Before I share with you our March 2022 results, as I promised in July 2021, 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
We have a son! I wrote about the first month with him in our life in this post. The birth itself was amazing and I’m married to a superwoman, no doubt about it.
With the birth of our son came lots of family visits, which was really nice too.
March 2022 was all about the birth and family, although we did manage a day trip to Letchworth as well, which was awesome. Our daughter got to see lots of farm animals and was very excited about that.
It was also Lazy FI Mum’s birthday, which was shadowed by the circumcision (“Brit” in Hebrew) of our son, which happened on the same day. Don’t worry, we still mentioned it and we’re waiting for her gift to arrive.
Also, March 2022 was crazy busy at work for me so the fact that it ended is great news for me. Now, I can properly spend time with my family (I’m typing this from Israel by the way).
Money related positives
I think the main positive is Rishi Sunak’s announcement about raising the National Insurance (NI) threshold. As I already accepted the 1.25% increase in the NI rate, the increase in the threshold was great news for me.
In short, in the 21/22 tax year (ended on the 5th of April 2022), you paid no NI on the first £9,568. From the 6th of April 22, this threshold was raised to £9,880. That’s not that much. However, from the 6th of July 2022, this threshold will rise to £12,570, a £2,690 increase! For anyone earning more than the threshold, that’s a saving of 13.25% * £2,690= £356.42. Most people will still be worse off than last year (where the rates were 12% and 2%, compared to 13.25% and 3.25% this year). However, as I was already aware of the rate increase, the threshold increase was a pleasant surprise.
If you want to dig a bit deeper, as usual, I’ll refer you to Money Savings Expert who wrote more about this.
In addition, my biggest client booked at least (!) 4 courses for this quarter, which is great news for me. I love this as I enjoy teaching and it also provides us with some extra money.
Negatives
The only money related negative is that we’re still (!) having a bit of a delay with purchasing our shared-ownership flat. However, there have been some positive developments in that area so I’m hoping to be able to provide you with some good news in the April 2022 (or May 2022) results post.
March 2022 results- savings rate
Our savings rate for March 2022 was 64.53%.
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 48.87%. Our 12-month-weighted average savings rate is 54.09%.
In addition, in the February 2022 results post, I’ve added a new calculation to help me track our annual goal, the YTD (Year to date) savings rate. This rate is the weighted average savings rate from January to whatever month we’re in. For this month, it will be January 2022 – March 2022 (three months). In April 2024, it will be January 2024- April 2024 (four months).
Our YTD weighted average savings rate is 56.42%, which is pretty awesome. However, I expect it to decrease in the next few months as statutory maternity kicks in.
March 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, 12-month, and YTD average figures to “smooth” the data.
Anyway, what was different this month?
In short- childcare, gifts, and lights.
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 savings rates. March was not one of those months. Not paying for childcare this month affected our savings rate and our March 2022 results.
The fact we achieved a 64.53% savings rate is not as impressive now that you know we didn’t pay for childcare this month. I still think this is a ridiculously good savings rate. It will be very interesting to see what happens when our son starts childcare. It will either result in two months each quarter with childcare costs (which will smooth the fluctuation) or one crazy month each quarter with a really low savings rate.
So how did we do it?
Gifts
I am very interested to see how much it costs to raise a child. For that reason, each child has its own expense category. If we pay for something for our daughter, it goes into her category. If we get monetary gifts related to our son, it goes into his category as a “negative expense”. This is what happened this month.
We had some expenses related to our son but we also got some monetary gifts (from family and our insurance company).
Lights
We finally got around to changing the lights in our flat. Until now, we had dangling light bulbs. Now, we (an electrician we hired) installed really nice plate-shaped LED light fixtures, which Lazy FI Mum chose. If you’re interesting, this is what she chose:
NYMÅNE white, LED ceiling lamp – IKEA
Anyway, that was another one-off expense and I’m really happy we did it.
March 2022 results- Net worth
In March 2022, our net worth increased by 5.42%. The 5.42% is made of 2 parts:
- Our actual savings increased our net worth by 1.32%
- Our investments went up in value (finally), which increased our net worth by 4.10%.
For the first time in 2022, Mr Market and the Lazy FI household are on the same team and pulling together in the same direction, happy days.
To be honest, we don’t get too excited about market increases or decreases. 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 March 2022, our net worth is 30.42% (February 2022: 29.06%) of that number.
Finally passed the 30% mark!
The 1.36% increase in our FI journey (as a percentage of our FI number) from 29.06% to 30.42% means a real (inflation-adjusted) increase of 4.69% (30.42 / 29.06 – 1)*, which can be broken down into these two parts:
- Our nominal net worth increased by 5.42% as mentioned above.
- The CPIH index decreased by 0.70%, which increased 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. I am over the moon with our 64.53% savings rate. I set a 33.33% goal, with 40% being an ambitious goal. As we have a 56.42% YTD savings rate, I’m starting to believe we can hit our ambitious goal this year.
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 a worst-case) scenario, we expect to be 52.63% FI by April 2026. We finally go over the 50% mark!
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.
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, Except for the 2022 bonus, which was already communicated to us and is therefore effectively certain. Just like teaching, any future bonus is not guaranteed. That means that if my employer has a bad year, the bonus can be 0%. My model assumes every year (from 2023 onwards) 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.
Well, that’s our March 2022 results, have a great weekend everyone!
Notes
* You might get a slightly different number (by 0.01%,). That’s due to rounding. The numbers I share are the accurate ones, the equations are just so you understand the way I calculate the numbers.
**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.
