Hello and welcome back to Mortgage Advisor on F.I.R.E. This week I will be talking a little more about mental health, and dealing with difficult people. I’ll also touch briefly on asset allocation within my ISA.
Quote of the Week
A quote that feels relevant today (as I write this) having heard the news that actor Chadwick Boseman has passed away at the age of 43. Although he is not an actor I am hugely acquainted with, as a Marvel fan I loved his portrayal of T’Challa. He may not have had length of life, but he had depth of life. His life had meaning and he leaves behind a proud legacy. My thoughts are with Chadwick’s family and friends.
In the wider context, I think we can all take wisdom from these words. We can only do so much to control or affect length of life but the depth of life is within our control. We can practice mindfulness and stoicism to live in the moment, and to choose our response to what life throws our way. It’s not an easy path to take in life, but it can bring peace.
Weekly Update
There are certain things happening in my life at the moment which are causing a lot of stress. I’m not going to talk in detail about those things, as they concern not only myself but people I care about. There are a couple of concepts that I want to discuss in general though.
All behaviour has a cause. It’s like stimulus and response; you feel hungry and so you eat. How you eat, and what you eat, can vary greatly. When you are hungry, it is generally much better to reach for an apple than a tube of pringles. Just because behaviour can be explained, it does not make that behaviour acceptable. Someone might be able to point to a specific trigger for their behaviour, but if that behaviour hurts someone else, be it physically or mentally, then the wounded party has no obligation to stick around.
I’m not saying that past trauma is irrelevant and that people should just get over past experiences. Bad things happen all the time, unfortunately, and people are being hurt and abused all around the world. It’s tragic, and unfortunately part of daily life for many. It’s wrong. What I’m driving at, is perhaps best explained with a fictional example. Let’s take Bob and Joan; two completely made up people. In his past, Bob was emotionally abused by his previous girlfriend. He was belittled, and mocked for his interests and hobbies. He was also physically abused, as Joan would smash cups against his head. Eventually, Bob left Joan and sometime later started a relationship with Susan. After a while, Susan made a passing comment about Bob’s hobbies which caused him to fly into a rage. He screamed at Susan and grabbed her by the throat.
In the above example, we can explain Bob’s behaviour towards Susan through what happened in his previous relationship. However, just because we can explain it, the behaviour is not acceptable. What Bob did towards Susan was wrong. An explanation for behaviour does make it acceptable, and let’s assume that Bob later explained to Susan why he acted that way, she is under no obligation to stick around to experience that behaviour again. Susan might understand the reason for Bob’s actions. She might even forgive him in light of the explanation, but she is under no obligation to stick around. People do not have to spend their lives fixing other people. They may choose to, and in some cases that is admirable. In other cases, foolish.
For those who know me personally, please do not read anything into the example provided other than the general concept. The content of the example is not a window into my life; it’s just a fictional example to illustrate an idea.
Over the last two-years, but especially the last three or four months, my capacity to cope with other people’s bullshit has reduced to almost zero. I’m still there for the people I care about, but those on the periphery of my life, I just don’t have time for their drama. I recently made a joke about the A-Level exam results scandal, that was obviously a joke, but I was then sent an essay by someone on my friends list who took exception to my joke. I ran the message through google docs and it was 1,755 words long. I got a couple of sentences into the message and just thought, “I don’t have time for this.” My comment was obviously a joke, and this person had typed up a rant. If they had reached out and asked me to explain my comment, I would have stated it was a joke and apologised for any hurt caused. I’m not a complete asshole. This person did not do that though; they tried to lecture me about something they did not understand. I replied, “It was a joke.” A day later, I received another rant from this person, to which my reply was, “I think you need to grow up and get a grip.”
I blocked that person from my social media accounts. As I said, my capacity to deal with other people’s bullshit is almost zero. Using Bob’s example, I can’t explain the person’s behaviour, but to be honest, in my mind the explanation is irrelevant. A mutual friend reported back to me a conversation with them where this incident cropped up. The mutual friend asked this person if they knew what was going on in my life right now, and the person said they didn’t. Had they known, maybe they would have approached me in a different way, but I doubt it based on the nature and content of their rant. Was my zero tolerance approach to this acceptable? That’s up to each person to decide. I didn’t go off on an abusive tirade against this person, despite my initial reaction being to tell them to “get fucked”. The replies I’ve quoted are my actual replies verbatim. I didn’t actually swear, but I did feel like it. My behaviour may not be acceptable, but it can certainly be explained.
