The most common new year resolution is to exercise more, followed by ‘lose weight’ and ‘improve my diet’.

Sorry ‘save more money’ and ‘career ambition’, you only come 4th and 5th!

But even though goals are better than nothing, they are not very useful.

Every January, I keep going back to what James Clear (Atomic Habits) says:

Forget about goals, build systems instead

Build systems, and the score will take care of itself.

This applies to everything: weight loss, investing, career promotion etc.

For example, say your goal is to lose 20kg.

How do you go about it? The goal might seem daunting at first and can quickly end up in the ‘too hard’ pile.

You have a rough idea – cut down on snacks and junk and eat more salads and fruits instead. Try combining it with exercise to make it happen faster.

Easy in theory, hard in practice.

A system consists of simple routine tasks you can do without much effort.

For example, cooking at home might help you lose weight if you plan meals ahead. As long as you stick to it, that is!

Your system might include what recipes you make, how you’ll source the ingredients and how often you cook.

Every Friday lunchtime, for instance, you’ll order next week’s ingredients online. You’ll cook in batch mode every Monday and Thursday for the rest of the days.

On Friday or Saturday, you can reward yourself with a takeaway dinner.

Goals help set the vision.

But a system will make or break the progress towards your goal.

You can apply systems to all areas of your life. Entrepreneurship, getting a promotion at work, being a good parent, and investing and saving.

Different goals can have synergies between them. For example, cooking at home will help you lose weight and save money.

The benefits of having a working system go beyond achieving the goal. Because they make sure you stick to it and stay caught up.

When having a system, you take advantage of this continuous improvement that compounds over time.

My goal: Strengthen the body

After spending some time with a pro-CrossFit athlete, I got enough motivation to start working on my body again (Thanks V! )

I need to stick to the system of hitting the gym every second day, with no exceptions.

I can do it most days, but some other days are hard! Like really hard, no motivation etc. I focus on making the bad days count. If I can make the bad days count, I can keep going.

I also feel much happier after a workout, which gives me another reason to do it.

FTSE 100 All-Time high – Not in the news, is it

It took two decades, but the FTSE 100 is at an all-time high!

There’s always a bull market somewhere !😉

That’s right; our UK home index has hit an all-time high (in British pounds).

You won’t see this in the news, maybe in some #Fintwit circles I lurk in, but that’s about it.

I am not ignoring the cost of living squeeze and the high prices. Households are struggling.

But at the same time, I will highlight a positive when I see one. Optimists live longer, they say.

If you are in a position to have savings, you are at a great place already. Consider putting those savings to work to beat inflation, which is (slowly) dropping.

Oh, those mortgage rates are following too.

Company Investing makes an impact!

More than 200 business owners have taken the company investing course so far.

I am very grateful, and it’s nice to see this makes a difference in people’s finances.

In January, we had two live Q&As where I met some very clever business owners. We had good fun talking about tax, investing and business.

The live Q&As are part of the course and go hand in hand with the recorded videos, notes and spreadsheets.

Are you interested in joining us? If you are running your own business, check if the course/community is for you!

Don’t forget to use your NEWYEAR coupon to get a £100.00 discount 🙂 Promo expires end of January.

Property partner rebrands to London House Exchange and adds liquidity

In other investing news, I noticed that Property Partner rebranded to London House Exchange just now.

I’m still down -7% since my original investment in property partner in 2018. That’s partly due to my decision to invest a good chunk of it into student accommodation and partly due to big discounts on the platform. Investors want out.

As I described in 2021, Covid hit student accommodation hard. It goes to show how much some of these PBSA properties have dropped.

London House Exchange have now added another metric, the Vacant Property Value.

From their definition:

Vacant Possession Value (VPV): assumes each unit within a residential block is sold individually, with vacant possession (i.e. no tenant in place)

For example, if you own a block of flats valued at £1m, you can get better outcomes by selling units one by one. Which can result in a higher return.

The vacant possession value should better reflect the portfolio value, in theory. That’s because selling individual units in a block is the strategy Property Partner follows when ‘exiting’ an investment.

And in practice, if we look at the actual selling record, the Sales price matches the Vacant Possession Value.

According to that metric, I’m not down -7% but up 1.5%. These include dividends and are after fees.

VPV won’t apply to my student accommodation though, so I’m not fully benefitting from that.

Speaking of which, my property portfolio looks much nicer without the student accommodation… but that’s wishful thinking.

Time will tell which metric better reflects the money I’ll get. For now, I hold.

Liquidity in the secondary market

Even good Property Partner properties can trade at a discount to what they sell in the open market. Which sucks because imagine you have picked fantastic properties and are up 30%, but you cannot sell them.

So if you have a healthy portfolio and are sitting on gains, you cannot easily exit because there are not enough people willing to buy – or at least at the estimated price.

There are some positive signs on the horizon. Since the Property Partner acquisition by Better, the parent company will now fix the liquidity issues in the secondary market. Or at least try to.

They will buy 1% of all properties on the secondary market each month for three months. Retail investors can jump on the wagon, too, investing at a -25% average discount to the property values.

To do so, they offer a new investment plan somewhat close to what I would describe as a “property index fund”.

The all-Share Investment plan will target clients who can invest in a highly diversified portfolio with a focus on shares trading at a discount to property valuation.

You can view it here. Always do your own research.

Last but not least, they grew the PP team, which is a good sign for the platform.

To my surprise, Better also bought Trussle, the online mortgage comparison. You may have used one of those. I will try Trussle and Habito on my next remortgage.

Another area where software is eating the world.

Life Sciences and BioTech

Next week I will interview Andy Craig of How to Own the World book fame.

Andy is a repeating guest with whom I could talk for hours.

I know his background is in biotech businesses, and we briefly covered some of it last time (23:50).

This time I want to focus on this emerging trend and how life sciences will change the world around us.

Yes, of course, you can expect a discussion from an investor’s point of view since Andy is launching a new fund on the subject.

Are there any questions you’d like me to cover? Please give me some inspiration!

Other resources

I recently read the Price of Money book by Rob Dix.

Rob did an excellent job explaining how complex economics work, like quantitative easing, inflation and currency depreciation. The focus is to help the reader understand and potentially take advantage of the situation.

For such a dry subject, Rob’s writing, knowledge and humour delivered! It’s written from a UK investor’s point of view, which is always helpful and a bit rare.

A relevant book across the pond, a bit more advanced but dry, is the Pragmatic Capitalist by Cullen Roche.

I also finished watching the 4-episode Madoff documentary, “The Monster of Wall Street”, on Netflix.

A huge Ponzi scheme. Enough said!

Netflix did a good job describing the situation, interviewing real victims and showing what happened.

But I’m pretty sure that’s not even half the story. What they don’t say is what happened behind the scenes.

There are so many open questions:

• What was going on with so much money?
• Why were fund managers committing suicide or being killed?
• Was the SEC truly so blind?

I guess we’ll never find out.

Films like that make you question who you give your money to…

As always, thank you for reading and happy investing …carefully!

PS What do you think of my email approach to include the entire blog post in the newsletter? That’s different to my previous ones, where you only get a preview and a link.

Freshly served cold coffee.

Sun’s shining.

People walking past.

Can you picture me writing this post in Greece?

So here I am, writing about Greece as a potential place to live.

You don’t necessarily need to be financially independent to move to Greece. But working remotely or covering at least some living costs from elsewhere would solve many issues.

I have always been a big fan of the Greek / Mediterranean way of living. Obviously, I am biased!

But I present my arguments so you can make your own judgement.

Greece would make for a great place to live, particularly so if you are Financially Independent. Families included.

Here are the main pros and cons before I dive deeper:

Living in Greece is Fun!

What’s FIRE life without fun?

It doesn’t matter what sort of person you are. You will find something fun to do in Greece all year round.

From sports to activities, nightlife or art, Greece is just fun.

Are you a sports person? You can do sea sports: windsurfing, sailing, kite, (or just sunbathing 😉).

Sure the weather attracts people to beach holidays.

But Greece can be fun in the winter too. Skiing, hiking or just relaxing at the chalet.

Do you enjoy family trips to small villages in the mountains? That’s on the menu too.

Do you like history or mythology? Visit Knossos, Europe’s oldest city, or the ancient theatre of Epidavros.

Not to mention the all-time classics: Basically the entire Athens (incl. Acropolis), Delphi and Meteora.

Pick any place in Greece and you will find ancient monuments from thousands of years ago.

Weather, obviously!

The mild climate uplifts my mood. That’s probably not the same for everyone. But when the sun is out I am definitely happier.

London weather has changed too, for the better. I’m not rooting for climate change, but I can’t help but observe how much warmer and sunnier London has become.

Now, although Greece is warm, beware that it gets TOO warm for some. Almost unbearable in the summer.

35 or even 40 degrees are not unheard of. Turn on the A/C and wait. It can get hectic.

Right now in spring, it’s perfect. Here is a sunny morning at 25 degrees in the city centre of Patras. A town ~3 hours drive from Athens.

