Part 267: End of an Era

Hello and welcome back to Mortgage Advisor on FIRE.  This week I discuss the end of my current employment, the FI canon, and another milestone hit in my journey.

Weekly Update

Although my contract with my employer ends on December 10th, I had my last day of logging on to their systems this week as I had booked the last few days off with my remaining holiday allowance.  It’s been a huge part of my life working for this employer; over 13 years.  I’ve met a lot of good people and accumulated a breadth and depth of knowledge about mortgages.  It’s time for the next chapter in my life to start.

Before that next chapter starts, there’s an interlude over Christmas and the New Year.  Next week Oana and I are in London for a few days for the Kygo concert at the O2.  It’s going to be a flying visit and we only have one full day in the capital.  We have booked a table at an Italian restaurant we like, and between that and the concert we probably will not have much time for anything else, other than a visit to the Lego shop and a Reuben sandwich from this place near King’s Cross.  Most people go to London for culture.  I go for Lego and food. 

Ongoing elbow pain…

I was supposed to have an appointment with the surgeon about my right elbow, but it was cancelled at short notice as he was sick.  It’s just one of those things, but the difficulty I have is that my private health coverage runs out at the end of December.  With my trip to London and Christmas between now and the end of the month, it was a worry I would not be able to be seen.  I called the secretary and calmly explained my predicament.  Sure enough, taking the calm approach resulted in them squeezing me into a clinic before the end of the month which they normally would not be able to do.  

This is what I don’t get about some people.  Things happen in life, and not everything goes to plan.  When it’s a genuine issue that can’t be avoided, like illness, bereavement, bad weather, and so on, there’s no point getting angry about it.  If the other party works with you to arrive at a solution that’s all that matters.  The time to get annoyed is when you are dealing with incompetence or a poor attitude.  

More fun with Monopoly

Speaking of poor attitude, apparently I displayed one during my recent game of Monopoly with Oana. I don’t see what I did wrong, as I was just making observations, like;

“Isn’t it funny how you always land on my properties and I never land on yours?”

And…

“Isn’t it weird that I have all these houses and hotels, and you don’t?”

And…

“Awww that’s cute having to pay £10 in rent.  I remember back when I first started out and was charging that.  It’s just pocket change now.”

At first, I didn’t notice her staring daggers at me as I was busy verbally counting out all my money and wondering if this was the most anyone ever had in a two-player game.  

I mean, I don’t see what I did wrong.

Storm Darragh

On Saturday we were due to have a new television delivered in the morning.  We’ve had our current one for over six years and it’s starting to show its age.  We had some vouchers for John Lewis, and around Black Friday we found a good offer.  Anyway, the delivery truck had a flat tyre so it was not until late afternoon when it arrived.  The guy was apologetic but I was pretty chill about it because it is literally just one of those things.

The new TV is great.  It’s bigger than the old one and the picture quality is incredible.  What annoys me is the requirement that everything seemingly has for an app.  If you buy a fridge, you need an app. If you buy a toaster, and you need an app.  It’s annoying.

I would have liked to go out on Saturday for a walk or something but there’s a real chance I would have been carried off by the wind.  The sounds from outside make it seem as though the windows are going to get blown in.  As I type this there are at least two confirmed fatalities due to Storm Darragh. Unless we manage to tackle climate change we will have to learn to cope with more extreme weather.  Without a massive technological breakthrough, I can’t see how we are going to turn the tide of climate change.  

Legal Tender

Ah yes, this phrase has popped up again this week alongside the cringey “cash is king”.  I find it hilarious how some people think that paper money is somehow more secure than digital.  The frustrating thing is this isn’t even what the phrase is supposed to mean, but the way in which people use the statement shows they have completely misunderstood it.  For example, having a sign at a food truck saying they prefer cash payments because “cash is king.”

For the last time, a private business does not have to accept physical cash as payment for goods or services.  They can choose to accept only digital payments.  Legal tender refers to the obligation for physical money to be acceptable for the payment of debts.  The statement “cash is king” refers to having readily available money rather than credit or too much stock.  

Amazon

Just a random one that makes me shake my head.  We order some household stuff in bulk from Amazon as it’s convenient and a bit cheaper.  One of the things we get is kitchen roll.  We order 18 rolls that come in 6×3 packs.  This is where, in my opinion, it’s absurd.  Working from the outside in, we have a cardboard box, filled with packing paper.  Under all this is a plastic layer keeping the six packs together, which are all individually wrapped in plastic.  Then, a roll of paper surrounds a cardboard tube.

Card, paper, plastic, plastic, paper, card.  

It’s not as bad as the time we ordered some packing tape which came in a box roughly five times too big and was also filled with packing paper.  It’s such a waste. 

I hate Amazon for the way they operate but it’s such a convenient way to get stuff in bulk when we don’t have a car.

