Hello and welcome back to Mortgage Advisor on FIRE. In what should have been a celebratory post, now that my FIRE journey has hit 100 weeks, I ended up being delayed. To my readers, I apologise. Hopefully you will understand why I was late. This week’s blog is a little different with no weekly quote. The first part focuses on my eventful week. The second part looks at my investment strategy in more detail.
Weekly Update
Apologies everyone for the delay in posting. I usually schedule the blog to go live at 09:30 each Sunday, but I was not well enough to do that. Fortunately, I had written most of the end parts of this post during the early parts of the week. So, the delay… I was taken to hospital late Friday evening by ambulance. I was not in a good way. I had a temperature of 39.2, I was light headed and everything had a feeling of unreality. I couldn’t think straight. Also, when I peed, it was painful.
I have been a staunch defender of the NHS for some time, but I’ve also stated in several blogs that I feel it needs huge reform to cope with an aging population and different health demands. This week was my worst experience with the NHS for a long, long time.
I started feeling off on Wednesday. We have been having our bathrooms refurbed and because both bathrooms were out of commission at the same time (to speed up the overall job) we booked a hotel from Monday to Thursday so we could shower and freshen up. As we were preparing to leave on Wednesday evening I did not feel good. I was light headed and it felt like withdrawal from Sertraline, which is something I have on prescription. I’d had a problem with my latest prescription where the GP had messed up with some of my meds, which meant I had to go without a few of them from the previous Saturday until Tuesday; but Sertraline was not one of them. I figured I was tired and stressed from having three guys in the apartment from 08:00 to 16:00 working on the bathrooms. It was noisy and disruptive, however they have done a fantastic job.
The following morning I tried to get through to my GP for an appointment but I wasn’t successful. At my GP you have to call on the day and hope you get through before the appointments are taken up. That evening I got worse and filled out the NHS 111 online form. However, it was difficult to complete because many of my symptoms did not fit into the binary options given. I called the 111 line and spoke with a lady who went through the same questions and stated she would get an out of hours GP to call me within six hours. As it was 22:00 and I was spaced out, I went to bed. The out of hours GP called but I couldn’t understand him due to his strong accent. I was exhausted, drained and hoped a good night of sleep would put me right. I was ill enough to need help, but not well enough to get there myself, when he suggested I come to the hospital. I said I would try the GP in the morning.
Friday morning I woke just before 08:00 so I could start ringing when they opened. At 08:42 I got through. All the appointments had gone. I was incredulous. The receptionist was absolutely no help, and I had a choice; A&E or the walk in centre. Either option would require a lengthy wait which could easily be 6-7 hours. I wasn’t well enough to go through that. So, I stayed home. Later that evening I got worse. I filled out the 111 form again, and after just a few questions it stated I needed to call 999.
The lady who answered the ambulance line was not particularly helpful either. Here is a little transcript of what happened:
999: Is the patient breathing?
Me: Yes.
999: I asked if the patient was breathing?
Me: Yes.
*a few other basic questions*
999: Is the patient responsive?
Me: I’m the patient.
999: You said the patient wasn’t breathing.
Me: No, I didn’t.
999: Yes, you did.
Me: No I didn’t, but whatever.
The ambulance turned up a few minutes later.
At this stage I am absolutely exhausted from dealing with this short call. I had no energy at all. I also think I might have been hallucinating. The paramedics came in; two men, one with a laptop asking questions and the other one observing and taking my vitals. My temperature at this point was 39.2.
The guy with the laptop was a complete douche. He asked questions and interrupted my answers. When my answers didn’t fit into the box on his form, he tried to get me to change my answer. He was abrupt and did not come across as caring. They said I probably had a nasty UTI and that I would almost certainly need antibiotics. I had been thinking this when I called the GP Thursday, but I digress. They asked what I wanted to do. Did I want to go to hospital? Not if I could avoid it. Could they not write me a prescription for the meds I needed? No.
The paramedics called the out of hours doctor but they would not prescribe without seeing me. So, hospital it was. The two paramedics marched down the corridor of the apartment whilst I stumbled several meters behind, hardly able to maintain balance. I made it to the ambulance and collapsed on the gurney and just willed for the journey to be over.