Fun is driven by the people. Greek people crave having a good time. There’s always a reason to go out, which explains why the hospitality industry is always on fire!

Low Cost of Living

Now before this blog turns into a travel or lifestyle blog, time to talk about the usual subject: Money!

The “Crisis Cheesepie”, 0,60 € poster I stumbled upon was half a joke.

The 2010s was one of the toughest decades for the country. Austerity, high taxes and a hostile business environment.

The quality of life worsened for many. House prices crashed big time. Can’t go wrong with bricks and mortar..? Ask those Greeks who are still in negative equity.

Greece is a country where the average income is much lower than in the UK. The cost of living is much lower too.

When it comes to spending, everyone is different. This is why instead of telling you how I see prices through my own lens, I better talk data.

Spending in Greece vs the UK

Numbeo and Nomadlist are some great sources.

Comparing the two capitals, living in Athens costs HALF what London costs.

Now you might say, London is crazy expensive anyway! How does Greece’s cost of living compare to the UK as a whole?

Consumer prices including rent in Greece are 31.52% lower than in the United Kingdom.

Therefore, I see Greece as a potential FI destination if you want to bring your FI date much closer. Long live geo-arbitrage!

If your income comes mainly from investments then choosing a city with a lower cost of living can easily cut your spending in half.

Here are some data comparing London to Athens:

Groceries are a mixed bag and it really depends on what you buy.

Fruits and veggies are cheaper in Greece but milk, chicken, eggs and cheese are actually more expensive. I think your pantry would cost less in the UK.

Transport is good only in Athens. Even there, you’re probably better off using a taxi (cheaper than Uber) or owning a car like most people.

I still cannot comprehend how expensive childcare is in the UK, particularly in London. Both Greece and UK offer free schooling.

But if your child does not speak Greek, an international school is your only choice. Ok, maybe homeschooling too.

When comparing private childcare, London schooling costs £18,246 on average compared to £6,885 (8,194€) for Athens.

All these are averages. If you want to dig deeper, here is the full-scale data comparison of London vs Athens or the UK vs Greece.

Great Food!

I could probably post more than 100 Greek food pics.

Food in Greece is GREAT!

It’s because the primary ingredients (e.g. tomatoes, peppers, meat) are local, fresh and tasty.

But at the same time, Mediterranean cuisine offers a huge variety of recipes.

Stuffed veggies with rice, souvlaki, gyros, Moussaka, Pastitsio (Greek lasagna), local fish and seafood (calamari, octopus, small fish), courgette balls, greek salad, bougatsa, stuffed grapevine leaves, I could go on.

Truth be told, Greece is probably not the place for a foodie though. I mean, you can find the odd sushi or falafel place but that’s as “exotic” as it gets.

Also, eating out misses the “fine dining” aspect that you’ll find in places like London / NYC. But you are compensated (and then some) with taste and view.

Cooking

The typical FIRE person also cooks at home. This fits well within the “Web of Goals” philosophy. This is a powerful strategy which I first read in the Early Retirement Extreme book (a tough read!).

The idea is that you set certain goals. Your activities can be structured around those goals in order to find synergies between goals.

For example, if your goal is to become wealthier and healthier, cooking works better than takeaway food.

That’s because cooking at home is cheaper and usually healthier. You can even consider it light exercise.

Then being healthier has the nice side effect that your health costs will also be lower, therefore strengthening the wealth goal. That’s the “web of goals” strategy in a nutshell.

Time to close this huge parenthesis – but yeah in Greece you can easily cook or learn to cook.

You have the option to buy local produce from the farmer’s market (“Λαϊκή αγορά”). Once a week, local producers sell directly to consumers.

You can basically sort out your week’s veggies and fruits from this place at great prices too. Some markets offer fish and other local products like nuts and honey.

Night Owl Friendly

Are you a night owl? Do you enjoy staying up late working or browsing Reddit til the morning? Then Greece is the perfect place for you.

Food places deliver takeaway way past midnight. Bars and restaurants are open until late.

Honourable mention: You will never wait 45 minutes for a takeaway delivery. Max 15′ 😉

Greece is very friendly to the night owl types. I’m certainly not one but having been there in my early 20s, I can attest.

This comes at a cost though. Noise. Greece is noisy at night and during the day too. Yes, it depends on the neighbourhood, city etc.

But on average, you will hear more motorcycles, alarms going off and dog-barking in Greece than in the UK.

Negativism

This might sound a bit controversial. I’m not sure if people in Greece are actually happier than those in the UK.

The income side of things hurts for sure. Greek income has less purchasing power, therefore you end up with fewer savings or less stuff to buy/do.

Chasing clients for payments is mentally taxing!

But income aside, there is a constant fear and dissatisfaction in the country.

The news has one goal. To spread terror which grabs attention. This applies in other countries too, but in Greece, this is more evident.

Perhaps it’s a cultural thing. Most households watch the TV news at least twice a day.

When I was a kid, I remember having lunch over bad events on the TV. Every single day.

This has not changed and it becomes a point of discussion when you meet people outside.

Please change my mind and tell me it’s just my own experience. But sadly, I doubt it!

Not Business-Friendly

Ask any self-employed person in Greece what’s stopping them from advancing the business.

During my recent trip there, I asked local professionals.

Theodor told me about bureaucracy, high taxes and an ever-changing regulatory framework.

You basically need an accountant for any odd little detail out there.

If you think knowing the tax framework in the UK is hard work, Greece will make it look like child’s play.

I’ve asked 2 accountant friends who are more involved with local businesses. One works at a big hotel chain managing their affairs. The other one operates an accountancy office managing small businesses and individuals.

The amount of tax changes taking place every few months is unbelievable… The tax system is ever-changing in arbitrary ways.

As a result, strategic business planning becomes much harder. And it’s not just that. You have to go back and forth with an accountant to stay compliant with the current regulations.

If your LTD company and your clients are based abroad, then you should be able to dodge most of the Greek tax fun.

Also, thankfully, things are changing for the better in the field of digital tax reporting. It is moving in the right direction. Greece is not, however, close to the destination. Miles behind if we compare the Greek tax system with the UK one.

Businesses thrive in a stable environment that is business-friendly. To give you an example, a new business in Greece needs to pre-pay the VAT for the NEXT year upfront! This kills entrepreneurship.

Investment income enjoys favourable treatment

Even though taxes are high in Greece, let’s give credit where credit is due.

First of all, income from capital is actually treated somewhat favourably.

Dividends, in particular, are taxed at a rate of just 5%. Interest at a rate of 15%. Capital gains at 15% too.

So living on dividends in Greece is very lucrative from a tax point of view.

There are no ISAs, however, and very few private pensions. This reminds me that I am actually spoiled in the UK with all these ISAs and personal allowances!

Further reading on the Greek tax system here and here.

International Schools

If you homeschool, feel free to skip this section!

If you decide to move to Greece with young kids, then what school will you choose?

Assuming you’re not from Greece, you would probably choose an international school where all courses are taught in English.

Options include British schools such as St Lawrence and St Catherine’s British schools.

But international schools are:

1. Private (so not free!)
2. Limited in two cities, Athens and Thessaloniki

International schools in Greece cost between £7,000 – £10,000 per year. That’s a considerable amount! Unless you were planning to go private anyway, in which case they are much cheaper than in the UK.

If you are interested, this platform offers a nice school comparison.

But the cost is somewhat expected. You have to pay for such a private education.

The location aspect is the most worrying. International schools are only located in Athens or Thessaloniki.

Although you could live in Athens, if you want to go to Crete or Rhodes, then the options are very limited.

Is Greece your next Chapter?

You should definitely consider Greece as a place to live, even if you don’t speak the language.

The low cost of living, the fun and the weather are worth a shot!

Local salaries and the business mentality are the two main issues. Better find a way around them.

I have not lived in Greece for more than 10 years. Even if we decide to go back, a test drive of 1-2 years before putting down roots will make or break the case.

What about other places? Have you considered making such a bold move?

Any other place I should look at?

As always, thanks for reading!

If you are a business owner, check out the Company Investing Course.

It includes everything you need to know to invest your company profits!

We focus on the how. How to make money investing, optimize tax, beat inflation, build passive income.

But once in a while, it’s ok to stop, take a breath and ask why we’re doing all these.

Here is the story of the Mexican Fisherman and the American Banker. I hope you enjoy it as much as I did when I first read it!

An American investment banker was taking a much-needed vacation in a small coastal Mexican village when a small boat with just one fisherman docked. The boat had several large, fresh fish in it.

The investment banker was impressed by the quality of the fish and asked the Mexican how long it took to catch them.

The Mexican replied, “Only a little while.”

The banker then asked why he didn’t stay out longer and catch more fish?

The Mexican fisherman replied that he had enough to support his family’s immediate needs.

The American then asked: “But what do you do with the rest of your time?”

The Mexican fisherman replied,

I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village each evening where I sip wine and play guitar with my amigos: I have a full and busy life, señor.