Mental Health
Last week I talked a little about my mental health struggles, and several people reached out to me to check I was ok, and to offer support. I want to thank each of those people for taking the time to check in and reach out. It came at the right time and gave me a much needed boost when I really needed it, so thank you.
I have started keeping a written journal, as in actual writing on paper, which is unusual for me. I have no idea how I used to write all day in school. Writing is hard on the hand. It’s helping though. I’m also trying to practice mindfulness alongside my stoic philosophy. The gym is also helping. Lifting weights is a satisfying way to work the stress out of the body.
The thing with mental health, is that it’s a lifelong battle. That’s not something that people want to hear. People suffering with depression, obsessive or intrusive thoughts, or anxiety, generally want to find a cure. There is no cure, at least not in my opinion, for these mental health conditions. There are treatments and ways to manage the symptoms, though. Ways to dial down the mental noise from these conditions. Once I realised it was a lifelong battle, it was something of a release. There is no point stressing about something that can’t be changed. So, my efforts switch towards tackling this acute phase. I feel as though I’ve bottomed out and am climbing back out of the dark place I’ve been in for the last few weeks and months. No doubt, it will not be a straight, upward line as I climb out. There will be setbacks, but I feel as though I’m moving in the right direction.
Health Update
Current Weight: 114.4kg (down 0.5kg from last update).
Current Body Fat: 39.2% (up 3.1% from last update).
BMI: 34.5 (down 0.2 from last update).
Weekly Goal: lose 0.75kg.
Ultimate Goal: 90kg.
Weekly Steps: 31,614.
A decent week healthwise with some weight loss but a big spike in my body fat percentage. The problem with measuring these things is that you can get weighed five times in one day and get five different results. So, it’s important not to get too fixated on an individual data point, but to instead look at the trend. Last week I talked about setting a target for getting my weight to 100kg by Christmas. That is still the target. I’m going to be gradually ramping up my cardio, alongside my weight workouts.
I’ve decided that I will donate £1 for every 0.1kg lost between now and Christmas, to a maximum of £150, to Rain Rescue, an animal charity in my local area. I’ve had a few interactions with them in the past and they are dedicated to the welfare of all animals. If you want more information about Rain Rescue, their website is: http://www.rainrescue.co.uk.
I’m having to be so careful with my weight training due to the shoulder surgeries I have had in the past. I have this annoying need to push myself as hard as I can in the gym, and this often creates injury problems. I read somewhere, a long time ago, that when you are lifting weights your muscles strengthen faster than your tendons and bones, which is part of the reason why people suffer joint problems when they push themselves too hard. The lesson to take from this is slow, steady increases in what you are lifting. Increase the weight in small amounts every few weeks, or even months.
Financial Update
Premium Bonds: £20,550 (no change from last update).
Stocks and Shares ISA: £12,456.92 (up £151.34 from last update).
Fuck It Fund: £0.00 (no change from last update).
Property Value: £187,554 (no change from last update).
Total Assets: £220,560.92 (up £151.34 from last update).
Credit Card: £0.00 (no change from last update).
Residential Mortgage: £143,171.61 (no change from last update).
Total Debts: £143,171.61 (no change from last update).
Total Wealth Figure: £77,389.31 (up £151.34 from last update).
Investment Income in 2020: £86.36 (no change from last update) (target £2,000).
Another steady week for the finances. I feel like everything is on hold until the BTL purchase goes through. We are still making progress on that front, and we might be in a position to take on a second property by the end of 2020/early 2021. My hope/aim is to try and have three properties by the end of Q2 2021. Then, pushing into the second half of the year I should be able to take on a fourth property. It’s all looking very promising at this stage. The closer we get to this first property, the more impatient I’m getting.
To help fund these purchases I may have to cash in some of my ISA. This will be a difficult decision to make, but it will help increase the passive income coming in now which in turn will help me replenish my ISA balance. There are some stocks in my ISA that I will not be cashing in though, as I believe they have a huge amount of long-term capital growth potential.
Asset Allocation
I was talking with someone a few days ago who has a similar outlook on investing as myself. We had a long discussion about asset allocation, and it occurred to me that I’ve not looked at my allocation for some time. This is what I found:
Most of my UK shares are from one UK-based company, and I think those shares are currently trading way under value. I’ll be holding on to those shares for the long-term, as I can see them quite easily tripling in value as a minimum within the next five-to-ten years. I’m still buying those shares as the current price makes it foolish not to. It’s a risk putting so much emphasis on one stock, but the company is too big to fail (the government would have to bail it out) and the stock can hardly fall lower than its current price. Time will either prove me right or wrong.
