Introduction
Hello and welcome back to Mortgage Advisor on F.I.R.E. This week I will go back to basics and discuss what F.I.R.E. is and why it’s important to me. I’ll have a look at my hopes for the next six-months, and the rest of 2020 in general. First, however, an update from my biking challenge.
Weekly Update
If you’re squeamish, I would probably skip the next few paragraphs.
On Sunday 26th April, I woke up early and had a coffee with a couple of digestive biscuits. I let the drink settle whilst watching a bit of news, and then I got ready for some peddling. I got on the bike and did a couple of hours. I didn’t feel any discomfort. I then went to the bathroom to take care of business before jumping in the shower. As you do, I looked down and saw blood everywhere. I stood up and realised blood was pouring from me but I felt no pain or discomfort. Blood was pouring from me. I used toilet roll to try and stop the blood soaking my bathroom floor, but the paper was soaked through within seconds. I was terrified. The bleeding slowed, and eventually stopped, and an ache came over me. I have felt worse pain, but I have never been so scared at my health. Even when my vision went blurry for a couple of weeks and there was the possibility of a brain injury I didn’t feel as scared as I was with this bleeding. It’s difficult to describe just how much blood there was. I thought I had popped an artery and that I was going to bleed out at home in my bathroom.
I went to A&E and the medical staff were fantastic. I was seen quickly and then admitted so that the surgeons could decide whether they needed to operate. The strange thing is, there was no obvious cause for the bleeding. As I started to feel better, and I was not bleeding anymore, the surgeons discharged me. I spent almost ten hours at the hospital. It was not a good day. I am now waiting for an endoscopy through my private insurance, but with the current situation I could be waiting a few weeks.
The result of all this is that I’ve had to withdraw from the biking challenge. I’m thankful to everyone who has donated so far, and I’ve kept the Just Giving page active. The generosity of people continues to surprise me. I’m an active member on a football forum and I received a private message off another member which was supportive of my efforts and my health issues. This man has just donated £60 to my fundraising taking the total raised so far to £200.
I’m so frustrated at having to withdraw as I wasn’t feeling physically tired. The saddle was uncomfortable but I had just received a better saddle cover. I just can’t risk a repeat of that level of bleeding. It’s not wise, nor is it fair on the NHS to take up their time and resources through an injury sustained whilst trying to raise money for them. The surgeons stated several times that they did not think the biking was to blame, but I can’t see what else it could have been.
Back to Basics – What is F.I.R.E.?
F.I.R.E., or the alternative formats of FIRE and FI/RE stand for Financially Independent, Retire Early. There are a few subtle variations out there such as Financial Independence, Retire Early. The meaning is the same though. So, the acronym has a definition but it doesn’t answer the question of what F.I.R.E. is.
Is it a philosophy? A way of life? A movement, religion or even cult? The answer to all these questions is “yes”, to an extent. There is F.I.R.E., LeanFire, FatFire and a range of other types of F.I.R.E. but the underlying concept is the same; you take control of your finances with a view to retiring early and in comfort. Money is not the goal; freedom purchased with money is.
I’ve recently joined Reddit and the F.I.R.E. group that posts on there. There are over 32,000 members of the subreddit and it’s refreshing to be able to talk openly about F.I.R.E. without the awkwardness that normally comes from talking about money in person. The great thing about F.I.R.E. is that the principles can work no matter the sum of money involved. It’s not always about retiring before 40. It can be about bringing retirement forward just a few years. Even if the journey takes longer than planned, following the method helps to teach good financial management and planning. There is no downside to following a F.I.R.E. lifestyle. The only sacrifice involved is putting your preconceived opinions about money to one side and being open to learning. There may be some financial sacrifices involved and that will depend on your own unique circumstances. Saving for the future does not necessarily involve scrimping in the present. It can be as simple as understanding that you don’t need to pay £50 each month for a top mobile phone when a slightly older model will perform just as well. It’s about understanding that you don’t need to spend £100 each month on a top TV package when you only half watch TV as you’re scrolling through Facebook on that overpriced smartphone.
To me, F.I.R.E. is hope. It’s about working towards a future where I don’t answer to a boss other than myself. It’s about being able to choose to walk away, or being able to jump at an opportunity knowing I have the financial security even if that opportunity is a dud.
Financial Update
BTL Deposit – Completed
Fuck It Fund – Completed
Stocks and Shares ISA: down 15.61%
No unsecured debt.
Residential Mortgage LTV: 79.81%
My ISA has made a slight recovery in the last week, but it’s hardly significant. I suspect that for the next few months the stock market will dip up and down with no major gains or losses. We are a long way from sustained recovery. I think there are a few companies circling the drain at the moment, and before this pandemic is over there will be some major companies going out of business.
My Fuck It Fund had monthly interest added for April which give it a nice boost, but I’ve just received word that the rate of interest is being cut by 0.25%. It’s hardly going to matter at this point. The fund is instantly accessible and I’m happy with the service from the bank who holds my funds. I could get a better rate elsewhere, but there’s the time, effort and energy involved in switching and I know there are some truly awful banks out there. For what would be a difference of a few pounds interest over the year, I’m happy to leave the money where it is.