Job Search

I’ve had a couple of interviews this week, including one on Friday that I’m excited by.  It’s just a case of waiting to hear back with, hopefully, a positive outcome.  I liked what I heard from the interviewer, and the job sounds appealing with a chance to properly push myself.  It’s also a position that would start in late February/early March which means I can have a short break, and also help Oana as she starts her new job early in the new year.

Canon in Fiction

The term “canon” refers to anything within a fictional universe that is considered real or legitimate.  For example, in Star Wars the films are all canon, but a fan-produced film would not be canon.  Star Wars canon used to include the book universe, known as the Expanded Universe, but since Disney acquired the rights to Star Wars, the books were moved to one side to form the Legends canon.  It’s a shame because the Thrawn Trilogy by Timothy Zahn is some of the best Star Wars out there, but I digress.

Anyway, Oana and I are working our way through Star Trek: Deep Space Nine and I normally check out the various ‘Trek subreddits a couple of times a week, as well as being in several Facebook groups.  One of the most common arguments is about canon, whether it’s what is Alpha canon, Beta canon, and so on.  It’s generally agreed that Alpha canon is anything we see on screen, whereas Beta canon is from books, comics, games, and so on.  Where there’s a contradiction, Alpha trumps Beta.  

So, in regards to Star Trek canon, I have my own headcanon because what we are told just doesn’t make sense.  Here is how I group the various ‘Trek shows, not including the animated shows.

TOS Canon

The Original Series

TOS Movies

TNG Canon

The Next Generation

Deep Space Nine

Voyager

Picard

TNG Movies

SNW Canon

Strange New Worlds

You may ask yourself, “what about Discovery”?  No, I’ve not forgotten about that dumpster fire but the only canon it should be part of is a cannon that launches it out of the solar system so it can never be watched again.  I thought about firing it into the sun instead, but that would require much more energy (orbital mechanics are a bitch).  

The debate about canon is taken very seriously by some people, and much like asking for food from a replicator, no matter how much you enjoy it someone will always argue that it’s not authentic.

Anyway, back to my original point about canon.  All this debate got me wondering about what FIRE canon would look like.

The Core Tenets of FIRE: The Canonical Principles

Spend Less Than You Earn

This is the foundation of financial independence, by creating a gap between income and expenses to save and invest.  Having this financial gap allows investments to grow over time which eventually leads to financial independence.  

Invest Wisely and Consistently

It’s not enough to just throw money in all directions at all sorts of speculative investments.  The approach needs to be carefully considered and it needs to be consistent over time.  Low-cost index funds are the backbone of this strategy.

The 4% Rule & Safe Withdrawal Rate

This guideline suggests you can withdraw 4% of your investment portfolio annually in retirement without depleting your pot. While the exact percentage is debated, the principle is a cornerstone of FIRE discussions.

Frugality and Intentional Spending

Prioritising value and cutting unnecessary expenses while still aligning spending with personal happiness and goals.  However, there’s a massive distinction between frugality and poverty.  FIRE is not a race to the bottom where you count every single penny.  Rather, it’s about not wasting money.

FI as a Spectrum

Recognizing that financial independence doesn’t always mean retiring fully.  It can mean pursuing passion projects, part-time work, or just having freedom from financial stress.  There’s a line from one of my favourite sci-fi books;

“He hadn’t been aware he’d felt wrong until he suddenly felt right again.”

• Leviathan Wakes: Book 1 of The Expanse

I imagine that having true financial independence will feel something like this.

Debates and Expansions of FIRE Canon

The 4% Rule vs. Alternatives

Some argue for a more conservative withdrawal rate or dynamic/flexible withdrawal strategies, especially given current market conditions.  Some people get so bogged down in the detail here that I think they miss the point.  No withdrawal rate is set in stone, and it’s not something that leads to instant failure.  If you’re drawing down too much and your investment pot is shrinking too quickly, then you can look at taking steps to address this.  It might mean dipping back into paid employment for a time, but if you are prepared it shouldn’t result in catastrophic failure.

I prefer to think of the 4% rule as a guide, and something to aim for.  Once you have 25x your desired annual spending in place you should be in the right sort of ballpark to seriously think about early retirement. 

Lean FIRE vs. Fat FIRE 

Lean FIRE focuses on extreme frugality and minimalism, while Fat FIRE embraces higher spending levels for a more luxurious lifestyle.  The key point here is that luxury and frugality are subjective.  Someone coming from a background of poverty may view having their own modest house as luxurious.  There’s no right and wrong here.

Coast FIRE and Barista FIRE

These variations challenge the traditional “full-stop” retirement model by incorporating part-time work or pausing contributions once investments can grow independently.  Again, there’s nothing wrong with this approach if it suits the individual.  Some within the FI community come across as elitist and don’t view these types of FI as being “canon”.

