Saturday 13 October 2018

2018 Quarter 3 Review, Readying for FIRE

Latchi, Cyprus at dusk
Latchi, Cyprus at dusk
With my work notice period now nearing completion I’m actually a little surprised at the calm in the RIT household.  Hopefully this means we believe we are reasonably well prepared and probably more importantly means that we still believe we are doing the right thing.

At work we’re just completing 2019 plans and I’m not excited by any of it which is a new feeling for me.  I’ve put this down to a couple of things.  One of the main objectives is something I’ve personally done on a larger scale twice previously so I would expect few challenges if I was leading the activity.  This might be a contributor but I suspect the real reason is that FIRE now just feels 100% like the right next step combined with feeling well prepared for what we’re walking into.  Not even Mr Market taking £72,000 from my wealth since its peak in mid-August and £58,000 in the last 3 weeks has made my think twice.  I guess that means I’m ready.

Our readiness for our Med move is also calmly progressing.  We have the removal company booked with them moving us in 2 stages for only an additional 5% cost.  This was our suggestion and I was surprised at the small delta cost meaning it was the lowest total move cost option we came up with.  The rationale is that the shipping time to Cyprus is about 4 weeks so what we’ll do is split our stuff in half meaning we’ll be able to stay in our current UK rental flat right up until the night before our flight and then in Cyprus we’ll only book a short term rental for 2 weeks which should be time enough to find a long term rental.

On the financial side we’ve also taken some precautions like opening additional current accounts with new banks as that will be almost impossible to do once we’re non-resident and banks have form of closing non-resident accounts when they decide it’s best for them.  For example Barclays has form with residents of Cyprus being specifically targeted for closures.  We’ve also opened up new UK savings accounts for a fresh 12 months bonus interest by which time we should hopefully be putting those cash funds to work on a home purchase.  The best I came up with here was the new Goldman Sachs Marcus account which is giving me 1.5% annualised.

We’re also starting to think about what we’re going to need to purchase in Cyprus for our new lives and making sure we can get access to that cash quickly.  We’ve therefore opened up a competitive international currency transfer account as well.  One of the things I’ve decided I’ll ‘need’ very early on is a new road bike.  Requirements are a relatively good price vs weight bang for buck, suitable for plenty of miles in the saddle, suitable for hill/mountain ascending/descending plus the flats and good enough that when I get dropped on club rides it’s because I’m a ‘fat unfit b*stard’ not because I’m riding something that weights 30kg.  The best I’ve come up with is this:

Canyon Endurace CF SL Disc 7.0
Click to enlarge, Canyon Endurace CF SL Disc 7.0

Do any readers have any better road bike ideas?

With the move now just weeks away this makes this quarterly update the last that shows how I’ve accumulated my wealth.  The next update will switch to how I’m managing drawdown.  Accumulated wealth is quite a loose term in this case given since the start of the year my wealth has actually reduced by £14,000 or -1.1%.  Let’s look at the details.


I unapologetically continue to define Saving Hard differently than most personal finance bloggers.  For me it’s Gross Earnings (ie before taxes, a crucial difference) plus Employer Pension Contributions minus Spending minus Taxes.  Earn more and one is winning.  Spend less or pay less taxes and you’re also winning.  Savings Rate is then Saving Hard divided by Gross Earnings plus Employer Pension Contributions.  To make it a little more conservative Taxes include any taxes on investments but Earnings include no investment returns.  This encourages me to continually look for the most tax efficient investment methods.  I finished the quarter with a reasonable Savings Rate of 49.3% against a plan of 55.0%.

RIT Savings Rate
Click to enlarge, RIT Savings Rate

This low’ish rate is a bi-product of me now being towards the end of my accrual journey.  I’m at peak earnings which includes taxes at 45% (the Additional Rate) plus 2% national insurance as well.  On top of that I’m also seeing peak tax on my non-tax efficient investments.

The bit I can control, my spending, is well in check.  Year to date, excluding work and rent costs, that’s a reasonable £650 per month.  It’s been helped by us not paying for a summer holiday or summer FIRE location research as we decided to just keep our heads down over the summer but it does include our one-way flights, removal deposits, night before flight accommodation and some private health checks we wanted to get done before we head off.

