you checked yearly, down once, up 4 times. Too much bad news will cause you to fiddle, and fiddling tends to lead to buy high, sell low losses.

    Why not check once a quarter, but against the numbers a year before each time?

  7. Hi RIT,
    I only look at capital values end of year. I'm a dividend investor. I should finish this year with £19K dividends, next year I should hit my target of £24K pa. For me 2K per month will pay all my bills with margin without working again. Mortgage is paid off. BTW, your net worth of $830K with a portfolio generating 4% is easily achievable with relatively low risk diversified dividend stocks. That will generate £33K pa. Even the FTSE currently generates about 3.5%. Regards, Jon.

  8. Of any interest?

  9. Impressive saving activity and control of expenditure and a substantial savings pot.
    I am surprised that your investment activities have not obtained a more significant return and glancing back at the earlier posts, I too am impressed by Tim Hales approach but surprised that you have followed an HYP approach and not a more international passive approach, likewise the equity orientation is fairly modest.

    I achieved FIRE in 2007 but with a very high equity position, the financial turmoil of 2008-2009 was a disappointment, a major market crash was anticipated sometime just not quite so quickly! The high proportion of equities maintained since then has improved my financial position markedly with 8 good years of freedom from compulsory work.

    I understand you need to buy a house sometime but have you considered buying one and renting it out. It is likely to have some of the inflation resisting properties of your index linked bonds provide a reasonably reliable yield probably exceeding that of your cash/bonds plus the opportunity of making a capital gain.

  10. I don't think I could match your pace! I think there's a big difference between the journey and the destination. I feel my main driver is the FI, or if not FI, then greater financial security to absorb what the world throws at me rather than the RE bit.

    I have achieved that to a small extent with a solid emergency fund and portfolios of funds and shares which would help manage a period off work much more easily, but the time to get to RE is a long way away.

    Perhaps for that reason I'm not beasting myself in the way you seem to, but kudos to you for doing it! Maybe in the last few years the motivation will be a lot stronger and I'll up the ante. At the moment the path is set but the tempo is solid, rather than spectacular, but I'm happy at that!