The investment banker scoffed:

I am an Ivy League MBA, and I could help you. You could spend more time fishing and with the proceeds buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats until eventually, you would have a whole fleet of fishing boats. Instead of selling your catch to the middleman, you could sell directly to the processor, eventually opening your own cannery. You could control the product, processing and distribution.

Then he added: “Of course, you would need to leave this small coastal fishing village and move to Mexico City where you would run your growing enterprise.”

The Mexican fisherman asked, “But señor, how long will this all take?”

To which the American replied: “15–20 years.”

“But what then?” asked the Mexican.

The American laughed and said,

“That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich. You could make millions.”

“Millions, señor? Then what?”

To which the investment banker replied:

“Then you would retire. You could move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

The End :)

Blast from the past:

• How to FIRE your boss
• How to be happy and enjoy life

True financial independence starts with spending less than you earn. In other words, it starts with saving. Investing is the icing on the cake, at least in the beginning.

I am a strong believer that big mortgages do actually work because they make you a forced saver.

You have no option but to “spend” a good chunk of the paycheque to pay the bank. You pay yourself first. Then 25 years later you own a house, magic!

Budgeting comes to mind as well, particularly if you owe debt or have a specific financial goal in mind (wedding, trip, kids college etc).

I was never a fan of budgeting. I guess psychologically it’s a bit depressing to know you cannot buy or do something because you have to stay within limits.

Noone likes budgets. (thanks Rishi…)!

They’re boring to set up, boring to maintain and stick to. Sometimes they’re necessary.

If you are disciplined enough you can do without a budget. But regardless.

I find it extremely useful, if not necessary, to at least have a rough idea of where your money goes.

This is the main reason I use Money Dashboard.

1. Money Dashboard – See where your money goes

Money Dashboard is a free app that gathers all your bank accounts in one place. You can connect only the ones you want and it will automatically pull the data (using OpenBanking).

It will then give you useful insights into your spending and income. You can:

• Break down your spending by categories (Groceries, Rent, Experiences, Food & Drink, etc)
• See how much you really spend per week, month etc
• Connect multiple bank accounts, including partner accounts
• Set a budget
• Help you stay on track

Basically, it will give you a true picture of your financial life, not what you think it is!

A useful statistic is when it shows the upcoming expenses before they arrive. So you know that you’ve got mortgage and nursery payments coming up before they’re here (note to self).

It might need some tweaking to get it right in the beginning. You get the odd transaction that is tagged incorrectly but it’s mostly right. Or you might want to create custom categories.

For example, “Coffee” is one I could have created. The amount of whole-bean coffee we consume adds up if you drink as we do!

Then you have the more traditional PIE chart showing how much you spend where.

Finally, you can create a ‘Spending Plan’ which is basically budgeting.

Overall, the biggest benefit I see is understanding the “Big Picture” of your spending. For example, I knew we spend a lot on quality groceries compared to other people but that was based on intuition. I didn’t have a clue.

Between FarmDrop deliveries, online grocery shopping, local Sainsbury’s visits, shopping from multiple accounts (wife too) you can lose track.

You can also spot the odd subscription service you had forgotten to cancel.

To sum up, getting the big picture right is key to saving.

As Housel says, the majority of personal finance is

• house
• car
• education
• healthcare
• childcare

The rest is a rounding error for most.

I use Neon which is the newest Money Dashboard remake. The old classic interface is something I have never used.

What about some data privacy?

Good old Excel is old-fashioned but does one thing well: Privacy.

With 3rd party apps, you give away your data in exchange for a service. Therefore, it’s very important to understand how your data is used or to what degree you can be anonymous. Especially if you’re giving away your entire financial picture.

Step 1: The first step with external apps is to check whether they use Open Banking or not. Sometimes you will see the PSD2 acronym too. Open banking is a control that ensures apps can talk to each other (via APIs) and you have the upper hand on what type of info is shared and when to revoke it.

For example, when Money Dashboard asks for my Santander account, I do not provide Money Dashboard with my Santander username and password. Instead, Money Dashboard opens a Santander page, in which Santander asks me if I authorize Money Dashboard to read statements and perform certain actions on my behalf.

When giving my consent, Santander will tell MD they have my permission and redirect me back to their page.

I’m not risking a rogue MD employee making bank transfers using my login credentials!

Careful with apps scraping your data without using Open Banking.

Step 2: Now even with Open Banking, it’s important to understand how your data is used after leaving the nest. One way to be a bit more clever about it is to ask how they make money.

In Money Dashboard’s case,

Money Dashboard makes money by providing insight and market research services to others companies to help them better understand trends in consumer spending. Rest assured that we have strict and robust procedures in place to ensure that we fully anonymise the banking data on the platform and that we never use users’ personal data in these market research products.

In the future, Money Dashboard may offer suggestions for financial products and services (for example credit cards, mortgages or insurances) that can save you money. If you buy something based on our suggestion, Money Dashboard may receive a commission from the product provider.

In short, Money Dashboard sells your anonymised data to 3rd parties who are interested in market trends.

2. Topia app – Your Financial Independence buddy

I have written before about FIRE and making work optional – Working because you want to, not because you have to.

That’s the main idea behind financial independence. Now, what if there’s an app to track your progress and help you along the way?

This is what Topia is all about. As a new entrant in the FIRE space, I like their interface and the work they’ve put in to help all FIRE enthusiasts.

Logan Leckie, who is the founder of the app can explain it better than I do. Here are a few words from him about Topia:

Who Topia is

My name is Logan, having discovered FI over 2 years ago I quickly become a massive believer in everything FIRE stands for and the wide array of positive externalities pursuing FI can have on someone’s life.

However, I quickly found that despite constantly discussing and talking about FI with my close friends and family, they all seemed to really struggle to initially understand what FI was and also really struggled to get started on their own journeys to FI.

It dawned on me that getting on the FIRE journey was actually a real pain in the ass for a lot of people. The core ones are:

• Understanding the numbers under-pinning FIRE as well as the relatively complex calculations needed to build your FIRE roadmap
• Knowing where to start and what to do next
• The custom-built excel spreadsheet needed to track progress (+ the monthly grooming/tweaking of the spreadsheet)

I found all of the above proved to be big enough pain points to prevent a lot of people from pursuing FI. I found it incredibly frustrating that my closest friends and family didn’t understand something I was so sure could have such a positive impact on their lives.

So, out of this frustration, Topia was born; I thought I have apps that make other aspects of my life a lot easier, why couldn’t there be an app to help make pursuing FI easier?

Topia started as a small side project and slowly but surely gained momentum. I have always had a sweet spot for entrepreneurship and so pretty quickly decided to leave my job in finance to crack on with Topia full time.

No more excel spreadsheets or monthly manual data inputs

In Topia, you can connect all your investment, pension, mortgage and debt accounts directly into the app. This enables Topia to track your net worth and progress to FI in real-time.

On top of this Topia will also do all the number crunching – we provide simple inputs which enable you to personalise your roadmap, Topia will then crunch the numbers to produce your very own roadmap to FI.

Tinker + life events

Easily build scenarios to determine how you could get to FI faster. What if you increase your savings rate by 10%, how much sooner will you get to FI?

What if you decided to buy a property? or have a child? How would that impact your journey to FI?

Track your savings rate and get to FI sooner

We all know how important your savings rate is in getting to FI. You can connect your bank account to Topia and track/monitor your savings rate in real-time.

Based on your spending Topia provides hints and tips to turbocharge your savings rate.

Ever wondered how much sooner you’d get to FI if you downsized your house/flat? Or switched over to public transport? What about bulk buying your food? Geo-arbitrage?

Who is topia for?

For advanced FI-ers Topia can complement the spreadsheets you already use by automating the tracking of your portfolio and savings rate in one place that you can check on the go.

But Topia is especially relevant for people at the early stages of their FI journey. Topia is designed to make it really easy to get started on your journey and help you get to that FI goal as soon as possible.

Topia also comes with a community of like-minded people as well as ‘Mentors’ – passionate and knowledgeable people from the FI community to ask questions and/or challenges you have at each stage in the FI journey.

Is my data private and safe in Topia app?

Topia is a brand new app and a startup.

I asked Logan to provide some info about how data privacy works in Topia, who has access to the data and whether my data is sold.

Topia never sell any data to anyone – no 3rd parties have access to any of the financial data. Internally, the only time data can be accessed is if a user reports an issue around the open banking data. If this happens the data is automatically anonymised before developers can then look into the problem which was flagged. See also how Topia manages user data in their video here.

From a security standpoint: We put in place every measure possible to ensure that all data is locked tight and secured at all times. This includes military-grade encryption, regular penetration testing and bi-monthly internal testing. On top of this Topia is registered with the Financial Conduct Authority (FCA) (FRN: 934702) and authorised as a PSD Agent. We are also registered with the Information commissions office (ICO number – ZA778054)

What is the Topia business model?

Topia is a free app and there is no charge anywhere inside the app.

Soon, they will allow users to invest through the app, without leaving Topia. Any users who opt to start their investment journey through Topia will pay Topia a platform fee, similar to how you pay Vanguard/AJBell/HL a platform fee to invest through them.