Thank you for reading this week, and I hope you have a great week ahead. If you are following FIRE 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.
Hello and welcome back to Mortgage Advisor on F.I.R.E. This week I will talk a little about the stress of taking my recent exam, and then discuss financial hypocrisy.
Quote of the Week
This quote comes from a song by Avi Kaplan called I’ll Get By. It’s a good song and the lyrics will relate to anyone who has suffered depression. The words I’ve selected come from the song’s opening lines and anyone who has suffered depression will recognise some truth in them. The feeling of being weighed down, and sleep being your only reprieve is one I have felt in the past.
Weekly Update
I passed my exam. I was so relieved. Last week I talked about not feeling confident, and I really wasn’t. I had so much of my self-esteem invested in passing the exam. I think I would have been in a bad way had I not passed it. It was like it was the one thing I had the most control over in my life right now, and because passing or failing was in my control, I needed to show I could do it. When the outcome of the exam flashed up on the screen I was delighted. That delight turned to frustration quickly though, because in my life things are rarely simple.
The process for taking these exams is that you attend a testing centre and they sit you down at a computer where you complete the exam. Once you answer all the questions you select the option for “Finish”, at which point you get a pass or fail outcome. Then, you hit “Submit” and your answers are sent to the awarding body. A week or so later, you get a full breakdown of your marks.
It all went smoothly for me until I hit the “Submit” button, at which point an error message appeared stating “Server Error”. Then, my exam disappeared. I was a little stressed out at this, because it appeared my results were lost and it looked for a time like I might have to resit the exam. The testing centre staff determined that the PC was not connected to the internet, and that’s why my results had not been sent to the awarding body. I was now feeling worse than if I’d just failed the exam outright. After several hours the staff were able to recover my results and confirm I had passed. I could really have done without that stress though.
I have now started work on the next exam and it looks very straightforward. The book is much smaller and the exam is only fifty questions instead of a hundred. I am booked in for September 30th, but I’m confident I can finish studying way before that date is due.
Mental Health
Regular readers will know about the struggles I’ve had over the last few months. 2020 has been the worst year of my life, and strangely enough it has almost nothing to do with Covid-19. It has simply sucked on a number of levels and I’ve felt like I’ve been stumbling from one crisis to another with no respite or room to take stock. It’s felt, at times, like being blasted from one end of the boxing ring to the other with just the ropes and sheer tenacity keeping me standing. I need a break. I also need help.
A few weeks ago I started having counselling, and whilst it has helped to talk about things openly and honestly with a counsellor, I don’t feel as though it’s equipping me with the tools needed to manage in the medium and long-term. I’m struggling to focus, and I think that’s why I’ve found preparing for these exams so difficult. It’s like having a broken bone and the counselling is pain relief. It helps for a while, but the bone needs to be set so it can heal. The pain relief helps with the immediate problem for a short time, but it does not address the underlying issue.
If anyone has any practical suggestions for dealing with stress, depression or intrusive thoughts, please let me know.
Health Update
Current Weight: 114.9 (up 0.8kg from last update).
Current Body Fat: 36.1% (down 1.2% from last update).
BMI: 34.7 (up 0.2 from last update).
Weekly Goal: lose 0.75kg.
Ultimate Goal: 90kg.
Weekly Steps: 27,067.
I really don’t know what to say that I’ve not said before. I need to start making progress here. I’m angry at myself. The thing is, as I said before, this has been the worst year of my life with one stressful thing after another coming up, and when I’m stressed, I eat. It’s a negative cycle which I need to break. In the past week I have rejoined the gym and started easing myself back into exercise. It’s my hope that as I exercise, that outlet for my stress will help steer me away from eating because I’m stressed.
If I’ve done my working out right, there are eighteen weeks until Christmas, give or take a few days. I want to be down to 100kg by Christmas. I’m making a commitment now, that if I am down to 100kg by Christmas, I will donate £100 to a charity of my choice. However, should I not hit my target, I will donate £100 to a charity chosen by my readers. I’ll talk more about this challenge in the coming weeks, and look at setting up a poll on the blog if that’s possible.
Financial Update
Premium Bonds: £20,550 (up £200.00 from last update).
Stocks and Shares ISA: £12,305.58 (down £159.87 from last update).
Fuck It Fund: £0.00 (no change from last update).
Property Value: £187,554 (no change from last update).
Total Assets: £220,409.58 (up £40.13 from last update).
Credit Card: £0.00 (no change from last update).
Residential Mortgage: £143,171.61 (no change from last update).
