Hello and welcome back to Mortgage Advisor on FIRE.
Weekly Update
I’d love to report back on a fantastic week but unfortunately it’s been a little frustrating. We had a plumbing issue with our en-suite bathroom, and these issues tend to come around more often than a new UK PM. This time it was a leaking pipe into the toilet cistern; the one that refills the cistern after flushing.
We managed to get hold of a plumber who came over an hour or so later and he seemed like a decent guy. He sorted the issue in just a few minutes and hardly charged us anything. We offered him a coffee and then spent around half an hour chatting about everything from cats, to Lego, to Pokemon, and Magic: The Gathering.
Although he didn’t charge us much, it was still an expense we could have done without. Back when I was working we had ordered some Lego from the Bricklink Designer Program, and I thought we had paid for it. We had not actually paid, so I was surprised to see a charge of just under a thousand pounds applied to my Amex.
The plumbing issue and the oversight with the Lego, in addition to some upcoming vet bills for Poppy, mean we have blown through the remaining cash savings we held.
But wait, there’s more…
On top of all this we had our half yearly service charge bill. Between service charges and ground rent we pay roughly £1,900 per year. The ground rent accounts for £200 of that figure, and we pay £850ish every six months for the service charge. Normally, we have it saved in advance, but this time we were a little under.
It’s been a difficult week financially, and it meant I had to cancel some planned outings with friends.
With all of the above I made the decision to sell some of my unopened Lego, that I’d hoped to keep for a while longer to appreciate in value. The sets below are available for collection in Sheffield, on the off chance any readers are interested:
Wealth versus Cash Flow
One of the interesting things about building wealth is that it doesn’t necessarily make you immune from having the occasional cash flow problem. Looking at this week’s figures, some people might assume that because my net worth is comfortably into six figures, unexpected bills shouldn’t really be an issue.
The reality is very different. Most of our wealth isn’t sitting in a current account waiting to be spent. It’s tied up in investments, pensions, and our apartment. On paper, those assets are worth a significant amount, but they don’t help much when the plumber needs paying this afternoon or the service charge lands in your inbox tomorrow morning.
It’s an important distinction that often gets overlooked. Net worth measures what you own overall. Cash flow measures whether you can comfortably pay the bills that arrive this month. You can be wealthy and still have a tight month if several unexpected expenses decide to turn up together.
That’s exactly why emergency funds are so important. They’re not there because you expect something to go wrong every week. They’re there because life has an uncanny ability to pile everything on at once. The leaking pipe, the surprise Lego payment, the service charge, and upcoming vet bills for Poppy could all have arrived over several months. Instead, they all chose the same week.
It’s also a reminder that financial independence doesn’t mean life suddenly becomes problem-free. Boilers still break. Cats still need the vet. Buildings still need maintaining. The difference is that these events become financial inconveniences rather than financial disasters.
This week has certainly been frustrating, and it has meant making compromises like selling some of my Lego collection and cancelling a few plans. But that’s a world away from worrying about whether the bills can be paid at all. That’s one of the biggest benefits of building wealth over time. It doesn’t stop bad weeks from happening, but it makes them much easier to recover from.
I could, of course, sell investments instead. But I don’t really want to interrupt my ISA if I can avoid it. The Lego was always bought as a hobby first and an investment second. Some of it has appreciated nicely, and if selling a few sets keeps my long-term investments untouched, that’s a trade I’m happy to make.
After a week that seemed determined to empty our bank account, it was almost a relief to spend ninety minutes watching England attempt to empty my enthusiasm for football instead.
In a repeat of the previous week, we saw another uninspiring England performance in the World Cup. I don’t understand what our strategy is in games, and we seem to lack ideas and creativity. Were it not for Harry Kane dragging us through that last match against DR Congo, the players would already be back in the UK.
I’ve heard a lot of people complaining about the kick off time for the match against Mexico, but it’s a very Anglo-centric view. The competition is taking place in a different time zone, and these matches are arranged before it is known who will be competing. Waiting until the line up is known before deciding the kick off time is not realistic when you factor in transport and accommodation for visiting fans.
I think FIFA shot themselves in the foot by trying to change the kick off time at such short notice, and if they’d just left it as planned, there’d be hardly any grumbling.
I’ll try and stay awake for the match, but I don’t think we’ll progress. I think a combination of the altitude, the home field advantage, and our lack of creative spark will really hold us back. I hope I’m wrong, but I think this will be our last match of the World Cup.
Bike Rides
We have managed to get a few bike rides in over the past week, including a fun evening ride where we cycled up a tall car park to the open area on top which gives some great views of the city. On Sunday we had a ride out to Rotherham and decided to explore. We ended up getting a little lost and turned to Google Maps to set us right. It knew we were cycling and told us to go down a footpath.