RIT Spending
Click to enlarge, RIT Spending 

Saving Hard score: Pass.  Well below the target of 55.0% that I set many years ago but when I net off taxes that leaps to 84.5%.  It’s also only 4% more than we were spending in 2015 and we’ve seen plenty of inflation since then indicating we’ve actually continued to reduce costs as we continue to focus on quality of life and treading lightly on this fragile planet.  That’s good enough for me.


2018 9 months in (06 January 2018 to 06 October 2018) investment return closed at -1.4%.

Investment wise I continue to morph the portfolio from one focused on accumulation to one preparing me for drawdown in FIRE.  This means:
  • Cash and cash like holdings (NS&I Index Linked Savings Certificates predominantly) for the non-mortgaged home purchase but also to give me a few years of cash buffer as I enter FIRE continued to improve.  At the close of 2017 that stash was sitting at £334,000 and is £342,000 today.  Plenty for what we’re trying to do as we enter wealth drawdown and I’ll share that in subsequent posts.
  • I’m also trying to ‘ensure’ I can live off dividends alone in FIRE.  2017 total dividends were £27,384 and this year is now looking like a very modest increase to something around £27,844.  For a while now I’ve been working with a forever assumed Euro exchange rate of 1.123 (which of course may prove to be a mistake given the continued slow motion Brexit omnishambles but I’m continuing to stick with it for now) which would make my 2018 dividends EUR31,269.  In contrast my latest proliferate Med FIRE spending, a budget where 47% of spend is for fun, is expected to run to EUR27,593 giving me spending cover of 1.13.  Given how much I can wind back spending in a severe bear market this continues to look healthy which may be one of the reasons I’m now so relaxed about my financial position.  
RIT Annual Dividends
Click to enlarge, RIT Annual Dividends

For completeness this is what my asset allocation looks like today.

Current RIT Asset Allocations
Click to enlarge, Current RIT Asset Allocations

I continue to invest as tax efficiently as possible with my tax efficient holdings now consisting of:
  • 43.4% held within SIPP's
  • 8.8% held within the no longer available NS&I Index Linked Savings Certificates (ILSC’s)
  • 14.6% held within a Stocks and Shares ISA.  
Tax efficiency score: Pass.  At the end of 2017 this was 66.3% and half way through 2018 it’s now 66.8%.  This is also helped by all new money that can’t be tax sheltered now being passed directly to the already FIRE’d, so low taxed, Mrs RIT for investing in her fun money portfolio.

Investment expenses also continue to be treated like the enemy.  2017 finished with expenses at 0.23%.  Today they are at 0.22% helped by a partial pension transfer earlier in the year and by not making previous investing mistakes like buying expensive active funds hat I can’t currently sell given my current earnings as they don’t have UK Distributor/Reporting Status.

Minimise expenses score: Pass.  A reduction by taking some conscious actions throughout the first half of the year.  0.01% doesn’t sound like much but given my current wealth that’s £135 a year staying in my pocket.  I’ll take that.

In the scheme of a lifetime of investing this year is insignificant.  I’m all about time in the market and not timing the market so let’s zoom out and look at my performance since I started down this DIY road.  My long run nominal is 6.5% which is a real (using RPI) return of 3.5%.  The chart below tells the story.  Note that the chart assumes a starting sum of £10,000 which was not my portfolio balance at that time but is instead simply a nominal chosen sum to demonstrate performance.

RIT Portfolio Performance vs Benchmark vs Inflation
Click to enlarge, RIT Portfolio Performance vs Benchmark vs Inflation

Long term investment return score: Conceeded Pass.  My whole investment strategy since 2007 has been about generating a long term real return of 4%.  3.5% is below that but has been good enough to help me achieve Financial Independence in under 9 years and FIRE in 11 years.  The question now is are we just starting to head into the next bad sequence of returns right as I enter FIRE?  It’s a question that shouldn’t matter to me provided the future sequences I’m about to experience are no worse than what we’ve seen in the past - which has included world wars, depressions and periods of high inflation - as back testing my strategy leads to 100% success.