Give Topia a try and good luck to Logan and the team. Exciting times ahead!

3. Keeping track of your investments

As your investments grow in size, it’s increasingly more important to track your investments, your annual returns and asset allocation.

What gets measured gets managed and all that.

The biggest benefit is understanding your returns, how complex your portfolio is and how it compares versus a benchmark, say Global Equity. If it underperforms for a long time perhaps you should stick to passive investing and stop taking any active punts.

Have your ‘satellite investments’ become too big or perhaps they are a drag on your portfolio returns?

Is your number of holdings unnecessary long? Simplicity trumps complexity in investing.

Moreover, understanding your asset allocation is important because it helps you rebalance. Are you back on track with your 80/20 portfolio? Are you overweight GBP by way too much? If your assets have drifted from your target allocation it’s time to take action.

Last but not least, another reason for tracking your investments is to get a nice momentum when things work out. This should push you to keep going. And let’s be honest, the past 10 years were truly amazing for equity investors.

How can we track our portfolio if we use multiple online brokers?

3.1 Morningstar Portfolio Manager

Morningstar’s Portfolio Manager is a free tool to track your portfolio. It’s old-fashioned, but it just works.

The main screen is a snapshot of your current holdings and their value. Something like this:

It shows you the market value for each of your holdings, its weight and the total sum of your portfolio.

You can build more than one portfolio, particularly useful if you manage investments for the family for example.

This is what I use to track my stocks and funds from different brokers all in one place.

Next, we have the Performance screen which is where you can find your portfolio returns. More importantly, you can compare them to a benchmark during different time periods.

There’s too much on this screen so let’s break it down one by one.

The Personal Return is exactly that: What your portfolio returns are, taking into account the timing of your contributions.

You might own an investment that is up 200% year to date, but if you only bought at the top you might be losing money during the same time. To put it simply, you can actually outperform or underperform a fund’s performance if you bought low and sold high during that period.

This is also called the money-weighted rate of return and it’s mainly the metric I care about the most.

The (Ann.) in the 3-year or 5-year column stands for Annualised – yearly. So in the portfolio above, for the 3 year period, the Personal return was 24.66% per year.

Sometimes, people refer to the performance of their holdings alone, without considering the time they made their trades. This might be useful if you want to see how your portfolio would be doing if not distorted by money coming in and going out.

That’s the Total Return which simply is the return without considering your contributions.

In the industry, you might hear about it as the time-weighted rate of return or sometimes called unitised.

Index Return: This is the benchmark’s return you have selected.

Asset allocation

The free tool is good enough but lacks some important features. I would like to see what my asset allocation is, stocks vs bonds and perhaps property. I would also like to see my currency exposure. How much of my wealth is in GBP vs USD vs EUR?

Morningstar’s paid version (Premium) offers the XRAY tool with more advanced analytics.

Morningstar Premium might be worth the cost if you take a more active approach to investing. It might also be useful if you are a passive investor with too many different funds across different brokers, company pensions etc.

How much does Morningstar Xray cost?

Morningstar Premium costs £159.00 per year at the time of writing (Nov 2021).

Pro tip: If you use the AJ Bell online broker you can actually have all Morningstar Premium features as part of the platform, including XRAY. You can add external transactions from your other brokers. Basically, they whitelabel the Morningstar Premium version. Thanks, Martin for the tip ;) 

Morningstar disadvantages

1. It’s a bit old-fashioned and slow. Developed using old tech and the interface kind of sucks.
2. Morningstar has no support for some currencies. It only supports USD, GBP, EUR, JPY and CHF.
3. Dividends require manual recording. Just go to Edit -> Dividends. It’s a bit frustrating that to record a dividend payment you need to report its reinvestment. What if I didn’t make one?
4. Stock splits need manual recording. Just go to Edit -> Splits.
   A stock split is when a company will increase (or decrease) the number of shares while also decreasing (or increasing) the value per share. They can do it for a number of reasons, but for the end investor, the result is the same. You will still own the same value you owned before the split.
   
   When stock splits happen, Morningstar will just display the new share price without adjusting for the change in the number of shares. That’s bad! Easy to fix, though, just manually record the split.

Obsessive tracking can be counterproductive, so check responsibly.

3.2 TrackMyStack – Net worth tracker

This is a tool developed by George, a blog reader.

It’s a net worth tracker and it does what it says on the tin.

• You add your assets like stocks, funds, crypto, home, cars, and even liabilities (like mortgage)
• You can create different portfolios, like Kids portfolio, Loans only, Crypto portfolio, etc
• Automatically updates the prices of securities
• Full privacy
• Supports both iOS and Android

I like the simplicity of the tool and the fact it is fully private. Not even an email required.

Not everything is perfect, though. It does not support dividend tracking – you need to enter the new shares or cash manually.

Then, the ‘sell’ functionality is not as intuitive as I would have liked. You can reduce your number of shares but if I’m selling everything I need to set it to zero, archive it or delete it. I reached out to George who confirmed this is ok, as you want to track your net worth, not necessarily your portfolio returns. Which is fine.

The pro version costs less than a latte (£2.59/month) and you real-time pricing and priority support while contributing to the app development.

When it comes to privacy and anonymity: No account is required to use the app and no syncing with other providers. Your wallet data belongs to you and can be exported or imported at any time. We don’t sell your data.

Moreover, you can export your data in XML format. If you ask me, owning your data is very important in case you want to do some manual charting, run tax calculations, switch to another tool etc.

Overall, I like TrackMyStack and use it for specific portfolios. My main net worth document is in an Excel spreadsheet.

And that’s about it! I have not been paid to write about any of the above apps.

Hope you liked the tools to help you stay on track and save time too.

With so many tools out there, I’m sure there are other options. What do you use? Please comment below.

Doing your hobbies full-time.

Keeping a job you love but without worrying about money. Exploring interests other than the already specialised 9-5 profession.

Travelling the world or connecting deeply with the local community. Doing the digital nomad thing.

Pick your desired life, that’s what money can do for you! It’s time you FIRE your boss!

The FIRE movement has come a long way. Wikipedia defines it as:

Those seeking to attain FIRE intentionally maximize their savings rate by finding ways to increase income and/or decrease expenses. The objective is to accumulate assets until the resulting passive income provides enough money for living expenses throughout one's retirement years.

Previous generations could only dream of this lifestyle.

Did you know that pensions are a thing of the 20th century? The Old Age Pensions Act was first introduced in 1908 here in the UK. For most of humanity (and even the first half of the century), most people were either just not reaching pension age or had to work until the end.

Obviously, the ability to make work optional in your 30s or 40s is a great luxury. It’s possible thanks to the investment income that things like buy-to-let properties or stocks can provide.

FIRE is something many of us want to reach. But is financial independence possible? And should you really pursue it?

This is a 2-part post. In the first part, I describe the maths behind financial independence and the reasons behind it. I want to analyse what it takes to get there. Part 2 will be about the dangers of early retirement – what can go wrong and how to protect ourselves.

To begin with, let’s have a look at the math. First, I want to highlight what numbers can tell us (and what they cannot). We also have many examples from people who’ve FIRE’d after such a long bull market.

How much do I need to retire early in the UK?

To make work optional, you need to gather enough savings and then invest them in income-producing assets. How much? Let’s call this The FI number.

How much can you withdraw from your portfolio every year without running out of money?

In other words, how much do I need to accumulate in order to ditch the alarm clock? First of all, many clever people have studied the math behind the question.

Assuming the often criticised 4% rule, an FI number of £100,000 can generate £4,000 a year for you, forever, without running out of money. You can lower it down to 3.5% (see SWR series) if you want to be safer.

When your annual living expenses cover more than 3.5% of your invested assets congratulations, you have achieved full financial freedom!

Remember, we cannot just dial up the risk and lower the FI number. That’s because investment returns won’t come just because we need them. We also need to protect our capital from the ups and downs that inevitably come with investing.

For example, a quick rule of thumb is to multiply your annual living expenses by 25 (4% of invested savings) or by 30 (3.3%). So if your living expenses are £2,500 a month, that’s £30,000 a year. As a result, to reach full financial freedom you need £30,000 x 30 = £900,000 in investments.

Whether you use the passive income to FIRE your boss or for other purposes is entirely up to you.

No need to go full FIRE or even abandon your profession. For example, you can use it to go on better holidays, get nicer things or help the kids with the mortgage.

Using the same rules, a £450,000 sum can bring you £1,250 per month!

How do you gather the sum in the first place? Saving is more important than investing in the beginning:

• At a savings rate of 10%, it takes (1-0.1)/0.1 = 9 years of work to save for 1 year of living expenses.
• At a savings rate of 25%, it takes (1-0.25)/0.25 = 3 years of work to save for 1 year of living expenses.
• At a savings rate of 50%, it takes (1-0.5)/0.5 = 1 year of work to save for 1 year of living expenses.
• At a savings rate of 75%, it takes (1-0.75)/0.75 = 1/3 year = 4 months of work to save for 1 year of living expenses.

