Hello and welcome back to Mortgage Advisor on FIRE. A look back at Christmas, and some discussion on my updated FI number.
Weekly Update
The days between Christmas and New Year are always strange and often lead me to think of airports. If there is one place on Earth where anything goes, it’s the airport. If you want to have tacos at 4am and wash them down with a beer, no one bats an eyelid in the airport. Or, if you want to have a burger for breakfast, you can have a tasty burger with a vanilla milkshake and you don’t have to answer to anyone. The week between Christmas and the end of the year is the temporal equivalent of the airport. If you want to have a bowl of Lindt chocolates as if it were cereal, go for it. If you want a meal to see you through from dinner to supper, have at it, my friend.
Christmas
Our Christmas was nice and chill and involved a lot of Monopoly playing. On the 24th we had my Dad over for some food and a couple of games, with the same schedule for the 25th. However, we also had to fit in our traditional watch of the film Four Lions. I don’t quite know how this tradition started, but not a Christmas Day passes without us watching it and quoting almost every single line of dialogue as it happens.
We eschewed the traditional roast dinner for Christmas Day in favour of a homemade curry. We normally make good curries with a blend of our own spices and a little cheat in the way of a shop-bought paste. The curry I made this year was a little underwhelming. It wasn’t unpleasant and everyone else enjoyed it and had seconds. I felt a little down about it though as it didn’t hit the heights I wanted. I just couldn’t get the right flavour profile going on.
Oana did make a fantastic raita, which we took a slight shortcut for the first time and it actually turned out better. Rather than using fresh mint, we used a little mint sauce mixed with Greek yoghurt, cucumber, salt, and lemon. I could just sit and eat that with a massive naan.
Boxing Day
On Boxing Day we had my Mom and Dad over, and Oana and I made a traditional, if somewhat restrained, Christmas Dinner. We had a turkey crown with stuffing, all wrapped in bacon. I made some roast potatoes in the air fryer and some mash. Also, a vegetable mix that Oana and I have enjoyed over the last few months.
The roast potatoes were easy enough. I peeled and rinsed a few potatoes and quartered them. Then, I steamed them for 5-6 minutes and transferred them to a bowl where I added salt, pepper, and some olive oil. Then, into the air fryer at 190 for 30 minutes. Every 6-7 minutes I checked on them and gave the tray a little shake. I added some extra salt at the end and then left them in the air fryer (turned off) to stay warm.
What I’ve discovered in recent years is that the key to great turkey, and most meat in general, is in the resting. Once the turkey was cooked we covered it in foil and let it rest for a good 10-15 minutes. It was delicious.
Lemon and Basil Chicken
As I write this we have some more food in the fridge that Oana prepared the previous night. It’s lemon and basil chicken which we will serve with mash and greens. The lemon chicken is one of our favourite meals and is fairly simple to make. You dice some chicken breast or thigh and leave it in an oven dish with freshly squeezed lemon juice, a little olive oil, salt, and chopped fresh basil. After marinating for a few hours, cook it in the oven (covered). Once it’s cooked through, the chicken and sauce are served over mash and it’s incredible.
What did you have for food over Christmas? I’d love to hear about your dishes, snacks, and so on.
What I’m Doing
Listening: Algorithms to Live By: The Computer Science of Human Decisions by Brian Christian and Tom Griffiths.
Watching: Star Trek: Deep Space Nine; Lord of the Rings trilogy (extended editions).
We’ve almost finished season five of DS9 and despite it being my millionth rewatch I’m still picking up new details. It’s also interesting watching it with Oana as it’s her first time properly watching it from start to finish, so I’m almost seeing it through fresh eyes again.
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DonateDonate monthlyDonate yearlyFinancial Update
Assets
Premium Bonds: £30,000.00.
Stocks and Shares ISA: £89,694.40
Fuck It Fund: £13,036.79.
Pensions: £90,662.71.
Residential Property Value: £237,447.00.
Total Assets: £460,840.90.
Debts
Residential Mortgage: £184,783.09.
Total Debts: £184,783.09.
Total Wealth: £276,057.81.
There haven’t been many trading days since the last blog post but my figures have all improved since last week. My pension is back above £90k, and my ISA had a little upward movement. I also put some more of my severance into my Fuck It Fund which will be used, in part, to subsidise our cost of living between now and gaining new employment.
I mentioned recently that I was going to switch my ISA to a different provider, and I’ve started that process. It’s not an instant thing and may take a couple of months. It will save me approximately £40 per month in charges which is not to be sniffed at. There isn’t much more we can do to cut the cloth with our household spending. The only thing we can try to cut down on is food shopping. The bulk of our spending is on regular direct debits, like the mortgage, council tax, electricity, internet, and water.