I’ve proven that combining Saving Hard and Investing Wisely gives Early Financial Independence and the option of Retiring Early.  Both the theory and my personal experience says that if you want FIRE it’s the first of those that is the priority.  This is the contribution I’ve personally seen from each element.

RIT Contributions from Saving Hard and Investing Wisely
Click to enlarge, RIT Contributions from Saving Hard and Investing Wisely

I’ve now been on this journey for nigh on 11 years and all that Saving Hard and Investing Wisely adds up.  My progress to FIRE now looks like this:

RIT Progress Towards Retirement
Click to enlarge, RIT Progress Towards Retirement

Wealth today sits at £1,295,000.  Continuing to look backwards and I’m still pleased that I did my One More Year(s).  That extra buffer feels really good and it allows me to do some silly things throughout FIRE like buying a new carbon ride bike on FIRE day 0 when a second hand aluminium one would I’m sure do 99% of the job.

This wealth has come from nothing more than hard graft, considered spending and taking some time to focus on some selected investment fundamentals.  Netting off the home purchase, converting to Euro’s and now with proliferate spending in the FIRE calculation that’s a starting withdrawal rate of 2.3% against a planned 2.5%.  It still doesn’t get much better than that...

How is 2018 progressing for you?

As always please do your own research.


  1. Good to see the plans are on track RIT and I hope all goes well with the move. As usual, it looks like you have all the angles covered.

    As for returns, I had been doing well up until the past week or so when my tech funds took a hit however my VLS 60 has tempered the downside. YTD return for the portfolio is just 0.5% so hoping for a recovery in the coming couple of months.

    1. Hi John, good news you're still above water. What's keeping you there?

      About the only thing I own that's positive year to date is my US Equities. My UK, AUS, Europe, Japan, EM Equities, UK Index Linked Gilts, UK Corporate Bonds, UK REIT's, Europe Property and Gold are all negative from a capital perspective when priced in £'s. Of course all but the gold have spun of dividends.

    2. Yes, there are a few keeping my portfolio in the black. My largest tech holding Scottish Mortgage has retreated quite a bit recently but still ahead on ytd, likewise Mid Wynd. Also my capital preservation fund Capital Gearing is ahead for the year and also TR Property, Tritax and HSBC Global Strategy.

      I have also been lucky selling some of my income trusts earlier in the year and not all off the proceeds have been redeployed yet. I have been expecting a correction for some time but whether there is more downside...who knows!

    3. I agree John - who knows what tomorrow brings. It's why I went away from using CAPE and I'd already proven I was a useless trader prior to that. A mechanical buy/hold rebalance strategy for me forever I think.

  2. Re: Bike choice. I'm a mountain biker so my advice won't be too specific to road bikes. What are bike shops/online stores like in Cyprus? Sure you can get replacement parts shipped in from elsewhere - but if you need someone to fit them and you have a bike with special requirements toolswise/parts wise? Also what are the roads like there?

    Personally, to guard against this I'd look to established - perhaps older - standards eg a threaded non-Italian fit bottom bracket, a middle of the range groupset, steel or aluminium frame (people tend to regard carbon fibre as having a shorter life). Perhaps even consider if a touring set up might suit needs better (especially if riding with the family).

    With any bike - contact points - saddle, handlebars/grips and pedals are worth paying attention to as the ones supplied may not suit. Again the options for trying things out maybe more limited in Cyprus compared to here.

    On bank accounts. Is there someone you trust who could act as a UK postal address for you?


      Good points made here - especially NB potential problems with decompressing the brake system when you take a wheel off eg to mend a puncture.

    2. That's a problem with all hydraulic disc brakes tbf. Providing you don't squeeze the levers with the wheel out or stuff some cardboard/supplied wedge in the calipers it should be fine.

    3. Quality of bike shops is something I don't really know about yet. Near to where we'll be I know there is one that sells Orbea and Look. I also know of another selling high end stuff from Cipollini. Time in country so far hasn't afforded me the time to do this level of exploring (looking forward to it though) and a lot of businesses (not cycling specific) don't do much online to the point of not even responding to emails. Go into the shop and speak face to face and they then couldn't be more helpful though. Quiet old school and something I'm attracted to.

      I mostly push a pen currently but I'm actually pretty good with my hands. For example I'd have no trouble changing a press-fit bottom bracket. Used to fix my own/friends cars in the past.