Total Debts: £143,171.61 (no change from last update).
Total Wealth Figure: £77,237.97 (up £40.13 from last update).
Investment Income in 2020: £86.36 (no change from last update) (target £2,000).
Since Week 32 the value of my ISA has only risen around £500 despite contributions of over £1,000. The stock market is frustrating me at the moment. I would like to start seeing some signs of recovery. It’s not a disaster if I don’t, because pound-cost-averaging means I’m still buying stocks at low prices. However, my plans are dependent, to a certain extent, on the value of my ISA increasing in the next year or so.
BTL Update
It would appear that the solicitors have finally updated the details of the purchase with the correct address. The purchase is proceeding slower than I would like, but we are at the stage where draft contracts have been received and exchange should take place in the near future. A completion date has been suggested in early October which should see us trying to find a tenant by the end of October once we have completed the works we need doing. I would have preferred to have completed earlier, but I’m just relieved to almost have this deal over the line.
When we move on to our second BTL there are a lot of lessons we can take from this process and apply to that next purchase. The main lesson is to be much more selective in viewing properties. At first, I was of the mindset of completing as many viewings as possible. This is just a waste of time for everyone; vendor, agent and myself. So, being more selective about viewings should make the process a little easier next time.
Accumulating Wealth and Financial Education
There have been a number of posts on social media recently that have been bitching about major business owners making more money through the pandemic. These posts are criticising the likes of Jeff Bezos making billions during the crisis. In my opinion, this type of thinking betrays financial ignorance. In life, money can be thought of as a game with clearly defined rules. There are two types of people; those who study the rules of money and those who don’t. Since I started studying the rules of money, it has become so simple to spot those who haven’t studied them. If you give someone the choice between understanding the rules, or being given a million pounds, those who don’t understand the rules will opt for the latter option. The thing is, 60%-70% (depending on who you ask) of those who receive a large windfall without a financial education end up losing it all. You can always acquire more wealth if you understand the rules of the game.
How does this relate to the super-rich acquiring more wealth? Well, the super-rich understand the rules of the game, or employ those who do. Jeff Bezos is an easy one, but Bill Gates will also do. According to an article in The Guardian, 90% of UK households use Amazon. So why is anyone surprised that Jeffe Bezos has an incredible amount of money?
Our entire culture is based on the laws of supply and demand; we are a capitalist society. This is what allows us to have the lifestyle we have, with everything from Netflix to social media. Entrepreneurs spot a gap in the market, and they fill that gap. The real genius is in creating a need, and then satisfying that need. Apple is great at this. They might not have been the first to create a smartphone or tablet, but for many people Apple create the language, create the need and then fill that need. I think it’s hypocritical to bitch about this online through your iPad. I think it betrays your own ignorance about how money works. If you want to use these services, like Amazon, Facebook, Microsoft and so on, you have to pay for them. That money has to go somewhere. Make no mistake about it, the desire for wealth is what drives people to create new products and services. Try going a week without using a smartphone, tablet, PC or laptop. After that, ask yourself what you would prefer? Access to these services knowing it helped make a handful of people very rich for creating these services, or a return to an earlier time with no internet, social media, accessible computers and streaming services.
Final Notes
Thank you for reading this week, and I hope you have a great week ahead. If you are following FIRE 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.
Hello and welcome back to Mortgage Advisor on F.I.R.E. This week is a soft-reboot of sorts for the blog, as it moves from Now We Live to the new site at davidscothern.com. I will be looking at the differences between Lean FIRE and Fat Fire, as well as introducing a new section to the blog.
Quote of the Week
As part of the soft-reboot I am introducing a new section where I post a quote I find amusing, motivating or just interesting. This week, my quote comes from the Stoics and the Spanish-born, Roman-raised Seneca.
I think this quote sums up the Stoic philosophy quite nicely. Stoicism is built on reason, and not succumbing to emotions, pain or suffering. It’s about accepting that bad things happen, and that life is often outside our control. The key is to choose how to respond accordingly. As such, “it does not matter what you bear, but how you bear it.”
This quote also ties in with a quote I posted a few weeks ago from Viktor Frankl, “Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”
We can’t control everything that happens to us. Sometimes bad things happen. Sometimes awful and horrific things happen. We can’t always control what we have to endure. All we can control is how we endure, how we respond and how we move on.
