Part 39

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will reflect on my battles with gambling addiction now that I’ve gone a year without gambling.

Weekly Update

This past week I started counselling again to try and work through some problems I’ve been dealing with.  I was nervous about the session, not so much about talking with someone but more so about where the conversation would take me emotionally.  The session went well and although I did get emotional at times, I’m glad I did it.  I have another session this week and I hope this process brings me some mental and emotional peace.

As regular readers will know, I have a cat called Sweep.  He’s an elderly gentleman at almost eighteen-years-old.  We went to the vet today and it turns out he might have an irregular heartbeat so he will have to go back for more tests in a few days with a specialist cardiologist.  He seems ok in himself, but at his age health problems are likely to become more common.  

Our BTL purchase is moving forward.  We are looking for a managing agent to deal with the rent collection and tenancy agreement but have been left a little disappointed with some of the offerings.  There are a few options we are considering but one that is off the table is self-management.  I’m not looking to become a landlord, but rather a property investor.  The last thing I want is to be chasing rent or dealing with maintenance issues.  We are waiting to hear back from a couple of agents and we will then make a decision.  Every step of this process has felt much more complicated than it needs to be, but the reward will be worth it.  

We are considering selling our own apartment and downsizing to release more funds for investment properties.  I mentioned selling our apartment on our local Facebook group and have received over a dozen requests for more information and to be kept informed as to when we are officially up for sale.  It seems that the concerns over the fire safety of the building were somewhat exaggerated as the agent that manages the development has pointed out there have been several sales in the last few months.  

Health Update

​Current Weight: 112.9 (down 0.8kg from last update).

Current Body Fat: 37.3% (down 1% from last update).

BMI: 34.1 (down 0.2 from last update).

Weekly Goal: lose 0.75kg.

Ultimate Goal: 90kg.

Weekly Steps: 35,766.

A respectable level of progress this week but it needs to continue.  Healthy eating and exercise is all about forming habits.  I need to create good habits in order to produce week-on-week progress, and then the cycle becomes self-reinforcing.  

Financial Update

​Premium Bonds: £20,350 (up £1,100 from last update).

Stocks and Shares ISA: £12,174.35 (down £233.08 from last update).

Fuck It Fund: £0.00 (no change from last update).

Property Value: £187,554 (no change from last update).

Total Assets: £220,078.35 (up £866.92 from last update).

Credit Card: £0.00 (down £310.20 from last update).

Residential Mortgage: £143,528.46 (no change from last update). 

Total Debts: £143,528.46 (no change from last update).

Total Wealth Figure: £76,549.89 (up £866.92 from last update). 

Investment Income in 2020: £86.36 (no change from last update) (target £2,000).

The stock market has taken a slight hit in the last week, but it’s nothing major.  I’ve passed through the £20,000 mark for my Premium Bonds which leaves me enough cash to see this first BTL deal over the line with a little to spare.  I may turn my focus back to the stock market for the next few months to try and take advantage of the fact many stocks are in a dip at the moment.  This could be an ideal time to start hoovering up some undervalued stocks which would reap dividends in the future.  

Now that the deal for the first BTL is moving along, I need to start thinking about the timeline for the second BTL.  I’m hopeful that I will have the funds in place for my second BTL by Q3 of 2021.  I would like to have the funds sooner than that, but the fact it’s taken so long to start receiving rent to compound my savings, in addition to expected dividend income not materialising, has delayed my plans somewhat.  Assuming I do complete a second BTL by the end of 2021, it will leave me two-years to achieve my goal of FIRE by the time I’m 40.  This means that I will need to acquire at least two properties in 2022 and two more in 2023.  This might just see me to my net monthly income target of £1,500 – £2,000.

Gambling Addiction

I think it was around 2008 when I placed my first online sports bet.  It started well with a few wins, and when I started reading stories of other addicts it almost always started with a win.  I don’t really know when it got out of control but over time gambling started taking up more and more of my time.  It eventually got to the point where almost all my spare cash was going on gambling.  It wasn’t just the cash that bothered me though.  It was the fact it was taking up an increasing amount of my time.  My work suffered.  My relationships suffered.  My mental health suffered.  What started out with a couple of pounds here and there, escalated to betting hundreds of pounds on games I knew little about.  

I’m more fortunate than some in that I managed to stop my gambling before I got into serious debt.  I think my fear of debt was greater than the strength of my addiction, which is something I am extremely grateful for.  Just because I did not get into debt through gambling, it does not mean I escaped without financial consequence.  I have no idea exactly how much money I wasted on this addiction until 2017 or so.  From that point on I started tracking how far up or down I was.  Between those losses, and earlier losses from the start of my addiction to when I stopped in July 2019, I estimate I lost something in the region of £10,000.  It makes me so fucking angry.

I placed my last bet just before 11pm on July 24th, 2019.  I was at the gym that night and some bets had not come in.  I was pretty pissed off but there was a sense of relief because I knew I had reached my limit.  I had tried reading about this addiction and had looked up resources to help support me through the early days of giving up.  I knew I could go long periods of time without gambling as I’d previously gone over 500 days without placing a bet.  That came to an end when I was stranded in a tiny airport in Sicily alone on my birthday for fourteen-hours.  I found a podcast from a guy in the US called Jamie Salsburg.  His podcast is called the After Gambling Podcast and I smashed through years worth of episodes in the space of a couple of weeks.  It was this resource, more than anything else, that gave me the strength to push through one day after another without gambling.  I reached out to Jamie on Twitter a few weeks ago and we had a video call where we talked about all things gambling addiction.  It meant a lot that a stranger took the time to speak with me about this shared addiction.  There are some family and friends who know about my struggles with gambling and although they want to help, they can only do so much when they don’t understand the problem from the perspective of someone struggling with it.  

The gambling industry is not regulated strongly enough and the argument that addicts just need to exercise self-control is not only insulting, but it completely misses the point about what addiction is.  With any addictive behaviour, self-control cannot be exercised and that’s why it’s an addiction.  In the UK it is possible to create an account online with a betting company and spend thousands of pounds within minutes.  Often, identity checks are only carried out after you’ve already placed bets and want to withdraw cash from your account.  There are no affordability or credit checks either.  I’m enough of a realist to acknowledge gambling will never be eradicated, but I would hope that the industry evolves in the right way so that gamblers are protected from themselves.  

If I had complete authority to overhaul the gambling industry I would make affordability and credit checks compulsory.  Following these checks, the betting company would decide how much the customer could spend each month.  All accounts would need to be verified through ID before a bet could be placed.  I would also create a centralised database so that customers would be unable to create accounts with multiple betting sites.  This would not cure problem gambling, but every barrier that is erected helps filter out problem gamblers.  Some will slip through, but I would argue that an imperfect solution is better than no solution. 

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  ​

Part 38

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week has been the hardest week of my life, and I’m too exhausted for a lengthy post, and so this week will see just a brief, but significant update.

Weekly Update


As regular readers will know, the past few weeks have not been great for me.  In fact, it’s been a pretty horrible run from November 2019 to now, with a number of health problems and some upheaval in my personal and professional life.  I’m not going to go into much detail here, as I don’t think it’s appropriate, but this past week has pushed me to the brink and it’s led me to a place of brutal truth and self-reflection.  

One quality I know I have is resilience.  I always come back from adversity.  Always.  I might take a moment whilst the intensity of what’s happened washes over me, but I always come back stronger and wiser.  This is no different.  I’m at a crossroads and I don’t know what the future holds, but this plan, the FIRE plan is a constant.  This plan does not change. ​

Health Update

Current Weight: 113.7 (down 2.7kg from last update).

Current Body Fat: 38.3% (up 0.2% from last update).

BMI: 34.3 (down 0.8 from last update).

Weekly Goal: lose 0.75kg.

Ultimate Goal: 90kg.

Weekly Steps: 84,993.​

On paper this looks like a good week for my health, however it masks the fact that I’ve barely been eating.  I’ve not been starving myself, but I’ve been so stressed that I’ve bypassed the emotional-binge-eating stage and gone directly to the stage where I’m not even aware of hunger.  

I have been walking a hell of a lot in the past week as I’ve not been able to sleep.  So, I’ve been out in the early hours just walking around until dawn.  I had a migraine towards the end of the week which I suspect was caused by a mixture of no sleep, lots of stress and a lack of food.  

BTL Update

We have found a property, and had an offer accepted.  It’s a three-bed semi-detached property which has been well maintained.  Our offer was accepted below asking price, and although we haven’t secured the property for much below market value, it has great cash flow potential.  Once contracts are exchanged I’ll post photos of the property, but for now I’m trying to remain calm and restrained regarding this development.

Financial Update

Premium Bonds: £19,250 (no change from last update).

Stocks and Shares ISA: £12,407.43 (up £151.42 from last update).

Fuck It Fund: £0.00 (no change from last update).

Property Value: £187,554 (up £2,306 from last update).

Total Assets: £219,211.43 (up £2,457.42 from last update).

Credit Card: £0.00 (down £310.20 from last update).

Residential Mortgage: £143,528.46 (no change from last update). 

Total Debts: £143,528.46 (down £310.20 from last update).

Total Wealth Figure: £75,682.97 (up £2,767.62 from last update). 

Investment Income in 2020: £86.36 (no change from last update) (target £2,000).

Another week of solid gains, magnified by my lender’s estimate of my property value increasing as well.  I’m edging ever closer to the £80,000 threshold for total wealth which will be a nice milestone to pass considering that I started this journey thirty-eight weeks ago with a total wealth figure of £53,840.  

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  ​

Part 37

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I look at the impact of the Grenfell disaster on apartment blocks and take a slight detour into science-fiction.

Weekly Update


I have barely had a chance to pause for breath in the last week.  I’ve been extremely busy at work, and then looking after my partner who can hardly move after injuring her back.  Between that, looking after the cat and trying to study, I’ve been pulling 14-15 hour days with just an hour or so here and there to rest.  I’ve not had the energy for exercise and I’ve been eating a little too much junk food because it’s easy to prepare and it’s a quick hit of energy.  I don’t see this letting up much in the next few weeks until society returns to some sort of normality.  I feel that normality will be short-lived until we see another surge in Covid-19 cases.  