As you can see, the entire FIRE equation depends mainly on one factor: Your living expenses. That’s the trickiest part.

How confident are you that you are not going to miss your estimate? As someone who is more than halfway there, I think the FI number is really hard to pin down. The biggest challenge I see is finding the right number.

What Is the Average Cost of Living in the UK?

The average cost of living in the UK is £3,479 per month for a family of four or £1,955 for a single person (src: https://www.expatistan.com/cost-of-living/country/united-kingdom)

Obviously, this is just that, an average. A family of four living in London, nice area, private schooling etc would need north of £10,000 a month. Conversely, a single person who’s a hardcore ERE fan, spending just £800 a month would need about 300k to retire early.

The earlier you start the faster the compounding machine will work in your favour. You can even retire in your 30s or 40s if you have a very high income and live like a college grad. Personally, I do have a high income but I do not live like a college grad anymore.

In any case, the main issue with FIRE math is that you have to know your living expenses to solve the equation. As you would expect, the earlier the retirement age the harder the assumptions become.

The Real Issue with FIRE maths

Predicting living expenses for the current year or even the next one is doable. But the FI Number is almost impossible to calculate long term (like 20 years), especially if you want to be on the safe side. 

It suffers from so many different assumptions.

• Will you have kids? How many?
• Public or private education?
• Does your partner work? Or have you even met them? Will they be a big spender or a saver?
• Helping the kids with housing? Will you leave an inheritance and how much?
• Will you need to support your parents later in life?
• Average investment returns? Future tax rates?
• Life expectancy?

It’s not that you cannot make assumptions about these things. It’s that you take a conservative approach about all of them, then you might never reach it!

In other words, life doesn’t happen in a spreadsheet.

Ok, some people will reach their number, and some Foxy Monkey readers I know have a substantial net worth already. But not the majority.

So the aspiring FIRE seeker needs to either limit their future selves or make assumptions that make sense at the time of writing but could be wrong 20 years down the line.

Arghhhh The Number seems too high! Should I abandon the FIRE quest?

Most FIRE seekers are great problem solvers. They are also creative minds. The optional work lifestyle does not mean work is forbidden. But it means focusing on the only work that matters TO YOU.

Cutting the BS at work, the meaningless meetings, going deeper in areas you like and also learning totally different skills, like mastering cooking, hiking or machine learning. Keeping only the work that interests you even if it’s unpaid. Most likely, your post-FI activities will bring some income already. This is a big advantage to the “I don’t know what the living expenses will be like” issue.

Not everyone has to become a lifestyle YouTuber… For example, activities in a FIRE lifestyle like hobbies can actually pay you to teach beginners after a certain level.

I know what you’re thinking: This sounds like a job!! I thought I’ll be retired?

Many people will just call bullshit on the FIRE movement just because the answer to the entire question is

“Go find a job you like then!” 

But I disagree.

A job you like but depend on is a totally different proposition. Assuming you have the income from elsewhere, would you do your current job without getting paid at all?

If the answer is yes, then well done my friend. For most people, even the ones that are fairly happy in their jobs the answer would be straight no. They would perhaps do it part-time or choose to do 30-50% of the work activities.

This is why most of the successful early retirees we will meet in part 2 do some kind of work already.

To sum up, this is part of the solution actually! Having enough money to avoid being forced into doing anything you don’t like while only taking on those tasks you enjoy (even if it means changing jobs, lower pay, etc). Having the insurance that the passive income provides.

And for those of you who love their jobs and would do them for free (that’s me 8 years ago…) have you tested the limits of your freedom?

Finding the right FI number can be hard. So should I abandon the quest? No! I’d say start with a rough estimate of your desired living expenses with some room for error.

Keep learning / being active on things that interest you in FIRE. That will let you have skills that can pay you if you have miscalculated your assumptions. This should also open up other opportunities that you were too busy to explore while in a full-time job.

Also, what if you have actually overestimated what you need? Or what if your investing proves to be very successful (or lucky)? Or that you end up bringing MORE income doing work or things you love? All these paths can give the upper hand to the aspiring FIRE-seeker.

Thanks for reading. In the next part, we will visit the dangers of early retirement and how to protect ourselves. We will also peek into other people’s lives who are on the same journey.

Happy FIREing!

I want to show you how you can protect yourself from identity fraud and how to find out if someone is stealing your identity for a profit.

How do I know all that?

I was a victim of impersonation. Someone was caught stealing letters from my mailbox and opening credit cards on my name!

Luckily, I found out quite early plus they did not succeed in opening an account. No animals were harmed in the making of this impersonation. But things could have turned out quite differently and very costly shall I say.

How an identity fraud is committed

Someone knows your name and where you live. It’s easy to find out about this info – either by grabbing a few letters from your mailbox, social media or just public info on Companies House / Electoral roll.

They can obtain some more info about you, like your date of birth by searching online. You’ll be surprised how much we voluntarily reveal every day. Even if you’re not on social, it’s easy, trust me.

The physical mailbox in particular contains golden info about you. Full name, address, bank account, sort code and transactions you made. Even if you only use ‘paperless’ bank statements there’s plenty of junk arriving every day like CapitalOne “apply now” credit cards waiting for you to reply back.

Ok. Once the attacker has enough info about you, they apply for a credit card or a new bank account pretending it’s you.

If they succeed, they buy the new macbook pro on your credit card, they put you in debt and sell it on eBay for a profit. Repeat until you find out you’re impersonated.

By then it may be too late! You owe £10,000 to the credit card you didn’t even know you had.

When I used to work at a fintech challenger bank, 30% of all applications were fraudulent!

Let that sink for a moment. 30%. We rejected hundreds of ‘applicants’ every day.

Unfortunately, it’s quite easy to steal identity these days especially if you’re not paying much attention. This is why you need to be vigilant and proactive. Luckily for us, it’s also easy to protect against identity fraud attacks and I’m going to show you how.

How to find out if someone is using your identity

The best form of protection is prevention.

You can prevent 99% of identity fraud by checking your credit report.

Here in the UK, banks and credit card providers have to check you are trustworthy before they can give you a loan. Yes, a credit card is a form of a loan. Your score is kept by credit agencies like Experian and Equifax who maintain a file for you.

If you have a good credit score, you qualify for a card. Otherwise, they won’t risk lending you money.

When an attacker applies for a credit product on your behalf, the card provider will have to look you up to see if you’re creditworthy. This will leave a trail on your credit report. A ‘credit search’ will show up that Santander bank, for instance, looked you up.

There are plenty of sites where you can see your credit file, often with the credit agency directly. Personally, the simplest solution I found is the website Checkmyfile.com. The first month is free and then it’s £15 per month but you can start/stop whenever you want. I quite like the user-friendly interface. They will show you all past history, even if you pay only once.

More importantly, I like that they aggregate the big 4 credit agencies on one page (Experian, Equifax, Crediva, Transunion). So you get 4 agency reports in one place.

There are also some free reports out there, TotallyMoney, ClearScore and MoneySavingExpert credit club, but I haven’t tried them.

So if you suspect that someone is using your identity, or you want to stay on top of things, CHECK YOUR CREDIT FILE REGULARLY! Check the Searches section and your Payment History which shows all your Lenders and the amounts.

Remember, spending 10 mins today can save you hours (and thousands) in a year.

Proactive > Reactive 🙂

What to do if you suspect someone is using your identity

Shit happens and the last thing you want is to check your credit file every week. Perhaps I do it every 6 months, and in between an attacker may try. Who knows.

Let’s say someone has used your identity and applied to credit cards and banks like they did to me.

If they succeed, you will see an unknown lender/bank or unpaid debt on your balance in the report. You should act immediately.

Here’s what you should do if you suspect someone is using your identity:

1. Call the company they applied to and tell them it’s not you. That will make you a “victim of impersonation”.
2. They will then put a flag on your name and submit a ‘Fraud alert’ on your name to CIFAS. CIFAS is a “not-for-profit” UK organisation whose aim is to prevent fraud. Most financial institutions will ask CIFAS if there is a notice of some sort on your name before giving you a card or bank account. That’s for your own protection. Let’s take a moment here and be thankful we live in a country with a mature and advanced system like that.
3. Here’s the interesting part. If at any point an attacker tried to impersonate you and failed, you are now flagged as a ‘Victim of Impersonation’ on CIFAS before you even notice. This mark will tell all subsequent applications that there’s a high chance of fraud. The card company will then take EXTRA steps to verify it’s really you before giving you a product. How awesome is that? Basically, once the attacker fails once, then everybody knows about it*. This makes your life harder, of course, because future applications made by you will take longer for approval. (I think the mark lasts for 13 months). But if that saves me from all this fraud hassle, so be it.
4. Report the incident to the police on Action Fraud Police
5. You can pre-emptively protect yourself by registering for identity protection at CIFAS (£25 for 2 years). If you worry then totally do it. I did it.

* In fact, the attacker will most probably sign up to receive free credit reports for your name while stealing. The purpose is twofold. They want to make sure you have a good enough credit score before they apply. But more importantly, they want to check you are not a victim of impersonation. If there’s a warning on your name they will stop trying. That’s what they did to me!

