Before I share with you our October 2021 results, as I promised in July, I’ll share with you what we’ve been up to the past month. After that, we can talk about the numbers.
What have we been up to this week/month?
A lot of exciting things are happening in the Lazy FI Family lately, here are this month’s highlights.
Positives
Personal life positives
Last week, I shared with you that Lazy FI Mum was pregnant. I’m excited to see how my daughter will be as a big sister. Also, my goal for this blog was to share the experience of pursuing FI with kids. Now, I’ll be able to share with you what it’s like to pursue FI with kids (and not “with a kid”).
One of my personal highlights of this month was when we went for a family swim at our local gym. It was amazing to see how our daughter got used to the water. Initially, she didn’t want to get wet at all. However, towards the end, she let me hold her as if she was swimming, so only her head was above water. We’ll try to do that again soon.
On the same day that we went swimming, our daughter woke up super early so it was still dark outside. We got ready quickly, had a quick breakfast and headed out to our local park to see the sunrise. We saw lots of ducks and geese, which my daughter loved chasing while shouting “catch a duck”. Sorry PETA.
This month, I also took my daughter to her first (and second) ever mystery dine(s)! She enjoyed the food on both occasions. Start them young.
Money related positives
We had our flat valued and are in the process to buy the rest of our flat, which we part-bought through the shared ownership scheme. Buying additional parts of your flat is called “staircasing” and I’ll write a post about that once we complete the purchase. Fully owning our home is exciting news for us.
I also landed a new corporate client for my side hustle (teaching Microsoft Excel). A law firm hired my services to improve their employees Excel skills. In addition, I was asked to record 4 hours of Excel training sessions for a professional body, so their members can watch it whenever they want. In the past, I used to teach mainly economics, accounting, and finance. However, Excel is perfect for online teaching, which meant that Excel is all I teach since the beginning of the pandemic.
Negatives
The main negative that’s on my mind is the weather. I hate the Israeli summer, the cold weather was one of my favourite things about London. However, now that I’m a dad it’s a bit different. I love going outdoors with my daughter and these few months are going to be interesting. I’ll have to learn to adapt and become an “indoor dad”. I’m sure the local ducks and geese are breathing a sigh of relief right now.
As I mentioned, we’re expecting another child in 2022. This made me build a budget, which taught us we need to pile up cash. If we don’t we might face a cash flow problem. So for the “negatives”, I think our negative forecasted cash flow is a literal negative.
If I already started talking about money, let’s see how our October 2021 results look like.
October 2021 results- savings rate
Our savings rate for October 2021 was 13.01%. As a reminder, my long term target is 40% with 50% being an ambitious target.
Our (weighted) average savings rate for the past 6 months is 49.04%. Our 12-month-weighted average savings rate is 50.33% (phew).
I am not disappointed with this result because I know the main reason, which I’ll share in the next section.
October 2021 results- What was different this month?
Every month something unusual happens. Sometimes it’s a one-off expense and sometimes it’s a one-off income. The fact that this happens every single month amuses me but also makes it harder to analyse the savings rate and draw conclusions. That’s why I also use the 6-month (and 12-month) average figure to “smooth” the data.
Anyway, what was different this month?
In short- some BIG expenses.
In order to buy the rest of our flat, we sold all of our Israeli investments, which came with a big fat tax bill. This made me appreciate ISAs even more. I’m working on a LONG post that will explain all the different types of accounts you can use to invest. In short- an ISA (Individual savings account) is exempt from capital gains tax, that’s all you need to know for now. If our investments were all in an ISA, there would be no tax bill. However, this is not a mistake we made, these are investments Lazy FI Mum made before we met and before she moved to the UK so an ISA wasn’t an option.
I treat this tax bill as an expense and is the main reason for our horrible savings rate.
I also spoke to our mortgage broker and he said our rate is too high so we’ll probably have to move to a new lender. This will come with a big fine, which will also be treated as an expense. Still worth it, I did the math. I’m expecting this month and next month to be really bad from a savings rate perspective. However, going forward, we should see an improvement because there will be no more rent to pay and more of the money we pay each month will go towards paying back the mortgage (principal) which is treated as savings.
In addition to all this fun stuff with our mortgage and capital gains tax, we also paid for a holiday in February 2022. I account for expenses when the money leaves our account so this is treated as an October 2022 expense.
Considering these big expenses (especially the tax bill), I’m surprised our savings rate is positive.
October2021 results- Net worth
In October 2021, our net worth increased by 2.08%. The 2.08% is made of 2 parts:
- Our actual savings increase our net worth by 0.28%
- Our investments went up in value, which increased our net worth by 1.80%
Mr Market once again shows us who’s the boss.
Achieving FI– how far are we into our journey?
Reminder: I set our FI number (how much we need to retire) in July 2020 and update it every month for inflation (I use CPIH* index).
At the end of October 2021, our net worth is 28.69% (September 2021: 28.18%) of that number.
The 0.51% decrease in our FI journey (as a percentage of our FI number) from 28.18% to 28.69% means a real (inflation-adjusted) decrease of 1.81% (28.69/28.18 – 1), which can be broken down into these two parts:
- Our nominal net worth increased by 2.08% as mentioned above.
- The CPIH index increased by 0.27%, which decreased our real (inflation-adjusted) net worth.
As you can see, 3 factors aren’t in our control:
- The market performance (are our investments worth more or less this month?)
- FX rate (are our Israeli Shekels worth more pounds or less compared to last month?). Now that we sold all our Israeli investments, this will no longer be an issue.
- Inflation (are things more expensive than last month?)
As these factors are out of our control- I’m still happy with this month’s results as we still achieved a positive savings rate, which is the only part that’s within our control.
