Before I share with you our April 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?
Personal life positives
After a very tough March, April has been so much better from a workload and stress point of view. Work has calmed down and I finally had (and still have) time for my family.
We used that time to go to Israel for 2.5 weeks. As my daughter had a holiday from her childcare, we thought “why not let her meet all her family?”. She loved it, she really blossomed and thrived on that trip. We came back with an even more confident daughter.
While in Israel, we were rushing from meeting one person to the other, it’s not exactly a relaxing holiday, it is a fun one nonetheless.
The whole “rushing around” thing meant I didn’t get too much time with my son on that trip. Now that we’re back in the UK, I am spending more time with him. We just got to the stage where he’s starting to smile, he’s adorable. The nice weather also helps, which means I can take him for walks in the pram during the day, just like I did with my daughter when she was his age.
Once we got back from Israel, our daughter moved from the “baby room” to the nursery with the bigger kids. It’s still the same childcare place, just a different room. It has only been 2 weeks there but we can see the immediate effect on her. She is much more energetic and talkative (I love it!).
Finally, just before April ended, my brother (one of many) proposed to his girlfriend. Luckily, she said “yes” and we will be flying to Israel again this year, I can’t wait. I love weddings in general, Israeli weddings specifically and my brothers’ weddings especially.
Money related positives
As I shared in the Generational wealth – part 2: Receiving gifts post, we received lots of monetary gifts. While I won’t give exact numbers, these gifts resulted in a crazy high savings rate for April 2022. Well, that and the way I account for these gifts (as negative expenses rather than income).
Another positive is that I booked another Excel course with the law firm that hired me to do a pilot course in December 2021. The feedback was really good and we have a full course booked for May 2022. As I write this post (May 6th), we are one session into the course with three more to go.
My biggest client also booked five courses for May-June, with my partner taking one course and me taking four. I’m looking forward to these.
I still can’t believe I’m getting paid to do something I enjoy so much.
In case you were wondering, we’re still (!) having a bit of a delay with purchasing our shared-ownership flat. However, we’re so close I can taste it. If we don’t finalise this deal by end of June, you’ll probably read a whole rant from me.
Another negative was actually a very interesting one for me. One of my most popular posts is Tax hack: How to save NI with pension contributions. It’s about timing your pension contributions. For example, instead of contributing 20% each month, you can potentially save money by contributing 10% on one month and 30% on another month. Anyway, I misunderstood how they calculate the National minimum wage per hour and I will dedicate a post to it next week or the week after as I learned so much from it, despite this mistake costing me a few hundred pounds.
This is a great opportunity to thank Lazy FI Mum for not ripping my head off when she found out.
April 2022 results- savings rate
Our savings rate for April 2022 was 81.76%. Yes, this is not a typo, 81.76%! Let me repeat this one more time:
Our April 2022 results include an 81.76% savings rate!!!
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.
As time goes by, I am more confident we can meet that “ambitious goal” of 40% and even, maybe, hopefully… hit 50% for the second year in a row, we’ll see.
Our (weighted) average savings rate for the past 6 months is 61.20%. Our 12-month-weighted average savings rate is 55.28%. Finally, our YTD (since January) weighted average savings rate is 64.65%.
April 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 two salaries.
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. April was not one of those months. Not paying for childcare this month affected our savings rate and our April 2022 results.
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.
While in Israel, we received a lot of monetary gifts from family and friends, mainly for the birth of our son. These gifts really improved our April 2022 results.
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” (and vice versa). This is what happened this month.
Besides the actual gifts, this method of calculation really moved the savings rate up, let me explain with an example. Let’s say we earned £1,000 per month and spent £700, that would leave us with a savings rate of 30%. Now, let’s assume we got a £400 gift.
If we treat this as income, we will have an income of £1,400, spending will still be £700, which results in a 50% savings rate.
If we treat this a “negative expense” (like I do), here’s what happens. Income will still be £1,000 but spending will go down to £300 (700-400), resulting in a 70% savings rate, as opposed to 50% in the previous method.
While this method artificially increases our savings rate (which I don’t like), I still prefer this method becuase it allows me to track the (net) cost of each child.
Don’t worry, it’s just because I’m curious, I will not hand them a bill once they turn 18. This is not legally binding, I hold the right to hand my kids such a bill in the future.
My job pays me a salary every 4 weeks, rather than every month. It’s a nightmare from a financial modelling perspective. However, it does result in 13 salaries per year, which means there is one month in which I recieve two salaries, Aprril is that month. An additional paycheck also really helped our savings rate go up.
April 2022 results- Net worth
In April 2022, our net worth increased by 0.20%. The 0.20% is made of two parts:
- Our actual savings increased our net worth by 2.80%
- Our investments went down in value, which decreased our net worth by 2.60%.
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.
That being said, 2.60% is still a big drop for one month. However, our crazy-high savings covered it all, which is incredible. This fact makes me very proud of what we achieved in April 2022.
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 April 2022, our net worth is 30.19% (March 2022: 30.42%) of that number.
I can’t believe we’re still above 30%.
The 0.23% decrease in our FI journey (as a percentage of our FI number) from 30.42% to 30.19% means a real (inflation-adjusted) decrease of 0.75% (30.19 / 30.42 – 1)*, which can be broken down into these two parts:
- Our nominal net worth increased by 0.2% as mentioned above.
- The CPIH index increased by 0.95%, 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. I am more than proud of us for achieving a higher-than-80% savings rate, I still can’t believe how high this number is.
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 51.63% FI by April 2026. Despite a decrease in our real net worth, we are still over the 50% mark, phew.
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. The bonus, which should be a very nice one, will be included in the May 2022 results. 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 April 2022 results, have a great weekend everyone!
* 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.