How to protect yourself from identity fraud

Ok to sum up, 7 quick steps to protect yourself from identity fraud.

1. Be proactive. Check your credit file regularly (every 3-6m) on sites like Checkmyfile.com. If you can’t remember when it’s due, put a recurring Google Keep reminder every 6 months.
2. Make everything paperless. Your mailbox can easily be compromised and you should assume everything that goes in IS hacked already. Broker statements, SIPP, etc.
3. Keep your bank accounts tidy. Don’t open a new bank account for the sake of having just another sign-up bonus. (I’m looking at you matched bettors ;) ). It’s one more bank account to keep an eye on.
4. Keep cleaning up your (physical) mailbox. Having a full mailbox is just a lot more information available for grabs to an attacker. It also shows you’re probably on holidays which makes it even more attractive to thieves.
5. When moving house, set up a Royal Mail redirect to your new address. It costs £33.99 and lasts for 3 months by which time you should have changed all your correspondence to the new address.
6. Use a home paper shredder to protect sensitive info. Do not throw sensitive info on your bin unless you want someone looking at how much money you’ve got up for grabs.
7. Business owners: Consider setting up a separate company mailbox if you can’t trust your own or don’t have an office. UK Post Box offer that.

As COVID has taught us, prevention is better than cure!

Have you been a victim? What other tactics do you use to protect yourself from identity fraud?

Happy digital housekeeping 🙂

It’s easy to get lost in the details. The big picture was and will always be the same.

Money is just a tool to help us get what we want.

I want to share a recent story with you which turned our lives upside down. About a month ago my mother-in-law was feeling unwell. Fever, cough, chest feeling heavy, trouble breathing…

We all know what those symptoms are. For a 65-year-old, getting covid is high risk… She hasn’t even visited the grocery store or taken a taxi/tube since the pandemic started. But I’m not surprised. Covid is so easy to contract.

She had 3 COVID tests, all of them negative. The NHS suggested we stay at home and not come to the hospital yet, because there’s a risk of getting infected there or in the commute. Getting covid on top of whatever else she had would’ve been very hard to overcome, indeed.

So my mother-in-law stayed home for a couple of weeks while the GP prescribed antibiotics for pneumonia. After a couple of weeks the fever still persisted and situation was pretty much the same. Something had to be done. Time to take the plunge and go to the hospital for a lung xray scan.

The analysis was not what we wanted to hear. GP called a few days later and said ‘She needs to be referred immediately to the lung clinic because this is highly suspicious of lung cancer’.

…

Speechless. Out of nowhere.

Covid suddenly seemed trivial… I wish it was covid.

We couldn’t believe what was happening. We only wanted this bad dream to stop. Like, now!

Make it stop.

Mother never smoked although father-in-law was a heavy smoker many years back. You never know with these things and I’m not a doctor.

The lung clinic would see her in the next 2 weeks. The wait was literally killing us, especially my wife.

Hours felt like days.

If you’re waiting for something so important time stops. You suddenly realise how everything we take for granted should be valued higher!

And is a 2 week delay going to worsen her chances? What can we do? Calling a few private hospitals to be seen ASAP was the next step. She has no private insurance but if there’s something our financial fortress can buy is paying for things like this.

No questions asked, we paid the ~£1,000 for a CT scan the next day which showed that LUCKILY there was no sign of cancer.

What a relief! I couldn’t believe it. The doctor couldn’t say for sure, more examination is needed to verify that. It all seems to be a lung infection that’s persisting for longer than usual.

Why am I sharing all these dark details with you dear reader? Especially such a sensitive topic, that I’m sure people here have had bad experiences with. I’m sorry in advance for triggering emotions.

In this 72-hour journey, I was reminded what money can buy. How the £1,000 spent on private costs is actually buying such peace of mind. Regardless of the outcome, having the option to know such an important outcome earlier is so, so valuable.

We are fortunate to be in that position and have worked hard for it.

But this is what money is for!

Buying your way out of a really difficult situation. Making an ok experience much better. I’ve written before whether money can buy happiness. Well, if money can buy the lack of stress and an easy-going life, doesn’t that count? Or a debt-free life. One less thing to worry about.

An experience like this goes to show the importance of having your emergency fund topped up at all times.

This goes beyond health. Booking a pricey trip without having to do a stopover. Buying time when COVID ruins your business or when your employer shows you the door. Dining out at a Michelin restaurant to celebrate a big win.

Spending big on things that are valuable to you. Ramit Sethi calls them your ‘Money dials’ – spending more on things you value while cutting costs in things you don’t.

Your ‘money dials’ can be anything – fitness, gadgets, relationships, and yes, even non-fungible tokens 😉

Making decisions based on cost alone makes no sense because life does not happen in a spreadsheet. This does not mean YOLO spending is wise. In fact avoiding this is what allows us to do it from time to time and get the maximum value out of it.

I’m not the one to tell you what to spend or not spend on. I’m also not sure if my mother-in-law will be 100% ok when this story ends; we’re not out of the woods yet.

But if there’s something I learned from this story is that sometimes £1,000 is not always £1,000. But way more.

Price is what you pay, value is what you get.

How we run our household finances is something we don’t talk about very often. A bit controversial.

Regardless of how much each of you makes, managing income, savings and common expenses can sometimes lead to arguments. A rocky road, indeed.

What if one person is a big spender and the other one a natural saver? I see 3 scenarios for dual-income relationships. Single income relationships have limited options which I also discuss later.

Scenario 1: Together in life but separate wallets

I know this is somewhat of a paradox, as sharing trips, school fees and a mortgage requires shared finances to some extent. But bear with me for a second.

What I mean by “together in life, not in finances” is the simple scenario of every person having their own salary and do whatever they want with it. Obviously, people are together, so common expenses like mortgage, rent, groceries, cars, holidays spent together, etc need to be split evenly.

People don’t have to live together but still, shared expenses like eating out, cinema, and holidays occur more frequently than not. But as long as the common outgoings are out of the way, my money is my money.

I guess this is most common at the beginning of a relationship, where boundaries are still unknown and bigger goals cannot be set yet. It certainly was for us, until it wasn’t. But I know people who follow this model many years into marriage and they’re happy doing it.

This has both pros and cons.

You need to know what your expenses are and do your balances once in a while to pay who owns what. I know there are apps to make it easier for you to track debt among X people but isn’t that just too much work? Maybe you have a good sense of what your shared expenses are and you pay them evenly. I pay groceries and car, you pay rent sort of thing.

Last but not least, I don’t see how this model can work if your salaries differ by much, especially if you live together.

Scenario 2: Salaries together as a single entity

I believe this is more common when people start living together simply because it’s easier to manage. If both salaries are considered as a single “family income” entity then it’s easier to plan, especially if they live in a joint account.

To satisfy personal needs, say expensive trips with friends, spa treatments, etc people can just tap into the joint account or have an amount going to their personal account every month. Yeah, not always. Who said that everything has to be split equally?

Your partner may be making more money than you do but still be happy for you to spend more than he/she does. If that’s the case, you definitely know how to choose a partner ;)

I think this scenario of joint accounting has also pros and cons:

It’s easier to let life continue without paying much attention to a joint account. This may cause more conflicts down the line.
But because it all goes into a single account, it’s easier to manage than the you owe me situation of Scenario 1. And easier to manage also requires enough discipline from both members, the lack of which can cause trouble!

Scenario 3: Anywhere in between and single income

Here’s how we deal with finances at the Foxy Monkey HQ:

Once a year we sit down and define what our expenses will be. This is based on historical spending and expectations about what we’ll need. The common spending is well… common. But the personal stuff is not equal. I can’t even remember who spends more but that’s not the point.

We then keep this personal allocation in our bank accounts and everything else goes as a standing order to our FreeTrade and Halifax ISA account.

We use a shared credit card as much as possible. The purpose is two-fold:

a) It gives us free 1.5% cashback on all purchases
b) We can see how much each member spends every month/year

The card we use is the Amex platinum cashback card (<- referral link). We both get £25 if you sign up through my link, and thanks! Amex is accepted almost everywhere nowadays; this was not the case 10 years ago.

We don’t really go back and check our yearly hypothesis too frequently. That only happens next year that we’ll sit down 🙂 But we occasionally keep an eye on the account (mostly me!!).

Obviously, big differences in salary or a single family salary make the joint scenario #2 more likely to happen.

It’s not unusual to see one family member quit their career or go part-time to raise children. And although raising kids is sometimes harder than a full-time job, it’s totally absent when economists count the GDP beans.

Does this mean that they shouldn’t have an equal say at the single income coming in? They should if you ask me. Society and nature expect the mother to play that role most of the time. And I believe sometimes this is what causes the much-hated gender pay inequality.
PS. Don’t shoot the messenger 🙂 

What really matters

If you want to buy a Tesla and don’t have enough money for the 2-month Southeast Asia trip your partner may not be very happy about it.