Last week I talked about selling my apartment to fund BTL purchases in a couple of years time.  There may be a problem with this approach.  I’ve been talking with another apartment owner who is trying to remortgage his BTL in my block.  He is having a number of issues regarding fire safety.  It seems that no mortgage lender is willing to lend on our building following Grenfell.  What happened there was a tragedy, and the response from the UK Government has been disgraceful.  I’ve seen a number of apartment blocks have similar issues where lenders are not comfortable securing debt against those properties.  As a mortgage advisor, I’ve had first-hand experience of this.  The surprising thing about our apartment is that we have no cladding.  It’s a simple brick construction and has only four floors of apartments.  There are some small areas of wood panels on the outside of the brick, but I’m talking about a single layer of wood that covers less than 1% of the surface area of the block.  It is almost certainly a case of lenders being too cautious, and I suspect our apartment building meets a few criteria that raises a flag on their system.  Probably something like; it’s over X meters tall, has more than X dwellings etc. From what I understand, we need someone to come out and certify the building as safe.  However, the cost of such an exercise is quite high and no one is willing to pay for it.  All of this means that we may only be able to sell to a cash buyer, and typically a cash buyer will want the property for below market value.  The other option is to rent the property out.  I’ve been reluctant to do this as the numbers do not stack up very well.  However, if I can bring the mortgage balance down and negotiate a reasonable management fee, then I might be able to make it work.  I would not be able to remortgage to a BTL though, and would have to obtain Consent to Lease from my current lender.  This means I would not be able to switch the mortgage to interest only which will impact on the rental return.  

Science-Fiction Interlude


As I’ve mentioned in the last few posts, I’ve been reading a lot of science-fiction in the past few weeks.  I have just finished the first book in a trilogy written by Cixin Liu, called The Three Body Problem.  I saw a film on Netflix based on a book by this author called The Wandering Earth, and it’s a story which sees the Earth turned into a spaceship so that planet can be moved to a different star system to escape our dying sun.  It’s a fun film and a fascinating premise.  I came across The Three Body Problem whilst reading about the last sci-fi book I finished (Rejoice! A Knife to the Heart).  First, a bit of background.​

The significance of the picture will become obvious if you read Rejoice: A Knife to the Heart.

The Fermi Paradox

The Fermi Paradox was suggested by Enrico Fermi who argued that there is an inconsistency between the lack of evidence of extraterrestrial life and the models that suggest that our galaxy should be teeming with life.  Related to the Fermi Paradox are the Drake Equation, which puts forward the formula for how common life should be in the universe, and the Great Filter, which argues that whilst life might be common, there may be something in the development of intelligent life that results in its extinction before it can explore and colonise space.

With the universe being billions of years old, it is theorised that if life was common in the universe, many civilisations should have risen and evolved into space-faring powers, who would have explored the galaxy using self-replicating spaceships, known as von Neumann probes (named after mathematician John von Neumann).  The idea behind von Neumann probes is that if a race was able to explore and exploit the resources of its own solar system, it could build a fleet of probes that would explore space and use the resources they find to build more probes.  This utilises the power of exponential growth.  Let me explain with an example. 

  • Alien race builds ten von Neumann probes.  
  • The average distance between stars in the Milky Way is approximately five light-years.  
  • The fastest probe we have created takes around 20,000 years to travel one light-year.
  • As such, we assume it takes 100,000 years to travel from one star to another on average.  
  • Assume each probe builds two new probes at each star system it explores. 
  • After one million years, there would be 590,490 von Neumann probes exploring space.  If I’ve done my calculations right, they would have explored over half a million cubic light-years of space.  
  • After one and a half million years there would be over 143 million probes exploring space.  

Your first thought might be that no intelligent life could endure for millions of years, but these probes would be unmanned and once launched would require no outside control.  In a universe as old as ours, if just one race had created von Neumann probes then it would be likely we have evidence of their existence.  

I don’t think we will ever have face-to-face contact with an alien race, but I could see a time when we discover evidence of intelligent life from another star.  I would put money on that evidence being a type of von Neumann probe.

How does all of this relate to the book I’ve just read?

One theory that explains why we have no evidence of alien life is described in the Dark Forest theory which states that alien civilisations are afraid of revealing their location and hide their existence as much as possible.  With travel and communication between stars difficult, if a race discovered the existence of another race nearby (relatively speaking) then both would fear the other was planning to destroy the other, out of fear the other race was planning the same.  As a result, everyone is hiding out of a sense of self-preservation.  

The book I’ve just read explores the Dark Forest theory, and it was absolutely fascinating.  

Thank you for indulging my impromptu TED talk.

Health Update

​Current Weight: 116.4 (up 0.7kg from last update).

Current Body Fat: 38.1% (down 1.4% from last update).

BMI: 35.1 (up 0.2 from last update).

Weekly Goal: lose 0.75kg.

Ultimate Goal: 90kg.

Weekly Steps: 33,875.

Another rubbish week healthwise.  Exercising at home has ground to a halt because there’s only so many hours in a day, and I’ve been exhausted.  I’ve also had a few bits of shoulder pain which always freaks me out, having had multiple surgeries on my shoulders in the past fifteen-years.  What I really need is for the gym to open so I can get on a cross trainer or rowing machine.  I can’t cycle because of the injuries I sustained a few weeks ago that led to me going to hospital.  On that subject, I’m still suffering because of that injury and have just been prescribed gabapentin to treat the symptoms.  I’m going to try and start intermittent fasting again as I’ve had some success with that in the past, but as I’ve said before, food is my go-to support when I can’t exercise and I’m stressed out.

​Financial Update

Premium Bonds: £19,250 (up £100 from last update).

Stocks and Shares ISA: £12,256.01 (up £399.41 from last update).

Fuck It Fund: £0.00 (no change from last update).

Property Value: £185,248 (no change from last update).

Total Assets: £216,754.01 (up £499.41 from last update).

Credit Card: £310.20 (down £32.77 from last update).

Residential Mortgage: £143,528.46 (no change from last update). 

Total Debts: £143,838.66 (down £32.77 from last update).

Total Wealth Figure: £72,915.35 (up £532.18 from last update). 

Investment Income in 2020: £86.36 (no change from last update) (target £2,000).

A positive week for my finances with gains made in the stock market and a small addition to my BTL fund.  My credit card balance has come down slightly, but as I mentioned last week it might be a little longer until I clear it completely.  

BTL Update  

We have completed a viewing today that came about through a chance conversation on a Facebook group.  The property was nice enough for an owner occupier but needed work to be considered safe for letting, as well as some decorating and carpets being replaced.  Also, the washing machine was located in the garage under the property which meant you had to leave the house, walk around the outside and down some steps into the garage to get your laundry.  I think this would be a bit of a hassle for people, especially in the middle of winter.  The vendors were clear that they are holding out for the asking price but between the work that would be needed, and the fact they’re holding out for the asking price, it would not be a deal that would make enough money to be worthwhile. 

We’ve been trying to view another property through Purplebricks but their website is the absolute shits.  It does not recognise our password, so we request a password reset.  The password reset comes through and we select a new password.  Then, we try to sign in and it states the email address needs to be validated despite the fact we’ve validated it several times before.  I emailed Purplebricks and their response was to send me a link to log-in on the website to arrange the viewing, despite me explaining the nature of the problem we are having.  I doubt I will be looking for a property through this agency, as it’s just too much hassle arranging the viewing. 

Another issue we have is arranging viewings around work.  Both myself and my investment partner work full-time jobs.  Agents tend to prefer completing viewings in the week, during working hours.  I’m starting to get very frustrated at the lack of progress we’re making, but it’s difficult to see what we could be doing differently.  The biggest frustration is that the main way to find properties when you’re starting out is online.  We haven’t cultivated the relationship with agents to be able to view properties before they go to market.  So, we rely on what’s online.  Then, you judge the properties by their photos which have been edited to make them look as nice as possible.  I said earlier, when we left the viewing, that I’ve never seen a property in person and been pleasantly surprised that it’s nicer than the advert suggested.  In almost every instance I’ve been angry or disappointed that the property has little resemblance to the listing.  

It’s back to the drawing board and we will try to line up some more viewings next week, and as always I will keep you all updated. 

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  ​

Part 36

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will share some projections I’ve been working on for the next few years, and post the interview I completed with my investment partner, my father, Darren Scothern.  I hope you’re sitting comfortably as this is the longest blog post to date. 

Weekly Update

I passed the exam.  It was such a relief as I honestly thought I had failed.  The exam was difficult and there seemed to be a lot of content that was not covered in the textbook.  The main thing is I passed, especially with everything I had been dealing with.  I needed that pass; more than I think a lot of people realised, I really needed that pass.  I needed something to go right after some of the most stressful weeks I’ve ever had.  It might not seem like a big deal, but had I failed that exam I think it may have knocked my confidence so much that I might not have gone back to it.  I’ve got a foundation to build on now; a base to build on and move forward.  The next exam is booked for mid-August and is focused more on investments and asset classes rather than regulation.  I feel much more confident about the material.  

There isn’t much more to report from the last week.  It’s been a little quieter with the neighbours but I’m dreading another weekend of drug fuelled noise.  I spoke with our management company and it seems that a lot of people have been complaining about different neighbours over the last few weeks with everyone being at home more.  I’m generally pretty chilled out about my neighbours making noise here and there; it’s an apartment building after all, but there are limits to what’s acceptable.  