      Roads from what I've seen are good and most importantly plenty of them are wide and quiet of traffic. There are also some coastal paths to ride along. It's one of the attractions. My exploring so far has been on foot and in a car so haven't ridden on the tarmac yet but have seen plenty doing it. There's also what looks to be a pretty significant informal club as well.

      I actually intend to eventually get a mountain bike as well but that will be my second priority and I won't spend much on that. We'll be close to the Akamas National Park which is full of trails. There also seems to be a lot of other opportunities off the Troodos.

    4. I am sure the local clubmembers will be able to help you in all sorts of different ways. I would join at the earliest opportunity - even if you don't think you are fit enough yet . Sounds like the terrain will do that job for you anyway.

  3. Hi RIT,

    My wealth tracking spreadsheet is very basic and doesn't tell me what my returns are from saving vs roi from investing. All I do is go through all my investments and accounts once a month and capture the figures and calculate total wealth. So I can see it going up and down but not why. I don't even track outgoings vs income so this is another gap.

    I plan to become more precise about it.

    On the note of outgoings, I can't remember if you detailed it but I find it quite incredible that you have a budget of only €27.5k pa. Have you ever broken this down or does that reveal too much personal detail?

    RE must be close now!

    1. I found it very useful to separate them as you can then compare your investment return to benchmarks and you can also hold yourself accountable to a target savings rate to name but 2 reasons. This post shows how I calculate investment return

      I have a detailed line by line spreadsheet of where the EUR27.5k will go. This post is the closest I came to sharing it. That post was based on living well on EUR22,429 - the increase is just an extra EUR100 per week fun money that has come from my OMY's. It's also important to note that spending is based on owning our home so we'll have plenty. Once I'm on the ground and have accurate numbers I've 100% validated I'll definitely share more.

  4. RIT - have you ever been measured for optimal bike set up ? Your supplier should be able to do this but if you are buying online then IMO it would be worth paying to have all the measurements done . Ultegra is a great groupset - can you choose crank length or does it come with 172.5mm as standard ?

    There is so much on the web for you to look at if you find that helps - but optimising your bike set up is always well worth it.

    I used to do some serious time trialling - wanted to do a 12 hour but had a bleed in my eye after a 3 hour ride ( related to undiagnosed blood pressure and possible dehydration ).

    1. Hi SV - never been fitted but I've read it brings big value to many. Prior to coming to the South East of England I was pretty poor and so rode an old steel framed thing I'd picked up second hand that 'felt right'. Did a lot of miles on it but not particularly quickly and TBH I couldn't even tell you what groupset it had on it as it was a tool (which I loved being on) rather than a hobby. In the South East I've stayed off bikes for fear of my own safety with the levels of traffic/narrowness of roads and instead gone with a lot of walking but very much looking forward to getting back on a saddle.

      Re: groupset. I was actually thinking of going with 105. That Canyon weighs in at 8.4kg with a 105 and discs which while not light doesn't seem bad. I've never ridden Ultegra but my understanding is that the big difference between 105 and Ultegra is weight. Would you ride 105? Crank length is not specified.

      What did you use for your time trialing?

      Other than Canyon I also thought about a Cannondale CAAD. Thinking aluminium might be a bit more robust as I get myself back up to speed but concerned the racier set-up may not play nice with many hours in the saddle and my 45 years.


      Comparison between Ultegra and Durace.

      I bought a 2nd hand steel framed Ron Cooper owned by a serious time trialler who was nearly 4" taller than me. Surprisingly it fitted me really well ( and I only have average length legs @ 32") It was fitted with Durace throughout ( except wheels ) - downtube changers and 16 speed - Reynolds 753 very stiff steel frame with curved front forks, calipers and 175 cranks. So - very old fashioned ! I have a fast cadence and rarely out of the saddle. It was a great bike for long and steady TT's. I think what you are looking at is a very versatile bike that should cope with different conditions and riding styles - but think about Ultegra as I think it will last longer than 105 and prove more reliable too.

      Another advantage of joining a club and riding in a group is that you can ask colleagues for advice about " how you look " on the bike which might help you tweak the set up . Also - if you start getting niggly pains during or after a ride ( especially knees ) - think set up again.