Weekly Update
I started the week with a slight hangover following drinks with a friend on Sunday evening. Then, it was back into the daily grind of work and study. My exam is on Tuesday and I’m not feeling highly confident. There are some parts of the unit that I’m comfortable with, but there are a lot of formulas I have to remember for different calculations, such as money-weighted rate of return, time-weighted rate of return, Alpha and Beta values, Sharpe ratios and so on. I’ve just spent almost an hour trying to calculate an Alpha value, following the instructions in the textbook and I’m coming out with an answer that differs from the answer at the back of the book. However, the book is riddled with errors so I don’t really know what to believe.
I’ve been enjoying moving my website from the old site, to the new one at davidscothern.com. I’m using a new hosting service and it’s much easier to edit and update. The old provider had an awful interface and I think it’s part of the reason Now We Live failed as a project.
I had envisaged NWL to be a site that discussed all things art, literature, culture and sport. For a time, I had a number of contributors but because the interface was so difficult to work with, the contributions stopped coming in and the site started to look tired. I tried a couple of times to reboot it, but in all honesty for the last couple of years my heart just wasn’t in it. My focus has been on this blog, but I never felt like NWL was the right home for it. This blog needs a dedicated home and I’m hopeful that this new site and provider will let it grow further.
I’m thinking that whilst I will stick to the weekly schedule, there may be times I want to post a smaller blog to compliment the main posts. One thing that frustrated me about NWL, and the host I was using, was the difficulty of posting in the moment. The mobile app was pretty much unusable but my experience with WordPress so far has been pretty good.
Health Update
Current Weight: 114.3 (up 0.1kg from last update).
Current Body Fat: 37.3% (up 0.8% from last update).
BMI: 34.5 (no change from last update).
Weekly Goal: lose 0.75kg.
Ultimate Goal: 90kg.
Weekly Steps: 27,067.
A stable week, which has to be a good thing considering everything I have going on at the moment. Assuming I pass my exam on Tuesday, I will be rejoining the gym across the road which has now reopened following their closure due to Covid-19. I can’t tell you how much I’m looking forward to doing some proper exercise again. More than anything else, it helps with my mental health. It’s impossible to be stressed when you’ve been lifting for an hour.
I will have to adapt my training though. The last year or two has been awful from an injury perspective with one joint after another failing me. I need to take greater care in not pushing myself too far, too quickly.
Financial Update
Premium Bonds: £20,350 (no change from last update).
Stocks and Shares ISA: £12,465.45 (up £184.89 from last update).
Fuck It Fund: £0.00 (no change from last update).
Property Value: £187,554 (no change from last update).
Total Assets: £220,369.45 (up £184.89 from last update).
Credit Card: £0.00 (no change from last update).
Residential Mortgage: £143,171.61 (no change from last update).
Total Debts: £143,171.61 (down £1,694.90 from last update).
Total Wealth Figure: £77,197.84 (up £184.89 from last update).
Investment Income in 2020: £86.36 (no change from last update) (target £2,000).
A pretty uneventful week financially. Some minor gains in my ISA but everything else is just stable. This is always the case in the week before payday, as my monthly investments are done, and all my bills are paid. So, until I get paid it’s like I’m coasting.
Post-BTL Uncertainty
I can’t decide how to approach my investments once I have completed my first BTL. Part of me thinks I should just carry on as I have in the past, with a hybrid approach of investing in stocks, funds, and Premium Bonds which double as my BTL deposit fund. However, it’s a slow process. There are certain stocks that I’m convinced will increase in value rapidly once we are past Covid. However, no-one can predict when we will be past Covid. Will it be six-months, a year, five years? Who knows. I’m happy to adopt an aggressive approach to investing, so it would make sense to pile money into stocks and wait for the recovery. The thing is, I want my return now. Despite the current downturn, long-term historic data shows that stocks generally outperform cash. Premium Bonds, not counting the monthly prizes, are basically cash. There is the small chance of a big win with Premium Bonds, but I keep thinking that if I had £10,000 in Premium Bonds and then the stocks I had my eye on rose back to pre-Covid levels, I could have cashed out for £25,000-£30,000.
Although stocks do generally outperform cash in the longer term, I think a fair few investors may be liquidating their holdings in cash as the market stagnates and, in all likelihood, suffers more losses in the coming months. I have quite a pessimistic outlook on the economy over the next few months, which looks something like this:
August to November: Relative stability as the furlough scheme gradually winds down and people return to work.
December: Signs of recovery on the high street as people indulge in comfort spending post-Covid lockdown. People spend money they don’t have trying to cheer themselves up after an awful 2020. Retailers retain staff and even hire new staff on seasonal contracts to see them through Christmas and the New Year.
January to February: Retailers begin huge online sales to clear backlogs of stock not bought over Christmas. As the sales drop off, many retailers begin letting staff go.