2020 Reading Challenge 

A few weeks ago I posted the list of the books I had read in Q1.  Now that Q2 is finished, here is the list for the last three months, with star ratings out of five:

April
26. Babylon’s Ashes: The Expanse Book 6 by James S. A. Corey.*****
27. Persepolis Rising: The Expanse Book 7 by James S. A. Corey.*****
28: Tiamat’s Wrath: The Expanse Book 8 by James S. A. Corey.*****

May
29. The Complete No-Nonsense Guide to Property Investing by David Tarn (re-read).*****
30. The Choice by Claire Wade.***
31. The Complete Guide to Property Investment by Rob Dix (re-read).*****
32. Dark Matter by Blake Crouch.****

June
33. The Glass Hotel by Emily St. John Mandel.*****
34. Seveneves by Neal Stephenson.***

I’ve not read anywhere near as much this year as in 2019.  A lot of the time I would have spent reading, I’ve been studying.  Also, I listen to a lot of audiobooks when I’m out and about, but with the lockdown I’ve not been out as much.  

I have been trying to keep up with the goal of reading more fiction written by women.  I enjoyed The Choice but it was only ok.  I can’t remember the names of the characters which is never a good sign, but it was an interesting premise.  It’s set in Britain where the government has almost complete control over your diet.  Everything you eat is monitored, as is the amount of exercise you complete.  
The other book with a female author that I read this quarter was The Glass Hotel.  I started 2020 having read Station Eleven by the same author, and both books are on the list of my favourites of all time.  I was blown away by both stories, but more so the characters that were brought to life on the page.  I’m a big believer that the characters create the story, not the other way around.  The best stories are when well-rounded, complex characters are thrown into unusual situations, and not when characters are just jumping through hoops to service a plot.  

Anyone who follows me on social media will know I’ve been banging on about The Expanse for months now.  It is, simply put, the best sci-fi in print at the moment and the TV adaptation is fantastic.  
I really enjoyed Dark Matter as well.  It deals with the multiverse and how the choices we make can have huge impacts later in life.  I don’t want to say too much more for fear of spoiling it, but you should check it out if you are interested in alternate realities.  

I stumbled across Seveneves by accident, as I went down a Reddit rabbithole.  Someone mentioned this story where the Moon breaks apart and humanity has to act to save itself.  A fascinating idea and I bought the book immediately.  The execution was mixed.  I really enjoyed the first two-thirds of the book, but the final third felt rushed.  I think it would have been better had the book ended early, with the final third being fleshed out as a sequel.  It will make more sense if you read Seveneves, as I can’t explain why without spoiling the book.  

Health Update

Current Weight: 115.7 (down 0.3kg from last update).

Current Body Fat: 39.5% (up 0.7% from last update).

BMI: 34.9 (down 0.1 from last update).

Weekly Goal: lose 0.75kg.

Ultimate Goal: 90kg.

Weekly Steps: 26,044.

Financial Update

Premium Bonds: £19,150 (up £1,900 from last update).

Stocks and Shares ISA: £11,856.60 (up £112.26 from last update).

Fuck It Fund: £0.00 (down £1,899.95 from last update).

Property Value: £185,248 (no change from last update).

Total Assets: £216,254.60 (up £112.31 from last update).

Credit Card: £342.97 (up £342.97 from last update).

Residential Mortgage: £143,528.46 (down £358.01 from last update). 

Total Debts: £143,871.43 (down £15.04 from last update).

Total Wealth Figure: £72,383.17 (up £127.35 from last update). 

Investment Income in 2020: £86.36 (up £25.00 from last update) (target £2,000).

As you will have noticed, there have been a few changes in my finances.  I’ve reduced my Fuck It Fund to zero as the interest rate was cut again.  The rate of interest was insultingly low and so I made the decision to delete the fund and transfer the money to my Premium Bonds.  Whilst it’s nice to have a cash reserve, the funds are still readily accessible in Premium Bonds.  For immediate emergencies I have a credit card with a substantial credit limit.  I will build up a cash reserve again in the future once interest rates have returned to normal levels.  

In the last week I’ve had a few things come up which I should have known about but slipped my mind with everything else I have going on.  My annual audible subscription was taken, and then I realised my supplies of Nespresso capsules were running low.  Between these two expenses I was £250 down, and then I had to take a few Uber trips to and from my exam, and there was a takeaway in the mix as well.  The credit card will be reduced to zero within a few weeks, although it may increase in the short-term as I have a medical bill of £150 to settle.  I had another £25 of investment income this past week which takes the year-to-date total to £86.36,  I was hoping to have brought in much more than this at this stage of the year, but events conspired against all of us.

FIRE Timeline Projections

I’m always thinking about ways to achieve FIRE as soon as possible.  It’s bordering on obsessive thinking, but not in a negative way.  It’s the only thing that keeps me motivated to work.  Property is going to be the main source of income that allows me to achieve FIRE, and so it’s a case of looking at the numbers and working out how many properties will be needed to achieve FIRE, and how much money will be needed to acquire those properties.  

In an ideal world deposits will be recycled from one BTL to the next.  The gold standard is to recycle the whole deposit but in reality 25%-50% of the deposit being recycled is a good result.  One potential problem with this model is that it relies on property values increasing either through refurbishment or general increases in the property market.  The outbreak of Covid-19 has made it difficult to complete work on properties, and it will almost certainly result in a property market slump for a short period.  So, releasing equity in this way is going to be tricky over the next few months and years.  This led me to look at how quickly I could save enough cash for deposits without raising equity from the BTLs I purchase.  As I worked this out, I concluded that there are three ways I can generate cash to buy BTLs with.  

  1. Saving cash each month.
  2. Using stocks in my ISA.
  3. Equity in my residence.

Saving Cash 

For a while now, I’ve been able to save or invest over £1,000 each month with little difficulty.  For the last couple of months it has been closer to £1,200 per month.  I’m shopping in the £90,000-£110,000 price bracket, but for the purposes of this exercise I will assume an average purchase price of £100,000, and that the current SDLT rates will apply moving forward.  The total cost for the deposit, legal fees, valuation and SDLT on a £100,000 will be in the region of £29,000.  I need ten half-shares of properties to achieve lean FIRE; i.e. enough to cover the basics.  To achieve fat FIRE, I need fourteen half-shares.  

A slight digression…

Some of the properties I will be buying will be in joint names either with my Dad or my partner.  So, I will receive half the rent for half the cost.  To more easily conceptualise this, it’s easier for me to think in halves rather than whole properties.  Yes, it’s a bit weird but I never claimed to be anything else.  

Another point; property values will change over time.  However, if values go up then I will be able to release equity from the properties I already have.  If values go down, the deposit requirements go down.  So, for the purposes of this projection, I think it’s ok to assume values remain static.  

Saving Cash – Continued

Assuming I can save £1,200 each month for forty-two months (from now until December 2023), I will accumulate £50,400.  Not quite enough for two whole properties.  It doesn’t look too positive.  However…

I have been working overtime at work and it seems as though the overtime will be available for a while.  I don’t need to work too much extra to raise an additional £300 net each month.  So, what do the projections look like if I’m saving £1,500 per month?

£1,500 x 42 months = £63,000.  Enough for two whole properties.  Better, but still a little short.

Saving Cash and Reinvesting Rental Income

If I take the above projection, but factor in additional variables, the picture looks a little better.  I already have enough money to acquire a BTL in joint names with my Dad.  We are looking at, as an absolute minimum, achieving a net return of £75 per month each.  Also, I will probably have around £5,000 left over from the purchase.  So, if I start from a position of £5,000 and save £1,200 per month (assuming no overtime) but add in the £75 per month from the first property it will take nineteen months to save up for my next deposit.

Assuming I acquire the property and rent it out immediately (I could have been lining the deal up before I hit the deposit savings goal), then I will have one-and-a-half properties let, netting me an estimated £225 per month on top of my savings of £1,200 each month.  From this starting point it will take a further twenty-months to save for the next deposit.  At which point, I have seven months left with two-and-a-half properties owned.  It’s still not compounding fast enough.  

Using Stocks

There is one stock I have in my ISA that I believe is massively undervalued.  In the next three-months I will have amassed a holding of over twenty-thousand units in that stock.  The 52-week high for the stock is a little under 75p.  I believe that by December 2023 it will be back trading at that level or even higher.  Each month that passes sees the units in my holding increase.  It’s not unreasonable to expect that holding, when cashed in, to provide me with enough funds for another BTL deposit, especially when used in conjunction with the seven-months of saving £1,575 described above.  

Using my own cash savings I can get to 2.5 BTLs with each half returning £75 net.  That means I’m earning £375 per month.  Added to the £1,200 I’m saving each month, I have £1,575.  Assuming I sell 20,000 units of stock at 70p (a little under the current 52-week high), I have almost enough for another property.  

This would see me having seven half-shares.  I need three more half-shares for lean FIRE.  This is where my own residence comes into play.

Selling My Apartment

My residence is in one of the most up and coming parts of the country.  There are often articles in national publications highlighting my area of Sheffield.  It’s going through an incredible period of regeneration and properties are in high demand.  I believe property values here will increase at a higher rate than the national average, and because the area is compact there is not much more room for further development.  If my property increases in value by just 3% per year, then by 2023 it will be worth over £200,000.  My mortgage at that point, should be under £125,000.  I doubt I would even need to engage an agent to help with the sale as we get a number of requests each week from people wanting to buy property in our complex.  So, I could almost certainly arrange a private sale, and walk away with £75,000.  It’s almost enough for three more properties (six half-shares) but it would be split with my partner, so we would both have half a share in those properties.  That would see me to ten half-shares.  

I know that it looks like a house of cards, with one assumption on top of another assumption, but I believe projections to be on the side of conservative-realism.  It is possible that in the next three years some of the properties I acquire will increase in value allowing me to release equity and advance at a faster pace.  Also, if I pass the remaining exams to become a financial advisor, I will be able to command a higher wage and save more each month.  

Also, the figure of £75 per month, per half-share of property is based on saving for void periods and repairs, and assumes a worse tax position than is realistic.  I calculated the figures assuming I would be paying 20% tax on the gross rent, when the reality is many of the costs are tax deductible which decreases the tax due.  So, although my goals are ambitious, my projections are always extremely conservative.  

First things first though.  I need that first property as soon as possible.