Although I’ve left my job, I am still expecting two more payments from my former employer, with each payment totalling roughly a month’s cost of living. Again, it’s nothing to be sniffed at.
Peak Wealth
In Week 247 my total wealth was £281,315.04 and this week I took another step towards surpassing that figure. This week, my wealth stands at £276,057.81. A 2% jump will provide me with another record high figure. I’m trying not to get too excited because the reality is until I get a job, my wealth will probably only decrease as we dip into savings to fund our daily cost of living.
My wealth will grow independently of what I hope for, but I still have little milestones I like to meet. This year it was all about getting my ISA and pensions to £80,000 which I managed, and then some. In 2025 I’d like to see them both pass £100,000. Following that, the next milestone is a combined value of over £250,000.
FI Progress
In addition to changing my ISA provider, I’m making a slight change to my investment strategy. I’m moving away from investment income and focusing purely on accumulation. Part of this means that I may look to use my ISA to repay my mortgage in future. Although it might not be the optimal course purely by the numbers, it has a major benefit as it passes the “sleep well at night” test.
If I follow through on this I will not want to use up the whole ISA. Instead, I’ll want to be left with a decent chunk to act as a bridge to my pension. So, here’s how the numbers stack up…
Mortgage
Interest on a mortgage is often calculated daily and applied monthly. This means that each month you will almost certainly end up paying a different amount of interest in cash terms. On a repayment mortgage, the general trend is that you pay an increasing amount of capital off as you progress through the mortgage term. For the sake of simplicity, I’m going to use some round figures.
Our current mortgage payments see us clear roughly £320 per month off the debt. That’s £3,840 per year. I’m going to use a figure of £4,000 because this will include some of the movement towards paying more capital over time, i.e. although it works out that we clear £320ish per month now, in a couple of years that could be £350, and in another couple of years it could be £420, and so on.
My ISA is approximately £90,000. If it grows at 6%, and I invest £10,000 per year, I should end up in the region of £270,000. If I wanted to use no more than half my ISA to repay the mortgage I would need to debt to be reduced to £135,000. However, 9 years of paying £4,000 per year would only see it reduced to approximately £148,000.
Still, being mortgage-free and still having £122,000 in the bank is not a bad position to be in as I hit the age of 50.
A word of caution…
It’s also important to note these figures are all projections. If I find another job fairly quickly, I should be able to invest more and possibly increase the payments on the mortgage slightly. Also, if interest rates drop I can switch our mortgage to a lower rate. I have 12 months to switch from my current deal before I’m put on the standard variable rate as I’m no longer eligible for my current product (it was an employee benefit).
Updated FI Number
If we don’t have any mortgage or rental costs then our FI number reduces in line with that. Between the two of us, we’ll be able to live a decent life on £2k per month, which is £24,000 per annum, and using the 4% rule to guide us, we would need a FI number of £600,000.
Again, these calculations are not an exact science but let’s take the £600,000 and add it to approximately £150,000 (rough guestimate of the outstanding mortgage balance in a few years), to arrive at £750,000.
If we take our starting position as £250,000 (a mix of our ISAs, pensions, and other investments), and using a growth rate of 6% we only need to invest a further £550 each month to get to £750,000 in 15 years. That’s better than I expected.
The potential problem with all this lies in the detail. I’ve lumped together ISA and pension balances which have limits on investing and drawing down. I’ll need to wait until I’m at least 58 to draw down my pension and it may end up being pushed back if the government decides to tweak the laws around pensions.
In the coming weeks, I may break this down and look at it in much more detail, but that’s a job for next year.
New Year
In the next couple of days I’ll be publishing a bonus post looking back at 2024, and ahead to my 2025 goals. If you have any goals or resolutions, share them in the comments and we can support each other.
Disclaimer
The views and opinions in this blog are my own, and do not represent the views or opinions of my former, current, or future employers, 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:
Biolink
You can now find all my social media pages by checking out my Biolink:
bio.link/davidscothern.
I love the airport and Christmas analogy, very apt for this time of year. I spent most of Friday and Saturday looking for some football scores, assuming both days were a day with plenty of games on.
The numbers are looking positive. Depending on the jobs both of you go into your pension contributions alone could be the £550 a month you mentioned.
Depending on how the numbers sit, there could be a thought of using a pension lump sum to pay off the debt. If you choose to run the mortgage that bit longer you could use that £148k in the example to cover the payments you’d be expected to make, take a hit on the mortgage interest and ideally at least match that interest in returns from the money. It could mean you don’t need quite as much in your pot to retire.
As mentioned though, the numbers are a guide rather than the hard facts, and it needs to pass the sleep well at night test.
Good point about the pension contributions, and about using the pension lump sum to repay the mortgage. Ideally though, I’d like that lump sum to pay for a nice holiday home somewhere, assuming it’s not needed to supplement income.