February to March: Unemployment soars as thousands of people are left unemployed as retailers cut job numbers. Many large businesses are focusing on consolidating stocks into centralised warehouses supplying online sales. Spending on the high street falls as more people are unemployed. As we approach the end of the financial year, businesses look for ways to cut costs by closing physical stores and letting even more staff go.
February to April: As post-Christmas credit card bills land, those who have lost jobs and income struggle to keep up with their debts. More defaults and IVAs are registered. People struggle to pay their mortgages, and there is a fire sale in the property market. House prices plummet as properties are snapped up by investors in a wave of wealth consolidation.
My advice to pretty much everyone this year is to ignore your initial thoughts about a big blowout this Christmas. Save your cash, and protect your finances against what is coming.
Lean FIRE and Fat FIRE
Within the FIRE movement there are a number of different subtypes. Two of the common ones are Lean FIRE and Fat FIRE.
Lean FIRE is when you have enough passive income to meet your basic expenses; the things you need to survive, so things like housing, food and utility bills. In this situation anything you earn from a job is spending money. So, you could technically retire in a Lean FIRE state but there is no room for error and nothing to fall back on.
Fat FIRE is where you have enough passive income for a comfortable life with sufficient funds for spending and emergencies. This is what I’ve been aiming for.
I’ve been looking again at my Lean and Fat FIRE numbers, in light of what’s been going on in my life over recent months. My Lean FIRE number is £800 per month, whilst my Fat FIRE number is more like £1,800 per month. So far, I’ve averaged around £10 per month passive income. It’s not as bad as it looks though. Covid has just washed away much of the passive income I would normally expect to have received. Were it not for Covid, my stocks would have returned around £1,000 this year. Covid also played a part in delaying my BTL purchase, which would have returned at least £100 per month. 2020 is an anomaly. I’m hopeful that in 2021 I can achieve a better return than the one I targeted for this year. Even if it is a better return, in order to achieve Lean FIRE I need to have £9,600 in passive income for the year. So, still a way to go.
Final Notes
Thank you for reading this week, and I hope you have a great week ahead. If you are following FIRE 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.
Hello and welcome back to Mortgage Advisor on F.I.R.E. This week will see the last post on Now We Live before the site is closed down and the blog moved to a new site; davidscothern.com.
Weekly Update
This past week has all been about trying to sell our apartment. We’ve been messed around a little by tradespeople and agents, and it’s been extremely frustrating. One estate agent told us verbally that they would sell our property for 1% capped at £1,700. In reality, our property will probably sell for £190,000-£200,000 based on recent sales in our development. When the contract came through, however, they had increased the fee to 1.5% with no cap. I queried this and the agent stated they did not remember our discussion. I have since spoken with two other agents who are offering 1% with no cap. I’ll probably end up paying slightly more with another agent, but integrity and honesty is everything in business. If this agent is going to screw with us on the fee, I have no confidence that they will not try and screw us further down the line.
I don’t have much else to report from this week as I’ve been studying relentlessly for my next exam on 18th August. Unfortunately, my preparation for this exam has been far from ideal as my personal life continues to present new sources of stress. Much like with the first exam, I’m just focused on passing it with little thought given to how well I do beyond that. Under these circumstances, a passing mark is all that matters.
One thing I have been enjoying recently is eating out and having a cold beer in the sun. The sunsets in our area have been spectacular lately, and I’ve had some fun putting the photos through various filters, as you can see below:
Health Update Current Weight: 114.2 (down 0.2kg from last update).
Current Body Fat: 36.5% (up 0.4% from last update).
BMI: 34.5 (no change from last update).
Weekly Goal: lose 0.75kg.
Ultimate Goal: 90kg.
Weekly Steps: 67,456.
I was concerned that I would have gained more weight this week, but fortunately I had a stable week. It’s just a matter of getting through one day at a time until I can dedicate more mental energy to eating well, and exercising. I’m itching to get back to the gym but all my time has been focused on selling the apartment and preparing for my exam. Once I have completed my exam in a couple of weeks, I’m going to sign back up at the gym and start weight training again. It’s my main source of relaxation and the best method I’ve found to reduce stress, and the last three-months have been the most stressful of my life so far. Those of you who know me personally will attest to that.
Financial Update
Premium Bonds: £20,350 (no change from last update).
Stocks and Shares ISA: £12,280.56 (up £672.74 from last update).
Fuck It Fund: £0.00 (no change from last update).
Property Value: £187,554 (no change from last update).
