Before I share with you our January 2022 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 month?
Positives
Personal life positives
Lazy FI Mum’s mother and brother came over for a long weekend. Our daughter really enjoyed spending time with her grandmother and uncle. They also looked after her while Lazy FI Mum and I went out on a “date” to celebrate a very successful 2021.
In last month’s results’ post, I wrote “It seems like at least once a month we have some family member visit London” so yeap, the trend continues. We love it though.
I had a few nice mystery dines this month, which meant I met friends which I haven’t seen for a while.
The highlight of the month for me is our local soft play. Our daughter absolutely loves it! During the 6 days between the 28th of January and 2nd of February, we went there 5 times! In the beginning, she stayed in the 0-4 years old area, which has a soft slide and a ball pit. In the last few days, she’s been owning the 4-12 years old area. She’s climbing rope ladders, crawling through pipes etc. It’s amazing to see how confident and comfortable she became there in only a few days. In case you were wondering, yes- I do the whole course with her.
Money related positives
OK, positives first. Although I didn’t get paid for them yet, I did manage to do quite a few Excel sessions (my side hustle). I tried to push all the Q1 sessions to January and February. I’m trying to keep my schedule as free as possible for March when Lazy FI Mum is supposed to give birth. I still have a few sessions in February but I think I’ve done the majority of the training for this quarter. Now, we are just waiting for the payment.
We also got some cashback that we were owed for joining our energy provider. Luckily, I listened to Martin Lewis and fixed my tariff for 3 years before all these crazy price hikes.
Negatives
Luckily, I can’t think of any personal life negatives this month. I had too much fun in the soft play to think of anything negative.
The only money related negative is that we’re still (!) having a bit of a delay with purchasing our shared-ownership flat. We’re really hoping to complete it before the baby is born.
January 2022 results- savings rate
Our savings rate for January 2022 was 43.40%. As a reminder, my long term target is 40% with 50% being an ambitious target.
However, with a new kid and maternity leave, my goal for 2022 is a third (33.33%) with 40% being the ambitious target. After this year, it will be back to 40% as the long term goal.
Our (weighted) average savings rate for the past 6 months is 46.14%. Our 12-month-weighted average savings rate is 51.10%.
If you sense a lack of excitement from me, it’s because I don’t think 43.40% this month is that great. More on that in the next section.
January 2022 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- big one-off expenses and no childcare payments.
No childcare costs
As you may remember, we contribute to our daughter’s tax-free childcare account once a quarter (every 3 months). This causes a huge fluctuation in our monthly saving rates. As we paid it in November, not having to pay for childcare this month boosted our saving rate and our January 2022 results.
However, because we didn’t pay for childcare this month, I think the 43.40% monthly saving rate isn’t that great. For comparison, in 2021, the average savings rate in months without childcare expense was 48.48%. That isn’t a good comparison either because we had a chunky tax bill in October 2021, which resulted in a 12.86% saving rate. If we ignore October 2021, our average saving rate in months without childcare expenses was 52.50%. I think we should be aiming for at least 50% in these months.
Despite that, January 2022 was a very fun month. As I said, I couldn’t think of anything negative in our personal life. I’m happy with many more months like this one.
OK, so I’m not impressed with our saving rate, but what caused it? what’s different?
Big one-off expenses
When going through our expenses, I noticed we had no energy bill, which was weird. After going into the app, it seems we had so much credit that we didn’t have to pay the bill this month and next month’s bill will also be very low. The reason is that I submitted a meter reading, which was a lot lower than our energy provider expected, nice!
It was finally time to replace our sh***y Dyson vacuum cleaner, which lasted around 4 years. That was an unexpected big expense, but totally worth it.
Another expense that is totally worth it is that we paid for flights to visit family in Israel later this year. As we paid for it this month, it’s considered a January 2022 expense.
We also increased our going out and eating out expenses due to the visit of Lazy FI Mum’s family.