I was taken by wheelchair into the ambulance section of A&E. I sat there for some time, not sure exactly how long, but I was desperate to pee. Someone wheeled me around and said they’d be back in a few minutes. I went to the loo and stumbled back into the chair, where I waited. And waited. Eventually, a nurse asked me if I was ok. I mumbled something and she took me back to A&E. I was then wheeled into a public waiting room with people who were not patients. I was in a wheelchair and just left in the middle of the room. Some time later I was taken to a bed but I needed to pee every few minutes. The nearest bathroom was down the corridor. In my state it was a massive effort, but seeing as though no one was around I had to do this every few minutes. Now, not to be too gross but at this stage I started peeing clumps of blood. It was painful. That’s all I’m going to say on the matter.
After a couple of hours I saw one of the doctors and she was lovely. She explained I had an infection and sent me home with antibiotics.
Result? I suppose in a way, yes. However, this could have been nipped in the bud by my GP much sooner had they got a system of booking appointments that made sense. It’s difficult to express just how ill I felt, and how ill I have been feeling since. I spent most of Saturday asleep, and most of today (Sunday) asleep also.
So, that’s why my blog was late and I hope you will forgive me!
2021 Goals – to be achieved by 31/12/2021
1 – Reduce weight to 92.8kg. (Current weight 117.9kg).
2 – Finish 104 new books. (Current total: 91).
Financial Update
Assets
Premium Bonds: £6,550.00 (up £50.00 from last update).
Stocks and Shares ISA: £41,058.12 (up £353.60 from last update).
Fuck It Fund: £1,000.00 (up £250.00 from last update).
Crypto: £718.10 (down £72.06 from last update).
Pensions: £49,267.85 (down £296.64 from last update).
Residential Property Value: £207,807.00 (no change from last update).
Buy-to-Let Property Value: £134,098.00 (no change from last update).
Total Assets: £440,499.07 (up £284.90 from last update).
Debts
Credit Card: £0.00 (down £88.04 from last update).
Residential Mortgage: £158,050.39 (no change from last update).
Buy-to-Let Mortgage: £93,043.14 (no change from last update).
Total Debts: £251,093.53 (down £88.04 from last update).
Total Wealth: £189,405.54 (up £372.94 from last update).
Investment Income in 2021: £2,745.57 (target £5,000).
Investment Strategy & My Road to FIRE
From reading the blogs and message boards regarding FIRE, it seems as though the most common approach is to invest as much as possible in index funds and then wait for compounding to do its thing. After enough time, there should be enough value in the funds to retire. A popular approach is to aim for your desired annual salary x 25. So, if you wanted to have an income of £20,000 once you hit FIRE, you would be aiming for a total investment value of £20,000 x 25; a total of £500,000. This is linked to the idea of the Safe Withdrawal Rate, which I’ve mentioned in previous blogs, which is the amount of money you can take from your investment each year without eroding the capital sum by the end of your projected lifespan.
I’m not comfortable with this approach because there are too many unknowns. You could work to build up your FIRE total, but then find you run out of money too early because you miscalculated your SWR. Also, you could end up living much more frugally than necessary and die with money in the bank. I’m also not keen on eroding the capital value of an investment. So, my approach to FIRE is probably different to those of other people.
My approach is to build up a portfolio of Income Generating Assets. In the build up phase to FIRE, I reinvest as much of that income as possible. Then, when I am receiving the desired income from my investments I can retire.
My Desired Income
Within the FIRE community there are different definitions and types. For example, there is Lean FIRE, and Fat FIRE, but there is also Part-Time FIRE (known as BaristaFIRE), as well as several others. The definitions all share the same goal of full or partial retirement at an early age. Where they differ is in how much income you are hoping to retire with. Lean FIRE is based around retiring early with a very frugal or restricted lifestyle. Fat FIRE is the opposite; retiring early with a comfortable income that allows you to cover the basics and have money left over for luxuries.
What I don’t like about these definitions is that they aren’t particularly specific. Two people could aim for Lean FIRE but have radically different numbers in mind. Everyone is different and everyone has different ideas of what constitutes frugal or luxury living. It is this lack of specificity that led me to work towards a numerical target instead.