Total Assets: £220,184.56 (up £672.74 from last update).
Credit Card: £0.00 (down £1,299.01 from last update).
Residential Mortgage: £143,171.61 (down £395.89 from last update).
Total Debts: £143,171.61 (down £1,694.90 from last update).
Total Wealth Figure: £77,012.95 (up £2,367.64 from last update).
Investment Income in 2020: £86.36 (no change from last update) (target £2,000).
A great week which saw me finally pay my credit card off. The funds had been in my bank all along, I just hadn’t got around to making the payment. Also, my monthly contribution to my ISA boosted the balance alongside some minor increases in stock values. I’m edging towards the £80,000 mark for my Total Wealth Figure and I’ll probably have a little celebration when I break through that ceiling.
I was hoping that the second half of 2020 would see some small signs of recovery in the stock market but my suspicion is that the market is going to remain at current levels for a while longer yet, or possibly even drop further. It’s not a big deal right now, as pound-cost-averaging means I’m getting more bang for my buck, but eventually I will want to cash in some of my holdings to put towards another property.
Buy to Let Update
I mentioned in my last post that the valuation came back fine with just a couple of minor points. There will be some repair work needed but we’ve budgeted for that, so it’s not a concern. We still need to decide on an agent to manage the property for us but this should be resolved in the next few days. My main frustration at the moment is from the solicitors.
The firm I’m using was one I was going to use last year when I had a BTL purchase going through. That deal fell through when the valuation highlighted one problem after another. My impression of the firm at the time was positive, but in the course of a few emails they’ve managed to damage their image. First of all, they got the address of the property I’m buying wrong. Then, they managed to lose the emails I sent with all our ID and proof of address documents attached, which meant I had to send them again. It’s not a major issue, as it’s not like they lost physical documents. It is a pain though, and despite me raising the issue several times they haven’t clearly responded to the address issue except to vaguely confirm they’ll deal with it. The error in the address is that they’ve stated it’s on XYZ Avenue when it’s actually XYZ Road. However, there is a property at XYZ Avenue as well. If they end up completing the searches against the wrong property, it’s safe to say I’ll be pissed, as I’ve pointed this out to them four times now.
I’m going to cut this one short as I’m pushed for time with my studies. Thank you for reading, and if you’re reading this on Now We Live, please check out davidscothern.com when you get a chance, as it will be the new home of this blog going forward.
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.
Hello and welcome back to Mortgage Advisor on F.I.R.E. This week, a change in direction.
Weekly Update
Life happens. All you can do is react most of the time. The world is complicated, and with billions of people all reacting to their own life, it should be no surprise that life simply happens. Trying to control it is futile most of the time. All you can do is react as best you can to what is happening around you. As Viktor Frankl states:
I was talking to a friend about how events in life shape who we are. I used an analogy. Imagine that a painful life event is like a river bursting its banks. The river floods and the water spreads over the land to damage fields, crops and homes. The flood waters will recede, and you can take steps to improve the flood defences to make sure that the same flood does not happen again. However, the buildings are still damaged, and the crops are still ruined. So, a person can look back at their past at things that have hurt them, and take steps to make sure they are protected against the same hurt in the future, but the damage it has done to their self-esteem, their trust and their happiness also needs to be repaired.
Part of the reason this post has been delayed is because I’ve been thinking about the direction I want to take the blog in, and in more general terms the direction I want to take Now We Live in. I started Now We Live in early 2016 when I was at a particularly low point. The idea was for a general lifestyle site that incorporated travel, literature, art and pop culture. For a time, I had several contributors but the interface to update the website is not user friendly, and it’s almost impossible to update the site “in the moment”. Over time, it became increasingly difficult to maintain the site and the contributors lost interest. As of the time of writing, Now We Live has evolved into Mortgage Advisor on FIRE. With that evolution, I feel it is time for a change. As such, this site will be closing and I will be hosting my blog on a different domain; davidscothern.com. I will update this site for another week or two, but I will be gradually moving all the Mortgage Advisor on FIRE content to the new domain.
Charity
A few weeks ago I saw a post on Facebook regarding an older man who lives nearby who needs help with his shopping. He has some health issues and people in the area had been helping out, but now they are back at work or have moved out of the area and so this guy has a gap in his coverage, so to speak. I volunteered to help out.