Interview

What were your first experiences of managing money?

That’s an interesting question, and I should probably preface it by saying that there is a huge difference between being in a situation where you should be managing money, and being in a situation where you do manage money. For me, I should have been managing money from when I left home to set up house with my girlfriend, when we became parents at a young age and wanted to be independent. Unfortunately, I wasn’t even aware that ‘managing money’ was even a concept. I’m not joking. There were reasons behind that lack of knowledge, of course. I guess the first time I actually started managing money, it was managing someone else’s money; namely budgets in my first management job, at the age of 22. It never occurred to me at that time that I could use the same processes to manage my personal finance, which sounds terrible, I know. But again, there were reasons for that.

When did you first start to apply a process to managing your own money, and what caused you to take a more active role in your own finances?

When I became a single parent, with custody, I had sole responsibility for making the domestic finances work, in very difficult circumstances.  Basically, there wasn’t enough money to make ends meet, and the result over time was predictably disastrous.  But I did have a rudimentary method of using a simple spreadsheet to show my current balance, upcoming outgoings and expected result.  When you talk about managing finances, at that time in my life, my thirties, it was all about putting out fires and damage limitation.   Debt, however, spiralled to almost unbearable. levels.  It was only by remortgaging my property, which had rocketed in value, that I got back on an even keel with debt consolidation.  It was that experience of debt that made me want to change my approach to money.  Since then, the only debt I’ve had is ‘good’ debt, where I’ve made a considered decision to take on debt because it worked in my favour.  At present, the only debt I have is my mortgage.  But there was a long journey between becoming free of bad debt, and getting to a stage where I had a desire to manage my money more positively, more proactively, and the financial awareness to do that.

To what extent would a better financial education have improved your circumstances in your 20s and 30s?

When I was at secondary school, I took a politics and economics course.  I can honestly say that within months of leaving school, the only thing I could remember about economics was the supply and demand chart. For my generation, and still today, it is scandalous that kids come out of school with so little awareness of the issues that affect personal financial security.  I genuinely believe that if I had been taught in detail about investment, compounding, and the irreplaceability of spent cash, I would be significantly well-off today.  I would never have undergone the ten years of stressful debt that I experienced.  There are many, many issues around financial education.  It’s not just about the numbers, but about the ethics of money as well.  It’s complex.  On the one hand, you have an establishment that is sadly geared to reconcentrating wealth into the possession of a social elite, and on the other hand, there is a culture in the working class, perhaps much more so in my generation, of seeing wealth as morally wrong.  This mindset is fed by the excesses, both moral and financial, of the wealthy elite.  But there is a third path, I believe.  With good financial education, there is the path of ethical capitalism.  And although I’ve come to it late in life, that is the path I now walk.

How difficult was it to change your financial mindset?

Changing my financial mindset has been weird.  When I started trying to learn about how to approach finances differently, I found some of my long-held beliefs were being challenged.  I think that can be difficult for anyone, and probably gets more difficult the older you get, as those beliefs have had longer to become ingrained.  It was difficult to accept certain parts of what I was learning, and I found myself going ‘yeah but,’ a lot of the time, and then finding my buts were pointless.  I think a lot of people who’ve tried to start learning about money will have come across Robert Kiyosaki’s assertion that a house should be viewed as a liability rather than an asset; that rocked me.  Also, I came across the concept that one way of differentiating being poor from being rich is that poor people spend money; rich people make money work for them.  Coming from a very lower working class background, that made me angry.  But I now believe there’s a great deal of truth in it.  The problem is, of course, one of education.  We’ve already spoken about the value of financial education.  People from economically deprived backgrounds often struggle for quality education, for a whole host of reasons.  It creates a poverty trap.  I believe that a certain category of person at the apex of financial success is, whether intentionally or not, perpetuating a social chasm in wealth, education and wealth education that ensures the poor stay poor.  This is why I always say I’m in favour of capitalism, but it has to be ethical capitalism.

Was there a “penny drop” moment for you regarding financial education, or was it more of a gradual awareness?

There were sudden steps along the way.  The first step came with the responsibility of being a single parent.  The second step came with becoming debt free and knowing that I could never allow myself to be in that position again.  But both those steps were just awareness that money was important.  No knowledge came with it.  There came a big step-change talking to you about investing, how it works, and what could be achieved.  That was the point at which I started investing in a fund via an ISA with Hargreaves Lansdown.  Reading books by Robert Kiyosaki and Napoleon Hill was like getting repeatedly punched in the guts, and with each punch, more clarity emerged.  Rob Moore’s stuff on property investment really got my management and business head directed toward financial security.  And then books by Andrew Craig and Ramit Sethi kind of helped me pull together ideas that had been swirling in my mind.  I have to say as well that most of the inspiration to pursue financial awareness, and to make bold decisions regarding aiming for financial competence and security in my life has come from your good self.  Without your example I might actually not have started down this road.

What does your idea of financial independence look like?

For me, financial independence means not having to rely on an employer to meet my financial requirements. Which is a strange thing, I know, if you think about it. I mean, if I was financially independent, would I just sleep and do nothing all day? Of course not – there are lots of things I want to do, and some of that would include activities that some people consider to be hard work. So, it might be a valid question to ask, well if you’re going to be working anyway when your financial requirements are met without recourse to an employer, then how is that different from working for your money? And that brings us to the crux of the matter: It’s not about financial independence for the sake of financial independence; it’s about choice.  It’s about freedom.  The poverty I experienced as a child, and the financial difficulties I experienced as a young adult, have been exhausting, and that is a huge driver of why I am pursuing financial independence.

If you could go back in time and give an 18-year-old you some advice, what would you say in 100 words or less?

Very simple, this one: “Try again with your education. Pursue your interest in the arts, for sure, but also be practical. Learn how to look after money, and learn the skills for a fulfilling career. Learn how to cook!    But most importantly; do not believe the people who have kept telling you that you are not good enough.  Fix your eyes on your dream, and NEVER give up.”

What investment types are you interested in other than property?

I’m very cautious, and safety minded.  Some might say too cautious.  But I tend toward looking for investment that is slow, steady and safe.  So, a tracker fund is ideal for my mindset.  I have a FTSE 250 tracker, that’s performing pretty well so far.

What would you say your biggest financial mistake and success was?

There have been plenty of missed opportunities over the years, but I think when it comes to actual mistakes, one thing stands out.  When I sold the first house I had bought, I made a significant profit.  I was very naïve, and I just put that money in the bank.  Stupid really.  Over a period of time, I spent it all.  Did I need a new car? Of course I did! Did I deserve an expensive holiday somewhere warm? You’re damn right I did.  Plain stupid.

In terms of successes, I would say simply learning from the mistakes of the past counts as that. To be specific, a while ago when I got quite a significant tax refund, every penny of it was invested. That’s the approach I take now whenever I get any unexpected income: Into the fund it goes.

Thank you for your time.

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post. ​

Part 35

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will be talking a little about my mental health, and my frustration at the lack of progress towards FIRE.

Weekly Update

I’d love to sit here and write that I’ve had a good week but that would be a lie.  I’m stressed with my personal and professional life, and having to deal with disrespectful neighbours.  When you live in an apartment you expect that from time to time there will be noise.  Most people are fine when you point out that they’re being unreasonable, for example when blasting music out at midnight.  We have one neighbour who is far from reasonable.  For the last few weeks he has been making noise at all hours, either through music at unsocial hours or having a party with people on the balcony drinking, shouting and singing.  Yesterday, there were maybe eight young guys at that apartment and from roughly 2pm until midnight all you could hear was shouting, music and singing.  I was trying to study, but even over my headphones whilst listening to my notes, I could hear them.  From two rooms away, with internal doors closed, I could hear them.  I don’t mind noise now and then, but this is several times a week and the fact it stopped at midnight was unusual.  It would normally go on into the early hours.  

You’re probably asking why we didn’t just tell them to shut up.  Well, a few weeks ago I did.  It achieved nothing except a confrontation, and the behaviour hasn’t changed.  What am I going to do; knock on their door and then have a brawl?  What would that solve?  Yesterday, as the evening wore on, we stepped outside several times and tried to get their attention.  This is a balcony no more than five meters from ours.  Despite calling out, they looked up and ignored us.  They don’t care; they find it funny.  If the people causing the disturbance, find causing the disturbance amusing, how do you confront that behaviour?

The way I see it, the only way to deal with groups of drunk people is by getting angry.  You can’t reason with drunk people; especially drunk, young men.  These guys are in their early to mid-twenties.  I heard them talking about student life.  This isn’t a student apartment block; it’s a private residence.  I don’t want to get angry; I’m stressed enough as it is.  I used to like the area I lived in.  Now, I can’t stand it.  There are some good people living in the block, but the amount of idiots has increased in recent years.  I can’t wait to move.

I’ve got my first exam for my financial advisor qualification on Thursday.  I’m feeling cautiously optimistic.  I think there are some sections of the module that I know well, such as the regulation of mortgages and advice requirements.  Other sections relating to the general regulation of the financial industry are more complicated.  There are a number of sourcebooks, policies, laws and acts to be remembered, as well as a range of different UK, EU and global financial regulators that have different roles and responsibilities.  Remembering all of that is going to be almost impossible.  Fortunately, it’s a multiple choice exam so I can try and concentrate on the parts I know well and hope that my strengths in those sections bring me up to a passing mark overall.  

I can’t wait for this exam to be done, assuming I pass.  My mental health is worsening as a result of stress in my personal life, professional life and in relation to my physical condition (being overweight).  Assuming I do pass this exam, I’m going to give myself two months to prepare for the next exam.  I need a break somewhere in my life though.  When you are stressed in work, find no respite at home, are under pressure through studying and can’t exercise in the way you would want, it becomes difficult to see the light at the end of the tunnel.  

Health Update

Current Weight: 116kg (up 0.8kg from last update).

Current Body Fat: 38.8% (up 2.2% from last update).

BMI: 35 (up 0.2 from last update).

