My early personal finance records are sparse at best; however I was undertaking a bit of (pre)spring cleaning this week and came across an early retirement planning spreadsheet that was last updated in November 2007. That’s just a month or so after I started on my FIRE journey. It made for some interesting reading given my current FIRE position, so much so, that I thought it worth sharing particularly in view of some of the comments here.
On my FIRE journey so far I've found that Saving (Earning minus Spending) has been one of the most powerful accelerators towards FIRE. To demonstrate to the end of February 2016 68% of my wealth creation has come from Saving while only 32% has come from Investment Return. Looking at the 2007 spreadsheet I thought I could save £16,000 per annum and I wasn't planning on it increasing through my journey. To contrast that assumption in 2015 I saved nearly £100,000. Errors included thinking my Earnings had peaked and that I wouldn't be able to spend less than I was at the time.
I thought my investment expenses would run to 0.75% per annum. Now ‘way back then’ Vanguard in the UK didn't exist but even so in 2015 they were down to 0.27%. I also I thought my investments could achieve a real annualised 4.3% after expenses over the long term. So far I've only achieved 3.4%.
I thought that in Early Retirement a safe withdrawal rate would be the 4% Rule – 4% of my wealth on retirement day increasing with inflation annually. Today I think 2.5% is more appropriate. That is a big error. For a person wanting to FIRE on £20,000 it represents an extra £300,000 of wealth that needs to be accrued which is a big chunk of change.
I thought that the UK would be home and that I would need £28,000 of earnings per annum to live well in FIRE. Today I think I’ll need closer to EUR25,000 and we’re now 99.9% Continental Europe bound.
Crashing all those numbers above together plus putting some home considerations into the mix made me think I’d need a little over £700,000 to FIRE which included some mortgage payments. Today I think I’ll need £1,000,000 which includes paying cash for a home early into FIRE.
The Excel model had me retiring at age 50. With a fair wind today I think I can FIRE at 44. That is a big difference.
In this blog (for now) I stay very close to just the personal finance side of the FIRE equation. I hoped by doing so I might be able to take the emotion out of it, show what’s possible if you stay at it, show there is a different way than that rammed down our throats every day and if successful it would result in a healthy readership of ‘like minded’ individuals who would adapt some of the techniques and bring new ones to the table. If I average the last 10 posts that is 1,877 of you. With the below chart being the end result of what I blog about, which is a far better result than I ever planned back in 2007, I made an error somewhere.
Personally, as I write this I'm floating on cloud nine. Financial pressures are just disappearing as each day passes which is enabling nearly 100% focus on the important stuff in life and the world is about to become my oyster. Yet at the same time we represent just 0.003% of the UK population (and we’re not all from the UK). All of the mathematical errors above I now understand but this one I don’t. Maybe I'm just the wrong one to spread the message.
Click to enlarge, RIT’s progress to FIRE
Looking back I made a lot of errors in those early 2007 days. With so many errors did I actually get anything right I hear you ask? Given I’m less than a year from FIRE as I write this post I think I had one thing very right. I started.
As always DYOR.