Ethics of FIRE

Some debate the social implications of early retirement, like the responsibilities of a financially independent person to contribute to society or how FIRE strategies might rely on systemic inequalities.  This is a tricky one, because there may be some validity to the argument.  Some people will, no doubt, view FI as a way of not having to contribute to society whilst still taking advantage of things like the NHS.  I think these people are in the minority.  

Anyone who achieves FI, not including those who win huge sums of money early in life, will probably have paid a lot of income tax, national insurance, and possibly things like CGT.  To achieve FI you need to have seen a lot of money flow through you via income and spending.  When I discuss FIRE with people, most seem to emphasise the first half of the acronym over the second half.  People want financial independence not because they don’t want to work at all, but because they’d rather work for personal satisfaction than money.  

What’s NOT Canon (But Often Misinterpreted)

Complete Retirement is Mandatory

FIRE isn’t just about quitting work entirely. Many pursue financial independence for freedom, not early retirement.  Most people want to work in some fashion but they want to work in a job that is satisfying and allows them to learn, and grow.  

Extreme Frugality is the Only Way

While some FIRE enthusiasts love cutting expenses to the bone, others find ways to save and invest without sacrificing quality of life.  You have to enjoy life in the moment as well as save for the future.

In short, the “canon” of FIRE is the shared foundation of financial independence principles, but like any rich universe, such as that in Star Trek, it’s constantly being expanded and reimagined by the community.  So, as the Vulcans would say, “Live Long, and Prosper.”

Discovery still sucks though.

What I’m Doing

Listening: The Secret Base: The Glass Book Three by Nathan Hystad.

Watching: Star Trek: Deep Space Nine; MasterChef: The Professionals.

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Financial Update

Assets

Premium Bonds: £15,200.00.

Stocks and Shares ISA: £90,062.00.

Fuck It Fund: £36.79.

Pensions: £90,126.85.

Residential Property Value: £237,447.00. 

Total Assets: £432,872.64.

Debts

Residential Mortgage: £184,783.09. 

Total Debts: £184,783.09.

Total Wealth: £248,089.55.

For the first time since starting this journey both my pension and ISA balances are over £90,000.  The next milestone is to get them both over £100,000.  I should be able to do this when the new financial year starts and the ISA allowance opens.  I’m hesitant to throw a lump sum into the pension because it’s not the priority at the moment.  My pension has plenty of time to grow with additional regular contributions when I’m back in work, although the tax relief on a lump sum is attractive.  I need to wait and see how much the tax, NI, and student loan deductions are when I get my final payslip.

Strong Foundations

The foundations are set now for FI, and my pension and ISA should grow by over £10k per year based on 6% returns.  Once they’re both over £100k, the total combined pot would grow at £1,000 per month based on 6% returns.  It’s like a good friend of mine says; “it’s like having another person working for you.”

Sometimes I have to remind myself that these are huge sums of money to most people, and having this much saved is amazing.  I remember having a conversation with a particularly unpleasant older guy who happens to be quite wealthy, who had a go at me for “only having £17k saved.”  This was some years ago, and he is at least thirty years older than I am.  Yeah, let’s compare when I get to that age.

Without any further contributions, and assuming a growth rate of 6% my pension would increase to £280k by the time I’m 60.  In combination with my ISA and Premium Bonds, the future is looking bright.  The cherry on top will be the state pension, assuming it is still around when I get to that age.  

What do I need to do to reach a million?

Between my ISA, Bonds, and pension, I have approximately £195,000.  I decided to check what I’d need to do to grow that total balance to a million.  First, the ground rules:

Starting balance: £195,000

Assumed growth rate: 6%

Time: 19 years

Zero contributions get me to £608,000.

£100pm gets me to £650,000.

£250pm edges closer, with a final balance of £714,000.

£500pm arrives at £820,000.

£1,000pm would see me finish on £1.03M. 

The thing about these calculations is that time and the growth rate are more important than the additional contributions.  For example, take £100pm over 19 years.  That’s £22.800.  If I increased the starting balance by that amount but then made no additional contributions I would expect to finish on £679k.  Taking that same principle for the £500pm scenario, the final balance would be £963,000 instead of £820k.  

Just to look at this from the perspective of growth rate, if I took my current starting balance and experienced 10% growth for 19 years, I’d end up with over £1.25M with no additional contributions.  Those little differences in growth rates make a massive difference over time.  

That’s all for this week. Thank you for reading, and be sure to leave a comment if you have any thoughts or questions.

DISCLAIMER

The views and opinions in this blog are my own, and do not represent the views or opinions of my employer, nor should they be considered advice.

If you want personalised financial advice, seek an appropriate professional.  If you are in financial difficulty, seek advice via the resources below:

StepChange

MoneyHelper

Biolink

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bio.link/davidscothern.