Weekly Goal: lose 0.75kg.

Ultimate Goal: 90kg.

Weekly Steps: 20,546.​

Financial Update

Premium Bonds: £17,250 (no change from last update).

Stocks and Shares ISA: £11,744.34 (down £264.92 from last update).

Fuck It Fund: £1,899.95 (up £45.01 from last update).

Property Value: £185,248 (no change from last update).

Total Assets: £216,142.29 (down £219.91 from last update).

Residential Mortgage: £143,886.47 (no change from last update). 

Total Debts: £143,886.47 (no change from last update).

Total Wealth Figure: £72,255.82 (down £219.91 from last update). 

Investment Income in 2020: £61.36 (up £4.92 from last update) (target £2,000).

This is the period of time between payday and my mortgage payment going out, and my regular investment into my ISA being taken.  As such, there’s not much to report.  I had some spare cash that I placed in my Fuck It Fund, which boosted the value slightly.  I didn’t pay attention to the balance until writing this blog, and I had the urge to add another 5p in there to satisfy the OCD part of my personality.  However, the monthly interest for that fund will be credited at the end of the month and take the balance above the £1,900 level.  

Interviews

I know last week I said I would have some interviews ready to be posted.  I’ve got the information ready, but with this exam coming up and everything else on my plate I’ve just not had the time or mental energy to deal with it.  Apologies if you were looking forward to reading them; I promise they will be posted in the next week or two.

How Long Until FIRE?

I’m becoming increasingly frustrated and impatient to achieve FIRE.  I desperately need a change, either in job or scenery; preferably both.  This lockdown is probably playing a big part in my low mood of late.  I can feel myself slipping once more into depression.  It’s like there are two versions of me; the version that is getting on with the tasks that need doing, and the other part of me that is demanding attention; The Black Dog (look it up).

So long as I keep busy, I’m managing to get through the minutes, hours and days.  I don’t want to have to go back on antidepressants again as they just make me mentally numb.  There was a line in the audiobook I’m listening to at the moment that struck a chord with me; it’s a character talking about their own depression:

“I once used drugs to fix it. Then I stopped. I stopped because I decided they were making me stupid, and I’d rather be miserable than stupid. I am what I am.”

Seveneves by Neal Stephenson

Drugs to treat depression work for some people.  I’ve tried a number of different types over the years when I’ve been depressed, and they’ve never really worked for me.  Exercise, a good diet and relaxation works for me.  I can’t get any of those things right now.

I’ve been spending a lot of time lately thinking about how long it will actually be until I can achieve FIRE.  It comes down to numbers and the power of compounded growth.  I also need the property market to stay stagnant for a time, before starting to increase so that I can more easily pull money out of each deal.  A quick reminder of the model I’m hoping to follow:

Step 1: Buy a property below market value.

This is best described with an example.  Let’s say I buy a property that would normally be worth £110,000 but for a variety of reasons I’m able to purchase it for £100,000.  I obtain an interest only mortgage for £75,000 and use a £25,000 deposit.  

Step 2: Increase the property value through home improvements or utilising growth in the property market.

When I took the mortgage out, the lender will have valued the property at £100,000.  Lenders will not generally value a property at more than what you are paying for it.  BTL mortgages are normally capped at a maximum LTV of 75%.  So, to release equity, I need to have a lower LTV.  I can either spend money on the property to improve it or wait for the market to grow.  Assuming that the property increases at 5% per year (figures can vary drastically), then after one year the property would be worth £105,000 with no improvements having been made.  However, assuming I had made a few simple improvements I could ask the lender to physically inspect the property rather than relying on their estimate.  I would be hoping that the increase in value was on top of the original, higher valuation when I bought the property.  So, at this point I would be hoping for a valuation of at least £115,000. 

Step 3: Release the equity

The valuation of the property came back at £115,000 and I have a mortgage of £75,000 which results in a LTV of 65.2%.  I could bring this back up to 75% by releasing equity in the property, amounting to an extra £11,250 which I then put towards my next BTL deposit.  

This is a very brief overview and in previous blog posts I break it down into much more detail.  

I’ve been thinking about the rent each property would achieve and how many properties I need to achieve my FIRE target.  I’ve assumed each property is bought for £100,000 and produces a gross rent of £550pcm.  Assuming this, five properties should produce a net income of at least £1,000pcm assuming I buy them in my sole name.  If I buy in joint names, the figure is halved but so is the amount I contribute to each deal.  Having ten properties in joint names is better than five in my sole name because the risks of problem tenants or damage to the properties is diluted across the portfolio.

With a clear idea of how many properties I need to achieve FIRE, my attention turns to how I will raise the deposit required as even the best models of Buy, Refurb, Refinance, Rent, do not predict you can pull out 100% of your cash on every deal.  I have a few ways to raise the cash.

  1. Regular savings: In a typical month I can save/invest £1,000.  If I do overtime, or get a bonus, the figure is higher.  As I receive investment income, the figure grows as well.  In just over two-years I can save a deposit for a property being purchased at £100,000 and the associated fees.
  1. Refinance the first BTL to release equity: This may help compliment the above option, but is unlikely to provide a full deposit (and fees) for another BTL.  If I have two BTLs at the same time, releasing equity from two may provide the funds to buy a third.
  1. Use the funds in my ISA: There is a stock in my ISA that I believe is going to steadily increase in value over the coming months and years.  I typically use a third, to a half, of my monthly investment into my ISA to purchase units of this stock.  Once I get to 25,000 units I will stop and switch back to investing in funds.  I believe this stock will increase in value to 100p per share in the next few years, and if I sell at that price, it will release enough funds for another BTL.
  1. Sell my residence:  I could release equity in my own residence, but I would be limited to 85% LTV (you can borrow more against your own home than a rental property).  However, if I sell the property I am, in effect, releasing all the equity.  My property is thought to be worth just over £185,000 right now.  Assuming a modest annual increase in value of 2.5%, the property will be worth over £200,000 in four-years.  At which point, my mortgage debt will be approximately £130,000.  That’s £70,000 of money released to put towards BTL properties.  

When I break the numbers down, I’m reassured.  I just need to get that first property bought and let.  

A few days ago I had a call with my investment partner and we hammered out some more precise criteria for our property searches.  We’ve had no success finding a property because everytime we enquire about one that has potential, it has already sold.  The market is insane right now, and I’m hearing the same thing from other property investors; the market is way, way too hot right now.

I’ve likened the property market to a plane climbing higher into the sky.  It’s getting higher and higher, and then the engines fail.  The plane does not immediately fall from the sky.  It might even continue to gain altitude for a while, but then it will level out, glide and fall.  Some people are predicting this fall will happen in Q4 of 2020, as the UK Government’s furlough scheme ends in October.  My prediction is people will live off short-term credit to get through Christmas and New Year, and then the shit will hit the fan.  Once Christmas is done, many employers will let staff go as they approach the new financial year.  Unemployment will soar and people will not be able to service their debts.  Properties will flood the market, and prices will drop.  I’m pretty much certain this is going to happen.  The only thing I’m not certain on, is whether this will be a long recession, or if we will see a quick bounce back.  

The government will have limited options to tackle this.  I thought initially that we would see tax hikes, but this would be political suicide for a government dealing with mass unemployment.  Taxation only works if there are people working who can pay tax.  The only way out I can see will be for the government to invest in infrastructure and manufacturing, to create jobs for people to move into.  

It’s going to be a difficult time ahead for many people.  Now is the best time to start looking at your finances and creating a budget, and if possible start building an emergency fund.  The worst thing that could happen is you don’t need to use it.

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  ​

Part 34

Hello and welcome back to Mortgage Advisor on F.I.R.E.  

Weekly Update

Although I am feeling slightly better in myself following a few weeks of stress in my personal life, I’m not anything like back to normal.  I’m feeling physically and mentally exhausted.  In addition to working full time, I’m exercising, writing and studying for my first exam on the road to becoming a financial advisor.  On top of that, there is the fact that some of the people in nearby apartments are not being particularly considerate when it comes to going on their balconies and shouting in the middle of the night.

We haven’t had any more success in finding a BTL, in part due to the pressures on my time mentioned above.  Until I complete my first exam, everything else is of lesser importance.  I completed a few mock exams on the modules I’ve covered so far and achieved a passing grade.  Had I not mentally shut down for the last few weeks I’m sure I would be further ahead with my studying.  Ideally, I would be better prepared at this stage but right now all that matters is passing the first exam, and then hopefully doing a better job of studying for the other five modules.  

The property market is going to pass through a period of instability in the coming months, I think.  With the furlough scheme coming to an end in October, and the ban on evictions ending at roughly the same time, I can see the market remaining steady until the end of 2020, possibly early 2021.  However, as people see a drop in income and we potentially see a surge in unemployment, I can see a surge in people trying to sell.  This will cause prices to drop and many investors with spare cash will start snapping properties up.  The economic impact of Covid-19 is going to be felt for many years to come. 

Health Update

Current Weight: 115.2kg (up 1.5kg from last update).

Current Body Fat: 36.6% (down 3.3% from last update).

BMI: 34.8 (up 0.5 from last update).

Weekly Goal: lose 0.75kg.

Ultimate Goal: 90kg.

Weekly Steps: 13,416.​

A bad week, health wise.  I’m not convinced that the weight gain is as significant as it could be part of the daily fluctuations that everyone experiences with their weight.  It’s strange that my weight increased but my body fat percentage came down.  I suspect that when I look back at this week, it will be something of an outlier.  I haven’t had the best week in terms of diet; this week I did succumb to stress eating and the pressures of studying meant I could not go out for as many walks as I would have liked.  

Financial Update

Premium Bonds: £17,250 (up £750.00 from last update).

Stocks and Shares ISA: £12,009.26 (up £340.01 from last update).

Fuck It Fund: £1,854.94 (up £100.00 from last update).

Property Value: £185,248 (no change from last update).

Total Assets: £216,362.20 (up £1,190.01 from last update).

Residential Mortgage: £143,886.47 (no change from last update). 