Which is why the technical bits don’t really matter. It’s more of an accounting task and it even becomes optional.

What matters is that you agree on what you want to do together and that your goals align. Then the splitting becomes much easier and it’s mostly accounting.

As you would expect, if one is a natural saver and the other a big spender, it gets much harder. Another factor to consider when picking partners 🙂. However, don’t get too deep into this rabbit hole. Patience is a virtue and research has shown that more patient people tend to be wealthier and happier. But up to a point.

As Klement says:

People who are more patient tend to be wealthier and happier. And on an individual level, people who are more patient and able to wait for delayed gratification have higher retirement savings and a better life in general.

Incredible as it may sound if you check the link between patience and self-reported happiness the most common measure used in happiness research), more patient people tend to be happier, but only to a point. Once you enter the top 6% to 8% of most patient people in the world, your life satisfaction peaks and then starts to decline.

Shifting to the top 1% of most patient people in the world reduces happiness by about a quarter of the difference in happiness between people with a college degree and a high school diploma. In other words, misers are less satisfied with their lives.

So having a partner who is different from your tastes may lead to more happiness despite your arguments telling you otherwise!

And that’s all I have to say about splitting finances between 2 adults. Unless you’re a 3-adult family (have you watched You Me Her?) in which case sorry, it’s too complicated!

What’s your experience managing money with your partner? I’d be interested to hear from people who have totally separate finances as I’m not in that camp anymore. Do you agree or disagree most of the time and how do you manage your finances?

The point where I no longer need to set an alarm in the morning. No longer need to worry about being late or having enough to pay the mortgage, college tuition and holiday getaways. It’s not that I’m sick of the 9-5. I actually like my job which is funny because it seems I’m desperately trying to escape it.

I’m not trying to escape my job. I’m trying to escape the need to depend on my job. That’s entirely different.

So our way of living and working here in London has always reflected that. I’m quite lucky that my partner agreed to shape our life towards this goal. Otherwise, life would’ve been a struggle for sure. But enough of my why of FI. Where do we stand today, September 2019?

We have crossed the halfway point and we’re about 60% there! The green line is staring at me as a lighthouse stares at a ship that’s been travelling for years. Is FI getting real……. for real? :)

Will we defeat the “This will never work” friends comments? Or is the green line a moving target? Will the definition of enough change over time? The good thing about the Work Optional threshold is that it’s set by us. We choose where to set it and how much margin of error to throw into the equation.

I’m starting to believe that reaching financial independence is not just a dream. It’s freakin possible if you put the effort in. It also requires some discipline. I’m also happy that trying to reach for FI has not made our lives miserable.

During this time, we bought (and furnished) a new flat, enjoyed some exotic holidays in the Maldives and Mauritius, went on an amazing US roadtrip while keeping a balanced life when in the UK. Obviously, having a high household income is key to FIREing early. Not spending the majority of your income helps too.

In fact, I believe saving is equally important to having a high income. When you learn how to manage your finances better and run your household like a business, you hone a different skill on the way. I consider the art of frugality to be a very useful one.

The stock market can take your wealth away but not your skills. Therefore being flexible with your spending can be very useful when needed the most in tough times. After all, living paycheck to paycheck leaves zero margin for error really. Get laid off when the boiler breaks down and you’re in trouble.

Managing a growing net worth is a challenge. Being closer to FI than ever, though, brings different questions to mind. Such as, how much can I withdraw from my portfolio every year to never run out of money? I have to rely on protecting my portfolio more than ever. So how do I invest to do that? What if there is no salary to top it up if its value goes down? What is the best asset allocation for my strategy?

Should we purchase private health insurance if we geo-arbitrage our way out of expensive London? What about taxes if I’m no longer a UK resident?

All this matter. But admittedly, they’re good problems to have! :)

How we got there

It would be great to tell you that in 5 years we followed a secret investing strategy that you should follow too. One that can double your money every 3 years and that makes your bank account flex like ‘The Rock’.

But unfortunately, there is no silver bullet. The process we followed to accumulate a good chunk of money in a short amount of time is exactly this:

1. Earn a high income
2. Spend less than you earn
3. Invest the surplus

I wasn’t lucky enough to participate in the UK property boom of the past 20 years. My investment returns were not amazing either given most of our wealth started building up from 2015 onwards. That’s missing half the bull market. But I was lucky enough to invest in bitcoin quickly grow my IT skills and have discipline.

It’s not because we invested in a bull market that brought us closer to FI. It’s because we earned a lot of money and kept most of it.

People will usually focus on how I invest. But high earnings and high savings matter more than investing. If I had to choose between being a good investor vs a good saver I’d always vote for the latter.

Anyway, when you earn 100k a year you’re privileged. But if you earn less than that this doesn’t mean that FI is not possible. It means that it will just take longer. To bring it closer you need to up your skills, ask for a raise or just work more. It’s just math and numbers don’t lie.

That’s it. No silver bullets. Earning a lot of money won’t help though if you spend it on Louis Vuitton and Aston Martins. In fact, depreciating assets will only make things worse as the habit of consumerism kicks in. Focusing on happiness, buying experiences and choosing to DIY instead of outsourcing everything certainly adds up.

I know people on decent salaries that save only 10% because… aren’t you supposed to save 10%? That’s about average. Maybe saving is easier for me thanks to my frugal nature. I don’t subscribe to the cultural norms so it’s kind of intuitive to avoid spending £250 on a Mont Blanc wallet.

No need to show off really, probably because I keep an inner scorecard. Unfortunately, most people like to keep an outer one and that’s an expensive hobby.

So we don’t keep a budget and don’t believe in the latte factor. But we know we can have anything but not everything, and live our lives by this rule. Buying freedom before buying other stuff puts things in perspective. We’re also not afraid of investing regularly, and tapping into the profits of the world’s best businesses as well as property buy-to-lets.

Investing Strategy

I cannot stress enough how important saving is. I always prioritise saving to investing when people ask me for advice. However, there’s only so much you can save plus saving is boring which is why I usually talk about investing. Eventually though, investing is what makes financial freedom possible. Besides, investing is my passion too. So how do I invest?

As the portfolio grows in value, my fear of managing grows with it. I mean… I’m more relaxed about the stock market swings than most people are. I also treated the -20% drop of 2018 as an opportunity to buy shares at a discount. But as the portfolio value increases, the absolute amount of money that can be lost (in £ not % terms) is quite scary!

Plus I did not live the 2009 crash which was probably the worst crash after 1929 in financial history. I am not confident I will stay calm despite the hundreds of articles/books/podcasts I have read on how it feels. Unless you experience it, you cannot know. The answer?

Now that we’ve entered the final 5-year FI window I’m trying to protect our portfolio from the sequence of returns risk. I would definitely want to avoid a scenario where the stock market crashes 6 months after we’ve pulled the trigger and cut our wealth in half! Panic may creep in.

Although there is still a lot more room for the portfolio to grow, I consider protecting what we’ve earned more important than maximizing our return. That said, here’s how our portfolio looks like today:

What’s right for me may not be right for you though. So always consider how risky you want to play it, not just how to earn the most money!

Securities (~60%) is where I invest most of our wealth. That’s a mix of global equities (50%) and bonds(10%). I use a mix of different funds mainly because of early mistakes in picking the simplest one. If I had to start all over again, there would be only 2 funds. One for equities, one for bonds:

• Vanguard FTSE Global All Cap (Equities)
• Vanguard Global Short-term Bond Index Fund (Bonds)

I’ve added a few tilts to capture more of the emerging market’s as well as small-cap companies but these are just the icing on the cake. If you’re interested, iShares EM IMI, KBA China A ETF and Vanguard Global Small-cap are the ones making my portfolio a bit more “exotic”.

My Property Partner investments and my flat’s deposit make up the property equity of my portfolio. Despite the fee changes, I would like to increase my investments there. That’s partly to drop the fee percentage but also to take advantage of the massive discounts going on in the resale market right now.

I believe investors are being very emotional following the recent fee hike as well as Brexit. Does this property look like it deserves a -25% discount because of an annual 1% fee and a drop in rental payments?

Property Partner also helps with tax treatment when investing in property as a limited company. Rent is received in the form of dividends which means I receive rent tax-free. This is how taxes work at Property Partner.

Property aside, I also like to keep some cash on the side. 13% may be too much and I’m probably paying for this ‘safety’.

But what I like about our portfolio is that the money is very liquid. Here’s an interesting graph:

So almost 70% of the portfolio is accessible within 2 months, and 84% within a year.

SIPP is at least 25 years away, and who knows when I will be able to access our pensions given the upward trend! But there are some benefits to having illiquid investments. The main one is that they’re not affecting your behaviour of selling at a loss (or selling at all for that matter)!

How much do I need to retire?

Such a hot question. I plan to answer it in detail as it deserves a post on its own. There are plenty of studies that examine the 100 or so years of stock market history to arrive at one number. The safe withdrawal rate is the maximum amount you can withdraw from your portfolio every year to never run out of money.