My mortgage balance increased slightly this week as interest for the month of April was added on 30/04/2020. I pay my mortgage on the 1st of the month, but the payment that came out on 01/05/2020 has not yet been reflected on the balance for this post. This will come down next week.
Forecasting 2020
The coronavirus pandemic has put a hold on normal day-to-day life, and as such it has delayed my investment schedule. The plan was to start viewing properties around Easter time with a view to completing a deal by June. I think that is unlikely to happen, but if the lockdown is eased in the coming weeks I might be able to push something through.
I had hoped to have £2,000 of investment income in 2020. I was expecting at least half of that to come from dividends, but the previously announced dividends were cancelled due to the outbreak. Although I understand the decision to cancel dividends in light of drastically reduced profits, it is personally frustrating. The one positive to dividends being cancelled is that many stocks are trading at much lower prices than they were six-months ago. Even if I successfully purchase a BTL by the end of Q2 and tenant the property quickly, I will still struggle to net £2,000 investment income by the end of the year. The aim now is to build a solid foundation so that going into 2021 I can be in a stronger position to earn more passive income.
There is going to be a delayed reaction to this pandemic and the economy will be reeling from this for the next 18-24 months as a minimum. We haven’t seen a flurry of large businesses go under yet, but it is still a possibility if this virus is not brought to heel soon. The government can only subsidise wages for so long, and the lockdown can only continue for so long until the treatment starts doing more damage than the disease. I’m not saying that the economy is more important than saving lives. The preservation of life must be the absolute priority, not just for the duration of the pandemic but at all times. So, what I am suggesting is that a strong economy can save lives. The last major economic crisis in 2008/09 led to an increase in suicide rates. If more people are out of work and isolated, we will see an increase in suicides again. If people are not keeping active through work, their physical health will also suffer. It’s a fine line to walk for the government and I don’t have faith in them to walk it successfully.
One possible result of all this could be the scrapping of the minimum wage. I would not put this past the Tory government. If we see a massive increase in unemployment, and businesses are struggling to pay wages, reducing the minimum wage could allow employers to offer jobs they otherwise would not be able to. I don’t think this is a viable, or correct, strategy but it’s just the sort of thing I could see happening.
What is more likely than scrapping the minimum wage is tax increases. The government is burning through money to support furloughed workers and business. Unless there is a magic money tree in Downing Street you can bet on tax increases; it’s going to happen. Also, I would prepare for another few years of austerity, although I can’t see how much more can be cut from public services without going full on to privatise the NHS. Fortunately for the NHS, I think the idea of privatising it now would be toxic for any government. What we have to be wary of is the stealth privatisation of specific services piece by piece until nothing is left.
Although I sound quite pessimistic with my outlook for 2020, I’m hoping for a quick resolution to this pandemic. As a race, we have advanced so much over the last few decades. I believe there are dedicated, hard-working scientists and doctors out there who will create an effective vaccine. It’s just a question of how long it will take. Once we have an effective vaccine, we can start returning to normal. There are some things pre-Covid19 that I hope we can leave in the past. What the past few months have shown is that many jobs can be done remotely. There is no need for millions of cars and buses to be on the road everyday. The Earth is showing signs of healing itself after just a few months of respite from human activity. This outbreak has also brought out the best in many people. Friendships have been formed between people who would not normally have connected. This crisis has also shone a spotlight on those who have previously been overlooked by society, such as trainee doctors and nurses, retail staff and those working in social care.
This pandemic has been horrific for so many people. Estimates range from 40,000-50,000 UK deaths due to the virus, and each of those deaths is a person who was linked by blood or friendship to many others. Society will feel the impact of this for generations to come. I’m not trying to downplay the severity of what has happened, and what is happening. For those of us who are still fit and healthy there is an opportunity to use this period of isolation to work on our own development. Whether that is strengthening relationships with those in our household who we would normally only see for a couple of hours after work. It could be watching your children grow and adapt to this new situation. It could be using this time to work on that book you always wanted to write, or learning how to cook from scratch for the first time.
Turbocharging F.I.R.E.
Now that my Fuck It Fund and BTL deposit is saved, I’m looking at ways to turbocharge my investments in the remaining months of 2020. I don’t think that I’ll be travelling out of the UK for the foreseeable, so saving for flights or cruises is not a priority. I will still put a little away each month for this purpose but it’s safe to scale it back. Ideally, I would want to invest 75% of my net income. Right now, I’m investing 48% of my net monthly income. Realistically, there is not much more I can trim from my outgoings. I don’t have a child. I don’t do drugs. I rarely drink. My phone, TV and broadband packages are basic and cheap. The only way I can increase my investment budget as a percentage of my income is to earn more. Every extra pound I earn goes straight into the investment fund. What I really need is another income stream, especially now that my dividend income has dried up and I don’t yet have a property to let. Everytime I go over this, I keep coming back to the same conclusion; overtime at my day job. I don’t really have an excuse if I’m isolating at home, do I?
Even with overtime, achieving the goal of 75% of my net income being invested is going to be very difficult. I can get to approximately 60% with a few extra hours of work each week. If I can find a way to trim more off my outgoings, then I may be able to push past 60%.
Final Notes
Thank you for reading once again. Next week’s post will bring something a little different to the blog as I will be interviewing another follower of F.I.R.E. Check back next Sunday, and in the meantime stay safe.
Mortgage Advisor on FIRE. 