Total Debts: £143,886.47 (no change from last update).

Total Wealth Figure: £72,475.73 (up £1,190.01 from last update). 

Investment Income in 2020: £61.36 (up £4.92 from last update) (target £2,000).

A good set of figures for this week with my salary being paid on Friday.  My monthly investment into the stock market will not take place until early July, so the gains in my ISA seen here are a result of general stock market increases.  

I received a small dividend from one of my stocks in the past week, which increased my investment income for 2020.  Had my other stocks not cancelled their dividends following Covid-19, I would be roughly 30%-40% of the way to hitting my target.  It’s frustrating, but then I remember that I could have worse problems to contend with.  

Ideally, to achieve a comfortable lifestyle in Romania I need £26,100 p/a from my investments.  I’m a long way off that, but I still believe it can be achieved by the time I’m 40.  Even if I don’t achieve it in time, the things I’m doing now will mean I’ll be in a much better financial position than if I simply gave up.  

Interviews

Over the next few weeks I will be posting a number of interviews I’ve completed regarding finance and gambling addiction.  I was hoping to post the first part this week, but life (and my exam prep) has gotten in the way.  So, this week’s blog is much shorter than usual.  However, next week will see normal service resumed.

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post. ​

Part 33

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will be sharing some thoughts on how society may adapt to a post-covid world, and how this could inform my investment strategy.

Weekly Update

Although my last blog post was not written to attract attention, I was heartened by how many people got in touch privately to check I was ok.  I’m still feeling angry and stressed, but I’m dealing with it better than I was.  I’ve gone a few nights without sleeping tablets which has been a relief.  I’m not working at the moment as I should have been in Romania.  I decided to keep the holiday from work booked as I felt I needed some time out.  I’ve spent much of the last few days finishing The Glass Hotel by Emily St John Mandel.  Some of you may recognise the name from a previous blog post where I talked about her earlier book, Station Eleven.  Both books by the author have smashed their way into my top-ten books of all time list.  It’s difficult to assign these works to a specific genre.  All I can say is that there are few books that have been so vivid, deep and atmospheric.  

The BTL search continues without success.  I’m becoming increasingly frustrated with estate agents for a number of reasons.  The first frustration is that I get the sense they sometimes don’t want to sell a property.  The amount of agents that only conduct viewings in office hours is absurd.  Many people who are wanting to view a property will be employed in some form, and finding time between office hours to view a property is difficult.  If I had a property for sale, and it had been on the market for a year and the agent was just shrugging their shoulders when people ask for viewings after 5pm or at the weekend, I would be furious.  

Another source of frustration is when the agents market the property in such a way that it is unrecognisable when viewing.  The property I visited today looked nothing like the pictures in the listing.  The advert stated that “some cosmetic refurbishment” is needed.  This property needed; several internal doors replacing, complete redecoration, all carpets ripping out, walls plastering and possible total floor replacement in the bathroom.  This is not “cosmetic”.  The property was not habitable.  The vendor was a nice guy, but he’s going to struggle to sell that property in the current condition and climate.  The thing is, I’m not opposed to a property that needs major work, under normal circumstances, if the price is right.  We are not in normal circumstances though.  If I was to buy this property, it could take months to complete the work and in that time I would be responsible for the mortgage, council tax, utilities and making sure the property was secure.  

I’ve had a chat with my investment partner and we’ve agreed that we are going to change approach and start looking at higher value properties, which will have a better chance of being let immediately. I don’t know what agents hope to achieve by deceiving potential buyers.  If I see an advert for a property that looks to be in a good state of repair, and it’s actually a dump, it’s going to piss me off.  If the advert was honest, it will attract the right type of buyer; i.e. one that wants a refurb project.  It’s like seeing an advert for a two-year old car, but when you turn up to look at it, the car is ten-years old, rusting and missing a wheel.  

Health Update

Current Weight: 113.7kg (down 0.6kg from last update).

Current Body Fat: 39.9% (up 0.6% from last update).

BMI: 34.3 (down 0.2 from last update).

Weekly Goal: lose 0.75kg.

Ultimate Goal: 90kg.

Weekly Steps: 48,763.

Another positive week of weight loss, but my body fat is not really moving much.  I need to make sure I’m losing body fat and not muscle, as muscle mass helps burn calories, where fat is just dead weight.  I need to keep my protein levels up, but it’s difficult now I’m not having any protein supplements and keeping a mostly vegetarian diet so as not to increase my uric acid levels.  

Financial Update

​Premium Bonds: £16,500 (no change from last update).

Stocks and Shares ISA: £11,669.25 (down £194.77 from last update).

Fuck It Fund: £1,754.94 (no change from last update).

Property Value: £185,248 (no change from last update).

Total Assets: £215,172.19 (down £194.77 from last update).

Residential Mortgage: £143,886.47 (no change from last update). 

Total Debts: £143,886.47 (no change from last update).

Total Wealth Figure: £71,285.72 (down £194.77 from last update). 

Investment Income in 2020: £56.44 (no change from last update) (target £2,000).

The stock market has taken a hammering in the last day or two.  I’ve lost almost £1,000 in value since Wednesday, as I’d just invested over £500 in to my ISA earlier in the week.  It looks bad on paper, but it’s nothing to worry about.  I’ve been saying for weeks that the market will dip several more times before the end of the year.  2020 is about buying stock whilst it’s cheap, and what I buy now could become vital to my retirement plans in the future.  Every unit of stock I am acquiring will most likely be worth a lot more as the next few years pass by.  At the risk of repeating what I’ve been saying for weeks, now is the perfect time to buy stocks (assuming you have done your research and are not getting into debt to invest).  As I said before, you shop more when there are sales and offers on.  Well, this is a massive sale with plenty of offers.  

Post-Covid

It’s going to be a different world once covid-19 is under control.  There are some aspects of “normal life” that I’m not sure will ever return to “normal”.  One of the first things that comes to mind are gyms, especially the bigger 24/7 gyms.  The gym I used to go to was a 24/7 gym and there were times when it was very crowded with multiple people waiting to get on each piece of equipment.  That sort of environment will not be safe going forward.  I can see gyms setting limits on the number of people allowed in at any time, which will inevitably lead to people cancelling memberships.  Perhaps a system where people need to book a slot to attend a gym would be a way forward, but any system to manage attendance at a gym will result in a loss of revenue for the gyms.  

Another type of business that may struggle is cinema.  I’m not suggesting that cinema will be a thing of the past, but the days of huge screens packed with hundreds of people could be over.  The obvious way to mitigate the spread of a virus in the cinema would be to make masks mandatory.  I don’t have much faith this would work, as people can’t be trusted to keep their phones turned off despite warning after warning.  Also, cinemas make a lot of money from food and drink, and wearing a mask will make it difficult to consume snacks and beverages.  

International travel is going to take a long time to recover but people will still want holidays.  The domestic travel sector could see a major increase in revenue in the next few months.  People will want to travel to the coast, or countryside, and holiday lets, cafes and spas could very well see a surge in demand.  

FIRE = Nihilism

I read an interesting discussion on Reddit where someone had expressed concern that FIRE equates to nihilism.  Their argument was that by pursuing FIRE, they are seeking to exit the game of life and spend their time outside the system, and that without a job they will have no purpose.  I get the argument, but I disagree.  FIRE does not mean that you will never work again.  It means that you have the ability to be selective about the work that matters to you.  In some ways, it’s the opposite of nihilism; you think life is so important that you want to escape unfulfilling work so you can fully embrace your calling.  

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  ​

Part 32

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will discuss our progress in looking for a BTL property, and talk briefly about long-term financial planning for major purchases.  

Weekly Update


Last week I wrote a little about the tough week I’d had.  Sadly, it’s not improved.  I’ve been in a state of constant stress now for almost two-weeks.  I’m finding it difficult to concentrate and I’ve been prescribed sleeping tablets.  I feel as though I’m in a permanent state of fight or flight.  It sucks.  I’ve been stressed before, but I don’t remember feeling this level of stress for this long with hardly any respite.  

The thing is, I don’t know what the answer is.  It’s human nature to try and fix things through action.  Some things can’t be fixed.  Some things can heal, but never return to how they were.  Some things need time, and nothing else.  There isn’t always a right answer; sometimes there are just wrong answers you can learn to live with.

I will be ok though.  I know that I will get through this stressful time, and that in time it will not seem as though it was that bad.  That’s the nature of time.  One quote that has stuck in my mind recently; “If you’re going through hell, keep going.”  The man attributed with this quote is a divisive figure, and I’m in no way promoting him through this quote.  I do feel it’s a motivational quote though, and one that has offered me some support over the last couple of weeks.

One step at a time.  One minute at a time.  One breath at a time.  

BTL Update

A few days ago we viewed our first potential BTL property.  It was not what we expected.  I know that agents will make properties look good, but what I don’t understand is when the pictures and description bear absolutely zero resemblance to reality.  I doubt anyone has ever turned up at a horrible property and thought “well, the advert was good”.  All it does, in my eyes at least, is make the property seem even worse.  If I knew a property was going to be an absolute hovel before viewing, I am prepared.  Also, from the vendors’ perspective it means that any person viewing the property is aware of what they’re dealing with.  

Within ten seconds of setting foot in the property, I knew it was a non-starter.  The vendor seemed like a nice lady; friendly and welcoming.  The house was a small, compact, three-bed mid-terrace.  The construction was old-school and it would not pass a safety inspection as a new build.  I think I described it as a “death trap”.  There was also the smell.  The property would have needed every carpet, curtain and all wallpaper ripping out.  Some places smell, but a quick clean and some fresh air resolves the issue.  This property had a smell that was embedded deeply in the property.  During the viewing, we saw several dogs and smaller pets kept in the property.  I love pets, and my cat is a source of support and friendship to me.  Those who have pets will know how much joy they bring to life.  I didn’t want to buy a property that had arguably been used as a kennel though.  