Let me tell you, it was no footpath. It was a dirt trail with plants overgrown on all sides. We got scratched and scraped but made it through until we arrived at a canal. We bumped into a middle aged guy and stopped to talk to him. It turns out he is looking after the area and slowly trimming some of the plants and trying to make the path usable again. He told us this was the Fitzwilliam canal and gave us some of the history of the area. We had a nice little chat with him and went on our way. Sometimes, these little encounters restore some faith in your fellow humans.
What I’m Doing
Listening: Quantum Radio by A.G. Riddle.
Watching: FIFA World Cup.
Reading: Leviathan Wakes (Expanse Book 1) by James S. A. Corey
Financial Update
Assets
Premium Bonds: £250.00.
Stocks and Shares ISA: £148,892.08.
Fuck It Fund: £0.00.
Pensions: £126,801.89.
Residential Property Value: £242,113.00.
Total Assets: £518,056.97.
Debts
Residential Mortgage: £173,633.19.
Total Debts: £173,633.19.
Total Wealth: £344,423.78.
Top Ten Countdown – The Best Financial Advice
10. Know Where Your Money Actually Goes
6. Invest Early and Let Time Do the Heavy Lifting
If money had a superpower, it wouldn’t be intelligence, it would be time.
Ask most people what makes someone a successful investor and you’ll hear answers like choosing the right shares, spotting the next big company, timing the market, or having insider knowledge of the economy.
In reality, one of the greatest advantages an investor can have has nothing to do with skill at all. It’s simply getting started.
Albert Einstein supposedly called compound interest the eighth wonder of the world. Whether he actually said it or not is open to debate, but the sentiment is absolutely correct. Compound interest is one of the closest things finance has to magic.
You earn returns on your money. Then you earn returns on those returns. Then you earn returns on those returns. Year after year, decade after decade, the process quietly gathers momentum.
The strange thing about compounding is that it doesn’t feel particularly impressive at first.
In fact, it can feel painfully slow. Imagine rolling a tiny snowball down a mountainside. For the first few metres, almost nothing seems to happen. But as it gathers more snow, it becomes larger, heavier, and picks up speed. By the time it reaches the bottom, it’s almost unrecognisable from where it started.
That’s compounding and the biggest mistake people make is assuming they have plenty of time.
“I’ll start investing when I get a better job.”
“I’ll begin once I’ve paid off the car.”
“I’ll wait until the kids are older.”
“I’ll start next year.”
Before they know it, next year has become ten years. One of the hardest lessons in investing is that the years you think don’t matter often matter the most.
A person who starts investing in their twenties has an advantage that someone starting in their forties simply cannot buy.
Even if the older investor earns significantly more money. Even if they’re more financially knowledgeable. Even if they make better investment decisions.
Time is doing most of the work. A basic example illustrates this better than words.
Person A starts investing £100pm and earns 6% p/a. After 25 years they would have a balance of £69,300 of which £39,300 is interest.
Person B starts investing ten years later. They invest £200pm for 15 years with the same interest as Person A. Although this person is investing double the amount each month, for 60% of the time that Person A is investing, they would only have a balance at the end of £58,165, of which £22,165 is interest.
Person A deposits a total of £30,000, and Person B deposits a total of £36,000, yet Person A ends up with more money.
The major difference is time. Person A is allowing much more time for compound growth to work on their investment. Starting early is the biggest advantage.
This is why I often smile when people become obsessed with squeezing an extra half a percent from an investment or endlessly debating which global index fund is marginally better.
Those decisions matter but they’re nowhere near as important as simply getting money invested in the first place. Far too many people spend months trying to optimise something they haven’t even started.
It’s a recurring theme in life. Perfection delays progress. Progress creates results.
Of course, starting early doesn’t mean starting with huge amounts of money. This is another myth that discourages people. You don’t need thousands of pounds to begin investing.
You don’t need to wait until you’ve “made it”.
Small amounts invested consistently over a long period will almost always outperform large amounts invested inconsistently. Consistency beats intensity.
The beauty of starting early is that it also gives you something incredibly valuable: flexibility.
You can afford market downturns because you still have years ahead of you. You don’t panic when headlines scream that markets have crashed because history tells us markets have always recovered eventually.
Instead of fearing volatility, you begin to see it as part of the journey. Ironically, as you get older, time becomes increasingly valuable because you have less of it. Money can be earned back. Bad investments can recover. Careers can change. Businesses can be rebuilt.
Time only moves in one direction. That’s why I often say that the greatest asset any young investor possesses isn’t their income. It’s their age.
And if you’re reading this thinking you’ve left it too late, let me reassure you. You haven’t.
Could you have started ten years ago? Probably.
Could you have started twenty years ago? Almost certainly.
But unless someone has quietly invented a time machine without telling the rest of us, that’s no longer an option. The next best time is today, because twenty years from now, you’ll either be grateful that you started… or wishing you had.
A Word of Caution…
The examples given here are very basic and there’s no context. There are going to be situations where holding off from investing in favour of paying down debts will make more sense. I’m not giving specific advice here, but rather discussing general advice about some of the high level concepts in investing. For specific advice for your circumstances, consult a professional.
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.