When can we achieve FI (and possibly retire)?
Based on my current calculations, I and Lazy FI Mum should both be able to retire in 2031/2032 if we wish to. This is 1 year later than last month. The reason is I reduced our assumed savings by a lot in my latest model. I am now looking at a “worst-case scenario”. So we’re looking at age 44 for me as a “worst-case scenario”, not too bad.
However, I run 2 more calculations each month:
What if we only pay our mortgage, contribute to our pensions and max our LISAs (no other savings or investments)?
Well, this will push our date back to 2032/2033, 1 year longer than the “regular” scenario.
What if we don’t even contribute to our LISAs and just pay our mortgage and keep our pension contributions?
This will push us back by 2 more years to 2034/2035. Look how important that LISA is.
I’m still happy with these results. They mean that I will be able to reach FI at the age of 47 even if we reduce our investments significantly.
Don’t worry folks, Lazy FI Dad is not going to work in his career until he’s 47.
We’re actually planning to move back to Israel in 4-5 years. At that point, Lazy FI Mum still wants to keep working and I want to move to be a “full-time” tutor. I say “full-time” but I just mean tutor and nothing else. Maybe from next month, I’ll start adding one more forecast- what % of FI will we achieve by April 2026. That way we can see that if, for example, we reach 40%- we only need to cover 60% of our expenses with work. Just to clarify- April 2026 is not our moving date but as I measure in tax years (April to April), this seems the closest to our actual date.
You know what? Let’s do it now 🙂
How far will we be in our journey to FI by April 2026?
Based on my “regular” (which has been updated to worst-case scenario), we expect to be 54.20% FI by April 2026. That means that if our expenses in Israel will be the same as in the UK, we only need to cover 45.80% of our expenses from work, sweet!
This is actually the first time I calculate this number, I’m very happy with that. Especially as it’s based on a worst-case scenario, which is no bonus from work and no income tutoring.
Well, that’s our October 2021 results, have a great weekend everyone!
*CPIH- “Consumer Price Inflation including owner-occupiers’ Housing costs”. As we are consumers and we do, partly, own our home- I think this is the best inflation metric for us. You can see the changes in the index here.
What kinda fees do you charged for your excel services, quite interested to see how this side hustle has treated you
Hi Daniel,
I charge anything between £40 and £150 an hour, depending on the client (private vs corporate) but mainly on the number of participants.
I think it’s important to clarify that I have some busy months and then months where it’s very quiet. As it’s a side hustle, it comes 2nd place after my full-time job.
In the future (around 2026, as I shared today), I’m hoping to focus solely on teaching. Nowadays, Excel is in high demand but even if this demand decreases, I teach other subjects too.
One more thing, while the money’s good I really do enjoy it and that’s the main reason I do it. It’s really not about the money.
Hi Lazy FI Dad, congratulations for you and your wife for the new baby on the way:) I was wondering if you share online the spreadsheets where you calculate your predictions? That would be very helpful, many thanks.
Hi Ania,
As it has super personal data, I can’t share it as it is.
However, I agree it could help people so I’ll try clearing it up and share OR… more interesting- maybe hold a few Excel sessions so you guys can build a model for yourselves 🙂
That will have to wait for a quiter period though.
Thanks LazyFi Dad, with the second baby on the way I wouldn’t count on the less busy period soon, haha / said Mom of the 3 year old Alex and 10 month old Olivia:) But sure, it would be great to see your data free / example based spreadsheets or have the excel session one day over a zoom or coffee:)
I believe in teaching people how to fish rather than giving them fish- I prefer to teach people how to build a model using Excel, then they can customise it for their own needs.
However, you raise a VERY good point about the second baby and free time which means I’ll start cleaning the file/fish 🙂
Re “57.60% FI by April 2026”, what investment return does this assume?
Hi Stephen,
1. I corrected it from 57.6% to 54.2%
2. I assume 4% real return per annum
Let me explain roughly how I got there (this will include a lot of rounding so will not be spot on):
We have 28.6% right now.
Assuming a 50% savings rate, every year we work, we save a year’s worth of expenses. For example: If we earn £1000 a year and save £500 per year, that means our expenses are £500 (income – savings). We saved £500, which is exactly 1 year of expenses.
Each year is 4% of our goal because our goal is 25 years of expenses. 1/25=4%.
– In 6 months (April 2022) we’ll save another 2% of our goal + the 28.6% will turn to 29.2%, brings us to 31.2%
– Year ending April 2023: The 31.2% will turn to 32.4% + 4% saves (1 year of expenses) = 36.4%
– Year ending April 2024: The 36.4% will turn to 37.9% + 4% saves (1 year of expenses) = 41.9%
– Year ending April 2025: The 41.9% will turn to 43.6% + 4% saves (1 year of expenses) = 47.6%
– Year ending April 2026: The 47.6% will turn to 49.5% + 4% saves (1 year of expenses) = 53.5%
As you can see, each year our savings add another 4% of our total goal (which makes sense at a 50% savings rate). In addition, we get another (roughly) 1-2% from our current investments returning 4%, bringing us to an increase of 5%-6% of our total goal each year.
The big assumption here is that we complete the purchase of our shared-ownership home. That will keep our current payments (rent+mortgage) the same but as it will be all mortgage, a bigger part of it will be principal (reducing the loan) and therefore, this will increase our savings rate.
Also, I don’t assume 50% flat every year, I have (in my opinion) more accurate numbers for each year for ourselves, which explains the difference between our 54.2% and the 53.5% calculated above. although it’s a small difference.
I hope that shows that I’m not assuming some crazy yield, it’s just a high savings rate 🙂