As I said before, the vendor was friendly and pleasant to speak with.  I sincerely hope she finds a buyer.  I do think that the agent perhaps needs to provide a reality check because I can’t see anyone paying close to the current asking price.  

Health Update

Current Weight: 114.3kg (down 0.8kg from last update).

Current Body Fat: 39.3% (no change from last update).

BMI: 34.5 (down 0.3 from last update).

Weekly Goal: lose 0.75kg

Ultimate Goal: 90kg

Total Weekly Steps: 46,123 (50,000 weekly target).​

Another week with weight loss which has been a small positive for me.  Normally when I’m stressed, I comfort eat.  The fact I’ve managed to keep a decent diet and continued to exercise gives me increased confidence that I will push through this difficult time.  

I’ve introduced a weekly step target to try and motivate me to walk more.  I like walking.  Being in the fresh air, and preferably the sun, whilst listening to a good audiobook or podcast is a simple pleasure.  It’s also a low-impact form of exercise and the last thing I need is another injury.  

Financial Update

Premium Bonds: £16,500 (up £800.00 from last update).

Stocks and Shares ISA: £11,864.02 (up £3,278.66 from last update).

Fuck It Fund: £1,754.94 (down £3,295.55 from last update).

Property Value: £185,248 (up £3,622.00 from last update).

Total Assets: £215,366.96 (up £4,405.11 from last update).

Residential Mortgage: £143,886.47 (down £485.63 from last update). 

Total Debts: £143,886.47 (down £485.63 from last update).

Total Wealth Figure: £71,480.49 (up £4,890.74 from last update). 

Investment Income in 2020: £56.44 (up £25 from last update) (target £2,000).

It’s all changed this week with my finances.  I cashed in £3,300 from my Fuck It Fund and used £800 to add to my BTL deposit, with the remaining £2,500 going into my ISA.  It looks like I got my timings bang on as my ISA increased by £3,278 since the last update.  Of the £2,500 I invested in the ISA, £2,000 went on a single stock which I believed to be extremely undervalued.  Since I bought the stock, the price has increased by roughly 25% and I still think it’s trading low.  Although I expected the stock to bounce back following Covid, I didn’t think we would see such a sudden recovery.  This could be a false dawn though, as I suspect we will see another stock market blip before the end of the year.  Even so, I’m in the stock market for the long-term and I believe this stock is a long-term winner.  

Another change to my financial position is the value of my residence.  I made some minor changes to my mortgage this week, and I was told the estimated value of my property has increased slightly.  Property value is all hypothetical because it’s only worth what someone is willing to pay.  However, it’s still useful to know that lenders think property values in my area are increasing.

There is a small element of risk involved in taking money out of my Fuck It Fund.  On balance, I felt the reward was worth the risk.  I can always draw money back out of the ISA in an emergency if it comes to that.  Part of the reason I withdrew the money from the Fuck It Fund was because the rate of interest had been slashed for the second time in just a few weeks.  I was earning 1.1% at first, which then dropped to 0.8% and in the last few days to less than half a percent.  Earning interest was not the primary reason for the Fuck It Fund; ease of access is a major part of why I had a pot of cash on one side.  There comes a point at which the interest is so low that the cash is losing value the longer it sits there.  Despite all that, I will resume building my Fuck It Fund back up to the £5,000 level because there is a great deal to be said for the peace of mind of having a decent emergency fund.

Budgeting

A lot of people know what budgeting is but I don’t think a lot of people understand what budgeting is.  There is a difference between knowing about it, and understanding it.

As a mortgage advisor I see a lot of people who want to borrow extra money on their mortgage.  Often this is to consolidate debts that were built up as people paid for weddings, dream holidays, expensive cars and other luxury purchases.  Sometimes, people just cut to the chase and apply to borrow money to pay for a wedding.  Now, it’s important for you to understand that I just don’t get the concept of marriage.  Do people actually want to be married, or do they just want a wedding?  I don’t know.  I’ve just never really felt the urge.  I find the idea of marriage to be a bit bizarre, but I’m not going to judge anyone who wants to get married.  What I am going to judge, however, is how people pay for their wedding.

The average UK wedding costs approximately £15,000.  According to the ONS, the average age of opposite-sex couples getting married is roughly 32.  (Note: I could make this point with same-sex couples as well.  I have no issue with same-sex marriage.  It’s just simply that there is more data on opposite-sex weddings.  The principle behind my point is identical for same or opposite sex weddings though).

Assuming that the people getting married both start saving for the wedding as soon as they turn 18, and save for 14 years, they will each have to save around £40 per month, every month, for those 14 years to be able to pay for a £15,000 wedding when they are 32.  I challenge you to find me an 18 year old who starts saving for their wedding at that age.  

What most people do is get their parents to pay, or get into debt, or their parents get into debt to pay, or even a selection of all these.  £15,000 paid back at 4% interest over ten-years means you will pay back just over £18,000 in interest and capital.  I’m talking about a wedding, but the principle applies to a car, or holiday.  Very few people, in my experience, think about budgeting as a long-term exercise for things they really want.  

Another example is someone who wants to save money for their child to have a deposit for a house when they finish university.  If you want to have £50,000 saved to give your child a head start, then you need to be saving roughly £200 a month, every month, for twenty-years.  

Thinking about large purchases in this way, and breaking them down into monthly saving commitments can help make the figures a reality, and help avoid debt in the future.  This is almost like a reverse opportunity cost.  If you work out what you need to have saved by a specific point in the future, it helps avoid the need for you to take out debt to fund your goal.  

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  

Part 31

Introduction

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will look at a possible change in my investment strategy, and discuss why FIRE is so important to a post-Covid world.

Weekly Update

Despite my last week sucking, I have to remember it’s all relative.  People are dying every day and I have less than no faith in this government to protect us.  The whole Dominic Cummings issue is absolutely absurd.  It’s the sort of news story one would expect to see in a former Soviet state, where they are transitioning from communism to democracy; not in a country that is heralded as a free and democratic state.  

You might be wondering why my last week was so bad.  Although I believe my blog should be open and transparent, there are certain things I draw the line at, especially where the privacy of other people is involved.  So, apologies but no major drama here.

I stated last week that I would update following a viewing of a potential BTL.  Well, we’ve had several viewings cancelled because the vendors have accepted offers before our viewing came around.  Back to square one.  However, a friend mentioned in passing that she might be looking to sell her BTL to use the equity for buying a bigger residence for herself.  I’m waiting to hear back about what sort of asking price she feels is fair.  

Health Update

Current Weight: 115.1kg (down 1.2kg from last update).

Current Body Fat: 39.3% (down 1.9% from last update).

BMI: 34.8 (down 0.3 from last update).

Weekly Goal: lose 0.75kg

Ultimate Goal: 90kg

Overall a great week for weight loss.  I’ve been eating well and doing resistance work.  I’ve got to take it slowly though as I can’t afford another injury.

Financial Update

Premium Bonds: £15,700 (no change from last update).

Stocks and Shares ISA: £8,585.36 (up £248.96 from last update).

Fuck It Fund: £5,050.49 (no change from last update).

Property Value: £181,626 (no change from last update).

Total Assets: £210,961.85 (up £248.96 from last update).

Residential Mortgage: £144,372.10 (no change from last update). 

Total Debts: £144,372.10 (no change from last update).

Total Wealth Figure: £66,589.75 (up £248.96 from last update). 

Investment Income in 2020: £31.44 (no change from last update) (target £2,000).

Another week where my ISA is moving up.  I’m still not convinced we are through the worst of this crisis though.  I suspect we are in a lull before the next wave of economic crises present themselves.  I think as we approach the end of the year, we are going to see a reduction in house prices as the market becomes saturated with people trying to sell up following a loss of income.

I’ve had to laugh a little in the last few days as I’ve had a few chats with people who have stopped buying shares because of the state of the economy.  Now is the perfect time to buy though.  You make your profit when you buy, not when you sell.  It’s amazing how the average person acts in exactly the opposite way one should when it comes to trading stocks.  You buy low, you sell high.  Granted, there are some other factors to consider such as the trend and performance of the share but you don’t stop buying when the price drops.  It’s like seeing your favourite snack at the shop on offer and saying “no thanks, the price is too low”.

Fuck It Fund Woe

In the last few months the rate of interest on my Fuck It Fund has dropped from 1.1% to 0.5%.  Although earning interest is not my primary concern, I don’t want to be taken for a ride.  I’m thinking about reallocating some of the funds in that account into other asset classes.  My current thinking is to withdraw £3,000 and place £2,000 in my ISA and £1,000 in Premium Bonds.  That would still leave me with just over £2,000 in liquid cash.  It’s definitely a good idea to keep some cash completely liquid, but with those rates being more than halved, I have to think about whether that cash is pulling its weight.  Many investors have likened each unit of cash to a worker, working to make you more money.  Well, with rates that low, it’s like my Fuck It Fund has gone on strike.  

If I was to withdraw cash from the Fuck It Fund, I would need to replenish it.  I want to have at least six-months of expenses covered from my emergency fund, and leaving £2,000 would cover 2.5 months of basic living costs.  So why not just keep the Fuck It Fund where it is if I’m just going to build the fund back up again?  If rates were low and the stock market was not depressed, I would probably just keep things as they are.  The stock market is so attractive at the moment though, and I might not get to invest again at these levels for a long time.  Overall, I think it makes sense to reallocate my resources.

Beyond Covid-19

It’s important to explain what Covid-19 actually stands for.  It’s CoronaVirus Disease 2019.  It’s a catchy name but the thing that’s important is that we are almost half way through 2020 and we’re still not past the peak of the Covid-19 outbreak.  Some parts of the world, such as Brazil and the US, are still not over the worst of this first wave.  Then, we will probably be hit with a second wave further down the line.  