Finally, Lazy FI Mum and I paid for our annual professional bodies’ subscriptions. My employer will reimburse me for mine next month (I hope), so that should be ok.
January 2022 results- Net worth
In January 2022, our net worth decreased by 3.82%. The 3.82% is made of 2 parts:
- Our actual savings increased our net worth by 0.83%
- Our investments went down in value, which decreased our net worth by 4.66%
Mr Market showing us who’s boss, but not in a nice way. All we could do is mitigate some of that effect by saving. In case you’re wondering- no, we’re not worried. We’re in this for the long run and that’s why short term fluctuations don’t bother us.
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 January 2022, our net worth is 28.52% (December 2021: 29.81%) of that number.
We were so close to 30%, we’ll get there soon. We just need to keep doing what we’re doing. Once we do, we will have a net worth that equals 7.5 years of our expenses (30% * 25), the 25 deriving from the 4% rule. That’s very cool to think about.
The 1.29% decrease in our FI journey (as a percentage of our FI number) from 29.81% to 28.52% means a real (inflation-adjusted) decrease of 4.33% (28.52/ 29.81 – 1), which can be broken down into these two parts:
- Our nominal net worth decreased by 3.82% as mentioned above.
- The CPIH index increased by 0.53%, which decreased our real (inflation-adjusted) net worth**.
As you can see, 2 factors are out of our control:
- The market performance (are our investments worth more or less this month?)
- Inflation (are things more expensive than last month?)
As these factors are out of our control- I tend to focus on the savings rate. While I was hoping for a saving rate of more than 50%, I think 43.40% is still a good result, especially as I am expecting to be reimbursed for my professional body subscription.
When can we achieve FI (and possibly retire)?
As I told you last in the October 2021 results, calculating an FI date is not relevant for us anymore. We will move back to Israel sometime between December 2025 and June 2026. As my models are split into tax years, that means April 2026 is our relevant date.
Once we move back to Israel, I will either move to “just” teaching (no accounting) or try and keep my current job but part-time.
If anyone’s wondering if moving to Israel will help or hurt our FI journey, I present to you this article:
Tel Aviv named as world’s most expensive city to live in – BBC News.
No need to click the link, the title gives it away. Good luck to us.
In any case, we will not reach our full FI number by the time we move to Israel. Therefore, the only relevant question is…
How far into our journey to FI will we be by April 2026?
Based on my “regular” (which is more like worst-case) scenario, we expect to be 48.73% FI by April 2026. We go below the 50% mark. Yes, the market took a pretty big hit in January.
As a reminder, this number is based on our UK level of expenses. I really don’t know how expensive Israel will be. We’ll need to track our expenses for a few months there to get a better understanding. Also, I will have to learn all the little local tricks (like I learned in the UK) on how to save money, get free stuff, and reduce my tax bill.
This month, no change in assumptions, I think I’m finally happy with that financial model 🙂
The April 2026 model assumptions
My model assumes that only our ISAs, LISAs and pensions (essentially, our stock/equity investments) will generate an annual real return of 4%. Meanwhile, I assume our real estate and cash will retain their real value but not increase.
In addition, I assume no future income from teaching as I can’t reliably forecast how much I’ll earn from this side hustle. That means any future income from teaching will be treated as a pleasant surprise.
Another future income I ignore is my job’s annual bonus. Just like teaching, this is not guaranteed. That means that if my employer has a bad year, the bonus can be 0%. My model assumes every year is such a year. Again, any bonus that does come through will be treated as a pleasant surprise.
I know these assumptions are very prudent but I prefer being prudent and positively surprised than “realistic” and having to deal with unforeseen issues.
I am finally happy with the model and how it looks (until the next mistake is found). Especially as it’s based on a worst-case scenario, which is no bonus from work and no income from teaching.
Well, that’s our January 2022 results, have a great weekend everyone!
Notes
*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.