My first goal is to achieve a level of passive income that will cover my basic living costs. To do this, I need £850pcm. So far in 2021, I’ve averaged approximately £300pcm. I’m not that far away from meeting my basic living costs, and I suspect I may hit this goal late 2022, possibly early 2023. Whilst ever I’m working, though, the passive income I receive is going back into the pot and turbocharging my race to the finish line.
My second goal is to achieve enough passive income to cover my basic costs, but also allow me to live at my current standard of living. To do this, I need a passive income of £1,200pcm. The third and final goal is to advance to a position where my passive income grants me a higher standard of living than what I currently have. This figure could be infinitely high because I could choose to draw the line anywhere. However, my mental figure that just “feels right” is to have passive income of at least £1,500pcm.
Getting from A to B
If I was to follow the traditional path of investing in index trackers until I build up a large enough balance, and assuming I use the x 25 calculation, I would need an investment value of £300,000. Assuming I was maxing out my ISA contributions it would take a long time to get to this figure. Also, the ups and downs of the stock market mean it could take longer to arrive at that figure. It’s just too uncertain for me to pin all my hopes on this strategy. Make no mistake, I like stocks and funds. I just don’t want to rely solely on this type of investment.
Unless you want to take the risk of setting up your own business, there is only one realistic way of getting a lot of passive income relatively quickly, and that is through property. The common refrain is that property is risky, expensive, too much hard work and has too many unknown variables. All of this is true of any asset class though. Any investment approach depends on you having done your research, and investing with your head and not your heart. The numbers have to stack up if the investment is going to be worth it. Let’s look at these points in turn.
Risk
There are a few risks with property, almost all of which boil down to the tenant. There is the possibility they might not pay rent and/or they might trash the property. The simple way to reduce this risk is to properly vet your tenants. Many “problem” tenants will go for the easiest opportunities because they know that it’s not worth the effort going through checks, referencing and filling out a fairly simple application form. It’s not worth it when they can just phone up an ad from the local paper and reel in an inexperienced landlord.
It’s impossible to eliminate risk. Life is a risk. All you can do is manage the risk. You could invest in a fund, and then find that the global economy goes through a horrific crash that lasts for years. There could be a major war that devastates the holdings within the fund. There could be a global pandemic even more severe than Covid. If you manage the risk and educate yourself around property, then you may very well find that the risk is not quite as extreme as you first thought.
Expense and Profit
Another common argument against property is that it’s expensive and there is little profit to be made. Tax laws have been tightened and when you factor in mortgage payments, agent fees, and budget for maintenance and void periods, it all eats into your profit. However, there are perfectly legal and simple ways to minimise your expense and it all comes down to research. It’s about knowing the area, the people that live there, the type of tenant you want to attract and how many stages there are to applying to rent the property. I’m not talking about subjecting potential tenants to my own version of the Squid Game (new Korean show on Netflix – it’s amazing). I’m talking about performing referencing and credit checks, and then once they have moved in, just be a decent landlord. Fix issues as they arise. Most tenants are honest, decent people.
With property you get the advantage of capital gain and regular income. Using the Buy, Refurb, Refinance model you can quickly build up a property portfolio. You do this by using the bank’s money to help fund your next deposit. I’m not going to cover this strategy in too much detail right now because I’ve blogged about it before and there is a wealth of information out there.
Potential Return
The BTL I have now, has a mortgage payment of approx £180, on interest only. Insurance is roughly £20, and the agent takes £72. Once my investment partner and I divide what’s left, we earn £150 each. It might not seem like a huge amount, but there are other things to consider. First, we keep some money in reserve to build up a contingency fund. Second, we overpay slightly on the mortgage as a hedge against non-payment of rent. We round our mortgage up to £200pcm. Also, money is kept on one side for our tax bill each year.
Assuming that future deals mirror this one, more or less, it can be assumed that each property will return £300pcm. To get to £1,500pcm passive income, I need at least five properties I own solely, or say three I own solely and then four I have a fifty/fifty share of.
None of the above factors in the income received from stocks and funds either, so it’s entirely possible I could smash through the £1,500pcm passive income goal and go much higher. We shall have to wait and see.
Biolink
You can now find all my social media pages by checking out my Biolink at bio.link/davidscothern.
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