I gave my number to the person who made the post and a few days later, whilst I was actually in the Peak District for a couple of days on holiday, the man called. I had a nice chat with him and explained I was away but I would be back in a few days. I did some shopping for him last Friday (31st July) and he seemed like a nice guy. I sent him a text message that evening and explained I would not be available Monday to Thursday of this week, but I could do another shop on Friday 7th August if needed. On Monday he called me twice to ask if I was able to do some shopping for him there and then. I explained I was busy and he seemed upset. He then called me the next day with the same request, at which point I sent a message referring him to what I had said before. I don’t think there’s a mental capacity issue here; I think it’s just an assumption that I can drop everything and help out. I explained that I could do a shop on Friday as planned, but I would need to know by Thursday 6th August. I have not heard anything, but I’m fully expecting a phone call tomorrow asking me to do a shop there and then.
I get this guy is struggling, but you know what, so am I, and so are a lot of people. I want to help but it has to be on my terms. I am going through a really difficult time in my own life right now. This may seem really harsh but if I’m going out of my way to help someone, taking an hour and half to walk to the supermarket, then to his house and then back home, it needs to be on my terms. If he can’t respect personal boundaries then I may have to take the advice I’ve been given by a few people and just block his number.
Health Update Current Weight: 114.4 (up 1.5kg from last update).
Current Body Fat: 36.1% (down 1.2% from last update).
BMI: 34.5 (up 0.4 from last update).
Weekly Goal: lose 0.75kg.
Ultimate Goal: 90kg.
Weekly Steps: 62,646.
I don’t know what else to say about the health update. I’m not finding I have the mental resources to dedicate to work, studying for my next exam for my financial advisor qualification, dealing with my personal life and keeping on top of my diet and exercise. It’s just all too much in one go. As such, it’s all about damage limitation at this point.
Financial Update Premium Bonds: £20,350 (no change from last update).
Stocks and Shares ISA: £11,607.82 (down £566.53 from last update).
Fuck It Fund: £0.00 (no change from last update).
Property Value: £187,554 (no change from last update).
Total Assets: £219,511.82 (down £566.53 from last update).
Credit Card: £1,299.01 (up £1,299.01 from last update).
Residential Mortgage: £143,567.50 (up £39.04 from last update).
Total Debts: £144,866.51 (up £1,338.05 from last update).
Total Wealth Figure: £74,645.31 (down £1,904.58 from last update).
Investment Income in 2020: £86.36 (no change from last update) (target £2,000).
The stock market took a hammering in the week of this post. It wasn’t the only thing that took a pasting, as my credit card balance has shot up. It’s not a cause for concern as I have the funds to pay it off in my bank account. I just haven’t paid it off yet. It should look much healthier in time for the next blog post.
Buy to Let Update
The property has been valued and apart from a couple of minor points, the homebuyer report makes good reading. There are a couple of things we will need to rectify but it’s all well within our budget. I can’t wait for this deal to be done and for our new tenants to move in. It will feel like a huge win, and like I’ve finally climbed the first rung of the ladder to FIRE.
I’ve started thinking a little more about my strategy for saving for the second BTL. I’m probably going to have to wait a while for the first property to increase enough in value to release funds for a new purchase, so the second BTL will have to come from my own savings. I have two options:
Option 1 – Premium Bonds
This was my preferred option for saving the first deposit because with interest rates being so low, this method of saving preserved my capital (more or less) and gave me the chance of winning prizes. Inflation can erode the value of the funds saved, but it’s not a massive problem in the grand scheme of things. The chance of winning a big prize is appealing and there is zero risk of default from NS&I.
Option 2 – The Stock Market
Covid has ravaged the stock market and many stocks are trading at, or near to, all time lows. One of my major stocks is trading at the lowest point since the financial crisis of 2007/2008, but I believe the stock will rebound. It does not even need to bounce back to pre-Covid levels. An increase of just 10% would be a huge boost to saving another BTL deposit. The proposal would be to throw most of my investment budget each month into this stock and hope that over the next few months the share price increases. If the stock was to return to pre-Covid levels quickly, it could fast-forward my timeline for acquiring a second property by months. The main risk is that the share price does not increase. The secondary risk is that the price falls, although that is unlikely in my opinion. Even if it does fall, the loss is only realised if I sell and there would be nothing to stop me holding on to the stock until it does increase, whenever that might be. The stock will increase, it’s just a matter of when and by how much. Normally, I am opposed to speculation in this way but I feel this is a special case just like the period just after the Brexit referendum.
Until I make a decision, I’ll be carrying on with my normal strategy of investing in both Premium Bonds and the stock market. Once I have my first BTL completed, I’ll revisit the question.
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.
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.
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.
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.
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.
Saving cash each month.
Using stocks in my ISA.
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.
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.
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.
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.
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.
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.