For a 30-year or so retirement this is about 4%, although the 4% rule is not very safe. But there are so many variables, such as

• The sequence of market returns (hence the sequence of returns risk)
• Retirement length
• Spending flexibility
• Taxes

Generally speaking, it’s easier to have a variable withdrawal rate that goes up when times are good and down when you need to guard your stock part of the portfolio. Also, contrary to the common belief, the asset allocation should be more conservative when starting retirement and moving to a more aggressive allocation once deeper in retirement.

Anyway, as I said, there’s a post coming on best strategies, withdrawal rates and asset allocation so stay tuned if this boring topic is of interest to you!

So what about us? We’re going to play it risky and depend on a 4% withdrawal rate :O The main idea is that there are always other income avenues such as blogging, matched betting, and perhaps more entrepreneurial hustles down the line that will cover the extra risk.

Knowing myself, why not take advantage of the fact that we will be making a side income as we have always had? We won’t depend on it, but that will act as an extra buffer for splurging or shielding our portfolio even further early on.

I can hear people typing “That’s not retirement Michael!”. Yes, I know it isn’t! I focus more on the FI part of FIRE which gives us options. Certainly, one cannot travel the world for 10 years. Well, not me at least. I want to do stuff, stay creative and help people. Which happens to bring income too.

Plus I don’t plan on stopping the IT work which is both fun and profitable. I just want to have the peace of mind that I don’t have to work if I don’t want to for an undefined period of time.

Being flexible with spending is also key in tough times and I believe we’re comfortable with it.

Share your FI progress in the comments. I’m interested in hearing other people’s opinions.

Foxy Monkey Meetup

I know this is an online blog but there are real people behind all these computers. Which made me think, why not gather everyone at a pub or somewhere and meet each other? This is much better than meeting everyone one-by-one as I’ve done before.

So the first Foxy Monkey meetup is happening, please come along!

Please don’t hesitate! Let’s have a drink, share some helpful tips and have meaningful conversations around personal finance, investing, career, etc.

Long-time readers of this blog may recall my sceptical thoughts on home-buying, and especially in London. I was always in favour of renting and investing the surplus anyway (and still are!). I can already hear angry readers typing “Michael, you hypocrite!” before they get to read another sentence!

And they will be right – from a pure mathematical decision, buying a Zone 2, London home right now is probably not the best investment decision. Depending on who you ask, London properties are down between -2 to -10% in the past 2.5 years. Having a mortgage on a property makes things even worse when prices are dropping. Worse case, you may even end up in negative equity!

A combination of stamp duty changes, tax increases on BTL and Brexit shambles have led to this drop. The other logical explanation is that London properties were just too expensive at 14x times average wages, much higher than the historical 4-5x. So now they mean-revert.

But we are where we are now and the London property future is less rosy compared to its 30-something golden years past of dropping interest rates and government’s quantitative easing asset boosting. That’s my opinion, anyway.

But buying a home is not a pure mathematical decision. It’s influenced by things like children and schools, proximity to family & friends, the feeling of owning your own place, personal tastes, urban vs non-urban debates and a good dose of ego boosts at dinner parties.

You probably know that I like to mostly keep an inner scorecard rather than an outer one. So I could not care less about what people think of my home/location or how I spend my money. But I do care about how my family and I spend our time in the next 5 years of living in London. And because finding good rental properties is a) pretty hard where we live b) expensive for what we need, we thought of giving buying another thought.

The cooling-off period also contributed to our buying decision. It’s just quite easy when buyers have the upper hand and the London frenzy has calmed down. Things become even easier when you’re a no-chain first-time buyer with some cash waiting in the bank!

Although negotiating is not my strong hand, it wasn’t really needed here. The reason being that we bought 50% of a shared-ownership property where the price is non-negotiable. The price is set by a RICS valuation and it cannot change even if the buyer wants to sell cheaper. That’s because the developer who owns some of it (the rental part) is not up for negotiations.

I’ve explained the shared ownership model in detail before.

In short, it’s a way to buy part of a property while paying rent on the other part that you don’t own. Our flat costs £600,000. We own 50% of the flat (£300,000 on a mortgage) and pay £500 rent for the remaining half. It sounds complicated but it’s actually quite simple.

The main advantage is the low deposit (i.e. £5,000) because you only need to mortgage the amount you own. But the low deposit was not the main reason we bought this way. I strongly recommend it for first-time buyers not only as a way to rent much cheaper but also as a way to buy against a dropping market. Sure, you may not participate in the full gains when property prices go up, but you’re not losing much either should prices fall. Plus you can buy the entire property anytime you feel like it.

By the way, prices staying the same for say, 5 years, is the equivalent of the real price dropping by 10% due to a ~2% inflation per year. If everything around you becomes more expensive but your house does not keep up, then you’re losing in real terms.

In short, I think buying a shared-ownership home is the best renting lifehack you can get. You also have the option to buy the entire property whenever you want.

Why we bought a shared-ownership flat

The main reason for buying half a home is that I’m just too afraid to get a huge debt pile. It is very important to learn to recognise good debt from bad debt. Buying a house using debt (mortgage) is a good use of debt since a house is an appreciating asset. Buying a Tesla on a credit card is not.

And although London houses are appreciating assets too, I’m not very comfortable paying £600,000 for a 2-bed flat. It makes me nervous. I want to live well in a nice place and enjoy the benefits of owning a place, but I don’t want to make a huge bet on the London housing market. Not right now, at least. I don’t want to hope that London will do well (or rather hope that it won’t crash miserably). Hope is not a strategy.

Our flat costs £600,000. Had we rented the place, we would have to pay £2,200 in rent per month. Had we bought 100% of the place, the mortgage alone would cost £2,079 at 2.29% interest rate (excluding service charges, bills, council tax etc). But shared-ownership? That’s £900 per month mortgage, £500 rent and £200 service charges. £1600 in total and a much lower deposit!

Of course, there are disadvantages such as the fact you cannot negotiate the buying/selling price and you cannot rent the place out. You also don’t participate in full when the market goes up (or down). But in my view, the pros outweigh the cons. I was also surprised by how quick and efficient the buying process was given how many parties are involved.

In fact, if I could buy a lower share of the flat I would. The rental part is so cheap (1.5-1.8% fee p.a.), that it makes sense to try and get a smaller part of a property while renting the rest. Unless, of course, you want to participate in the housing market in full. Shared-ownership is as if you have a cheap interest-only mortgage with a limited upside/downside.

Considering our plan to achieve financial independence in less than 5 years now, getting a big debt can destabilise our journey.

Owning 1% is no different from owning 99% in terms of property rights, service charges etc. But the shared-ownership scheme has restrictions in place that you must buy the minimum share you can afford. And 50% is our minimum.

Is your home a good investment?

A home is a place where you create memories and paint the walls pink should you want to. It provides the comfort of not having to ask anyone’s permission. It allows you to buy decent furniture and not forcefully move because someone wants you out. You own the goddamn place!

But set the nice family moments aside, is your home a good investment? Personally, I see it as an investment which is very concentrated (single asset, single location) and highly leveraged due to the mortgage. People would never take a loan to invest in the stock market, but they happily do so to buy their home.

I live in London, my job is in London and I’m already making a huge bet on the pound (£) being my main currency by just living here. Admittedly, not a good one lately. Why concentrate my wealth even more by getting a big debt on top of that?

But I hear rent is dead money and you’d need to live somewhere anyway! But if rent is dead money, so is interest payments. And buying/selling costs, and stamp duty and ongoing maintenance, furnishing etc. My boiler nightmare came true 2 days after moving in. We paid £350 for an electrician after the heating stopped working due to a leak! Not to mention the opportunity cost of locking a big chunk of your net worth into a house. Which you could otherwise deploy elsewhere.

One of the very first posts on Foxy Monkey was about the pros and cons of buying. At the time, 2.5 years ago, we decided to keep renting instead. As it turns out, it was the right decision from the financial point of view given our money grew nicely thanks to our passive income investments. You can read about it here:

We can go on and on about why your home is not an investment and the concentrated risk you’re taking for risking most of your life savings in a single location, single asset class. But it would be pointless to try to convince Londoners that their home is not a good investment.

The average London property now stands at £457,000 as the latest ONS house price index (May 19) reports. A £200k London property bought 20 years ago could now sell for £500,000! The million-dollar question is, are you willing to bet the same will hold true moving forward?

Again, I don’t see my home as the best investment. But I see the value of owning your own home, with a potential financial upside too!

Would we be better off not buying and investing the surplus? Probably. Another option would be to move farther out which would drop the cost of buying by at least 20%. Isn’t this what people do when they have kids? And not pay a crazy £600k for a nice flat with a gym, concierge, gardens and other fancy ‘facilities’ next to the tube. But we like central and we like our current area. We have a community and meaningful friends here and prefer to stay.

Not everything in life is about maximizing the FIRE pot. It’s about the journey of getting there too. Arguably, the most important part which is being travelled in the prime years of your life.

If you’re contemplating buying over renting, it’s worth giving shared ownership a shot. Take it easy ;)