As we see the economic impacts of Covid-19 unravel over the next few months and years, we will probably see businesses go under, people struggling financially and pension policies suffer poor performance.  When people, and businesses, struggle for money it is common for the immediate needs to be met at the expense of long-term needs, such as retirement planning.  People who were otherwise putting money away for their retirement may need to use that money in the present just to meet their basic living costs.  I’m not saying this is necessarily wrong; people have to eat and they have to pay their bills.  What this could mean is that these people may not have the same level of retirement provision in place by the time they retire if they are raiding their savings and investments now.  

Many people take a passive approach to their financial future by handing cash over to their employer’s pension plan.  These plans vary in quality.  Some employers will match an employee’s contributions whilst others will pay 2% for every 1% the employee pays.  These types of policies are great because they are basically giving you free cash.  However, not all employers provide such schemes and it pays to research what type of plan you are paying into.  Also, another fairly cheap investment people can make during this time is an investment in their financial education.  A library card can open up access to a whole world of financial education books.  This can help people to take a more active role in their financial future, and this active role might help mitigate the losses people are experiencing now as they are no longer tied to investments that were a mystery previously with all sorts of fees attached.  

Well, it’s been a much shorter post than normal this week, but to be honest I didn’t feel like writing much of anything.  Hopefully next week will be a return to normal.

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  ​

Part 30

Introduction

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will be talking about overpaying on your mortgage.  

Weekly Update

It’s often difficult to know what to write for this part of the blog, now that we have been in a lockdown for several months.  Life has taken on a routine of working, sleeping and eating.  I miss restaurants, and holidays.  I miss being able to sit in a cafe and have a conversation with someone that is not taking place via a video call.  I do wonder how life will look in six-months or a year, and whether we will ever go back to “normal” again.  A lot will depend on whether an effective vaccine can be developed, but there is not just the health impacts of this virus to contend with but the economic and societal impact as well.  Those impacts will last for years, if not decades.

In the last few days it was reported that the UK government borrowed £62 billion in April 2020 to help with the economic impacts of the coronavirus.  Further projections suggest the government may have to borrow almost £300 billion by the end of 2020.  I doubt the UK is alone in this, but the money will have to be repaid at some point in the future.  One of the main ways the government borrows money is through issuing new bonds.  Investors buy bonds which pay a coupon (interest) every six months and when the bond matures, the government pays the value of the bond back to the investor (note: it’s generally more complicated, and the value of bonds is not always static and can change with inflation, for example).  

All this money will have to be paid back somehow, and I think it’s inevitable that taxes will rise in the future.  I don’t think we will see major tax increases in the near future though, as if people are not working they can’t pay income tax.  I think it’s more likely that the debt will continue to increase for another 5-10 years, at which point we will see those taxes increase.  The tax increases may come in the form of an increase the percentage rates for each band, or what I think is more likely is that the bands may shift with the threshold for the higher rates of income tax coming down.  It’s going to be a tough time, economically, over the next decade.

We have finally started booking viewings for potential BTL purchases.  It’s an exciting time, but dealing with some agents has been challenging to say the least.  There really is a massive range in quality when it comes to agents.  Some of them are knowledgeable, friendly and efficient.  I’m sure at some point I will speak with one of these mythical creatures.  In all seriousness though, some of the agents I’ve spoken with this past week have been very helpful.  There have been a couple that have tried my patience, especially when it comes to their Covid-19 viewing policy.  My JV partner and I live in different households and we are keen to make sure the viewings are as safe as possible.  We are happy to enter the property one at a time (we are primarily looking at empty properties for now) and most agents have agreed to this, on the condition only one of us is in the property at any one time (sensible) and that we wear masks and use hand sanitizer (sensible) and that any discussion around the property takes place outside or over the phone (sensible).  One agent has stated we need to book two different viewings and that he will have to make two different journeys to the property (not sensible – fucking stupid).  I’ll let you know how the viewing goes next week.

Health Update

Current Weight: 116.3kg (down 0.5kg from last update).

Current Body Fat: 41.2% (no change from last update).

BMI: 35.1 (down 0.2 from last update).

Weekly Goal: lose 0.75kg

Ultimate Goal: 90kg

I’ve lost 0.5kg this week which is a step in the right direction.  My body fat and BMI hasn’t really changed though.  I want to increase the rate of loss, but I’m aware that crash dieting is not the answer.  I’m going to try losing 0.75kg each week moving forward.  That rate of loss should see me hit my target weight in 36 weeks.  Again, I’m fully aware that weight loss rarely follows a linear path.  The key is to keep making progress week on week.  

Financial Update

Premium Bonds: £15,700 (up £600 from last update).

Stocks and Shares ISA: £8,336.40 (up £193.02 from last update).

Fuck It Fund: £5,050.49 (up £25.00 from last update).

Property Value: £181,626 (no change from last update).

Total Assets: £209,894.87 (up £793.02 from last update).

Residential Mortgage: £144,372.10 (no change from last update). 

Total Debts: £144,372.10 (no change from last update).

Total Wealth Figure: £66,340.79 (up £793.02 from last update). 

Investment Income in 2020: £31.44 (no change from last update) (target £2,000).

I hit the initial target for my Fuck It Fund a few weeks ago, but I’m still continuing to drip feed money into that pot.  It makes sense to build up a decent cash reserve, so I will continue to put a few pounds in here and there.  The main thing is that I don’t dip into that pot unless it’s an absolute emergency.  

The stock market, or at least the parts I’m exposed to, appears to have found some sort of stability.  The value of my ISA has remained fairly constant for a few weeks now with just minor gains and losses from week to week.  I’m happy to see it continue at a low level for the next few months as I’m able to buy units for a lower price.  Over the next few years and decades, I’m sure that my financial comfort at that point will be due to having the means to snap up shares at a lower price now.  As the saying goes, you make your profit when you buy, not when you sell.

Overpaying on your Mortgage

Note: the next section uses hypothetical examples, and although I argue in favour of not overpaying on your mortgage, I don’t know your individual circumstances.  This is for information only, and does not constitute advice or a recommendation.  Before committing to a particular course of action, whether that be overpaying on your mortgage or investing the money you would have used to overpay, seek expert advice from a qualified finance professional.  

Conventional wisdom dictates that paying your mortgage off early is a wise move, because it decreases the interest you incur and leaves you in a better financial position.  In isolation, this statement is true; paying your mortgage off early reduces the interest charged over the life of the mortgage.  However, your financial life does not operate in a vacuum.  Last week I talked about opportunity costs and how spending money on one thing reduces your ability to invest and see returns on the money years later.  It’s a similar concept with overpaying on a mortgage.  As is often the case with financial concepts, it is best explained with an example.

Let’s look at a typical mortgage of £200,000 that is taken out over a 25-year term on a rate of 3%.  For the purposes of the example, I’m going to assume that interest rates remain the same over the term of the mortgage.  This is unlikely, but as inflation and rate changes apply to both debts and assets, it balances out.  

The mortgage payments will be £948 per month, with a total amount payable of £284,478.  Assuming that you increase your payments to clear the mortgage in 15-years, you will have to pay £1,381 per month; an increase of £433.  The total amount payable would reduce to £248,583.  Paying the extra £433 per month, saves almost £40,000 of interest and you’re mortgage free in 15-years rather than 25-years.  

It really gets interesting though, when you look at what happens if instead of overpaying £433 per month, that money is invested.  It’s widely accepted that annual stock market returns over time average out at around 8%.  Obviously, some years are better than others.  I’ll be conservative and assume a 5% annual return.  After 15-years of investing £433 each month, and assuming a 5% annual return, that investment will be worth over £120,000.  If you were to keep investing the £433 for 25-years, your investment would be worth around £260,000.  

Which scenario looks more attractive?  Option 1; overpay and save approximately £40,000 in interest and ten-years of mortgage payments.  Option 2; pay the mortgage off over 25-years and take the hit on the interest, but have investments worth over a quarter of a million pounds?  Well, before you decide, there’s something else to consider and it’s an important part of the calculation that people often overlook.  I’m talking about the other opportunity cost.

If you pay your mortgage off 10-years early by paying the £1,381 each month, which means for the 10-years after the mortgage ends you can invest that money instead.  £1,381 invested each month for 10-years with a 5% return will produce an investment value of £215,000.

Let’s compare the two examples side by side:

Example 1 – paying the mortgage off over a standard 25-year term
Mortgage debt: £200,000
Monthly payment: £948
Total amount paid: £284,478
Investment monthly contribution: £433
Total amount invested after 25-years: £129,900
Projected value of investment: £258,930
Total payments towards mortgage and investment: £388,830
End result: property owned outright and investment worth £258,930.

Example 2 – paying mortgage off over 15-year term
Mortgage debt: £200,000
Monthly payment: £1,381
Total amount paid: £248,583
Investment monthly contribution: £0 for 15-years, then £1,381 for 10-years.
Total amount invested after 25-years: £165,720
Projected value of investment: £215,338
Total payments towards mortgage and investment: £414,303
End result: property owned outright and investment worth £215,338

Bang-for-Buck

In example 1 your investment increases in value by 99.33%
In example 2 your investment increases in value by 29.94%

In example 1 your investment increases in value by £129,030 but you pay £35,895 more interest on your mortgage.
In example 2 your investment increases in value by £49,618 and you save £35,895 in interest.

For me, in this example, it’s crystal clear which option is more favourable.  However, this is based on the numbers alone without considering the unique circumstances for each person.  A married couple with three kids, might want the security and peace of mind of paying their mortgage off early.  I get that.  Perhaps for that couple, a middle of the road approach would be better, such as paying the mortgage off in 20-years and investing the difference.

Consideration also needs to be given to the relative rates of interest.  I based my examples on a mortgage rate of 3% and an investment return of 5%.  At the time of writing, it’s possible to get a new mortgage with a loan-to-value of 85% for 2% or less.  The historic rate of return from the stock market is closer to 8%.  I’ve rigged the numbers in favour of support paying the mortgage off early, but even after doing that it still becomes clear that it’s generally better to invest rather than paying your mortgage down.  I cannot stress strongly enough that this example does not take into account your own specific circumstances.  Before you make any decisions, seek expert advice and crunch the numbers yourself.  
 

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.