    3. Thanks for the hints SV. Difference between Ultegra and 105 on the Canyon is about EUR600 but that gets brakes, cranks and groupset upgraded. Might try and get a back to back ride on each - won't be a Canyon but should help with decision making given it's a big step up in price.

      Will definitely get involved with the club particularly as they say they are informal. Plan will be to go solo for the first couple of months. Want to do some self exploring, generally get to know the geography and get the fitness back to something sensible. Also on one of the forums I frequent have come into contact with someone involved in a mid-week chain gang that I'm welcome to join. They used to take it very seriously but they have some years on me so I hope that balances things out and I'll be able to keep up.

    4. Wow - EUR 600 - that IS a lot . Over to you .

    5. Haven't investigated it too heavily but there are some other differences as well - wheels, tyres, saddle, seat post etc. The reason I didn't is that even what I'm proposing to buy seems quite profligate and is probably far better than my capability justifies. I'd question whether even what I'm thinking of buying passes my value assessment meaning I should really be looking at much less.

  5. If the last bike you road was an old steel frame many moons ago then that bike will blow your mind. Thats a very sweet bike.

    8.4kgs not too bad for a disc.

    105 will be *plenty* good enough - its a superb groupset.

    You going to order it over there? Be *very* careful if you get it in UK and have to transport it. Carbon is fragile. And once you ding it, its fucked.

    1. Thanks The Rhino, that's reassuring.

      Ideally, I'd like to support my 'local' bike shop so plan is to get on the ground in Cyprus, scope out who my local bike shops are and then see what they have that's similar plus what that might cost. If they can come close with the spec vs price then I'll go with them and if not Canyon here I come.

      Your point about dinging is one I'm very conscious of. Maybe I should go aluminium after all...

    2. We have aluminium Rose and Canyon variants of the Ultimate/Ultegra in aluminium frames. Both are great bikes for pure road use. Ultegra is a little more precise than 105, but you wouldn't be able to tell much difference on a actual ride. However we have just bought a pair of PlanetX London Roads with Rival x1 groupset. And we ae really impressed with the all round ability of the bikes. Ideal if you want a do it all on road and trail bike. Not sure what the road/cycling paths are like in Cyprus. Prices are less than the Rose\Canyon variants.

  6. Careful. A mountain biker was shot dead the other day, mistaken for a boar.

  7. I can't see past Decathlon bikes for VFM.

    Their closest spec to your Canyon (Carbon frame, 105 groupset, albeit rim brakes) is £1400:

    The Alu framed equivalent is £800:

  8. Definitely wise to open extra bank accounts before you go. Also check how much are their online transfer limits. NatWest for example charges a high £22 for international transfers and you can only do £10k per day. I tried to open First Direct because it has higher limits and lower fees, but was rejected because of non-resident status.

    Also maybe worth getting a few extra credit cards. Halifax Clarity is excellent for overseas spending. Gives near perfect exchange rate.

    Also check Revolut, they give you both a UK and Europe bank accounts. Perfect exchange rate transfers between your account. Virtual debit card.

  9. Really robust and honest look at how you're managing the retirement. Good luck with the Cyprus move! I'll be checking back for advice and to check in with your porgress.

  10. I'm so happy for you @RIT, and most especially that you're feeling good about everything despite the recent drawdowns. (I know myself too well, and suspect I'd be think of One More One More Year to try to take advantage of the dip. ;) Well, if I was ever planning on totally retiring, which I don't believe I am.)

    Really looking forward to hearing how the shift to drawdown goes.

    Enjoy hitting the empty weekday roads on that new ride! :)

  11. It all seems real, yet surreal as you're talking about buying bikes and whatnot! :-)

    I hope the recent blip in the markets hasn't caused too much concern.

  12. I think not having mortgage in such low interest environment is a mistake. I would take mortgage out and rest keep invested for accrual.

    Also, I would be curious to know how this accumulated wealth is split between accounts for insurance protection (as shares accounts in the UK are protected only up to 50K) - it was always a headache for me and it would be interesting to see how others are solving this.

    In any case - enjoy your Mediterranean adventure, you are a decent guy who very much have earned it!