Before I share with you our May 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
In May, the weather finally got a bit better and we used that to meet up with friends, which was a nice change. It also got our daughter more comfortable around new people. It now takes her less time to get used to new people and get comfortable around them.
Our daughter turned two
The most important thing that happened in May is that our daughter turned two! I can’t believe it’s been two years, wow. These have been the best two years of my life, no doubt about it. We celebrated with balloons in the morning and with the kids that live above us. The oldest girl, 10 years old, is our daughter’s best friend, they spend so much time together. Our daughter loves playing with the younger kids (8 years old) too. It was a great day.
Other personal life positives
During the first week of May, Lazy FI Mum invited a friend from work to our home. As she’s on maternity leave, she hasn’t seen her colleagues for a while. They wanted to chat so I was “given a free day with my daughter”. I used quotation marks because “kicked out” was too harsh. Anyway, I checked what was happening in London and found the miniature art exhibition. It was awesome! We had the best time. My daughter was by far the youngest person there, it was mostly adults and some older kids. However, I assure you we had the most fun, I highly recommend it. It’s running until mid-July. You can read more about it (and order tickets) here. This is not an affiliate link, I get nothing if you go, it’s an honest recommendation. And now, some pictures from the exhibition:
During May we had a Jewish holiday called Lag Ba’omer, a holiday known for the custom of lighting bonfires. Our daughter’s nursery had a whole Lag Ba’omer parade with a funfair. We (the parents) were allowed to join. Seeing her with her teachers and friends was a rare treat for us and we loved it.
We also went to our friend’s son’s 5th birthday. Despite being a lot younger, our daughter had a blast and it was so fun to watch her enjoy herself. She also had her first-ever pizza! Lazy FI Mum is not so happy about that one haha.
In addition, we got an annual pass for the Zoo and used it three times during May!
Our son also had a great month, he’s growing and developing so quickly! This month he learned to smile and laugh, which is my favourite part. Can’t wait to see what he’ll do in June.
Money related positives
The two big ones this month were that several of my clients paid me and that I got my annual bonus.
Each time I analyse our monthly results and see income from teaching Excel I smile. I still can’t believe I get paid to do something I enjoy so much.
The annual bonus (along with the clients’ payments) made May 2022 the month with the highest income since I started measuring in July 2020. That is despite Lazy FI Mum being on maternity leave. We even beat April 2022‘s income, which saw me receiving two salaries. This happens once a year and it’s because I get paid every four weeks (not every month). That means that I get paid two salaries once a year, in April.
I am typing this part with rage: WE’RE STILL (!) DELAYED WITH PURCHASING OUR SHARED-OWNERSHIP FLAT. If we don’t finalise this deal by end of June, you’ll probably read a whole rant from me.
The other “negative” (although completely our decision) was mixing money and family. You can read all about it here. However, most of the money has already been repaid on June 1st.
May 2022 results- savings rate
Our savings rate for May 2022 was 16.52%. What a drop from April 2022’s 81.76%! However, it was almost all due to the money we gave to our family member. If we hadn’t given any money to our family member, our saving rate would have been 45.25%. If you’re wondering why I’m sharing both scenarios, keep reading, I promise an explanation is coming up shortly.
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 54.05%. Our 12-month-weighted average savings rate is 50.76%. Finally, our YTD (since January) weighted average savings rate is 52.09%.
If we ignored the money we gave to our family member, the numbers would look like this:
Our (weighted) average savings rate for the past 6 months would have been 60.52%. Our 12-month-weighted average savings rate is 54.22%. Finally, our YTD (since January) weighted average savings rate is 59.58%.
Why did I decide to show you both scenarios?
No, I’m not trying to make the numbers look better. If I wanted to do that, I would pick one big expense each month and decide it’s a one-off and should be ignored. The main reason I show both scenarios is as a heads-up for the June 2022 results.
As I treat this money as an expense, any amount repaid will be treated as a negative expense in June 2022. I suspect that the total amount repaid will be higher than our expenses!
This may result in a savings rate of over 100%. Sounds ridiculous, doesn’t it? for that reason, in the June 2022 results, I will also show the two scenarios. If you’re confused, let’s show an example (using made-up numbers).
Let’s assume we have £2,000 income each month, in May we spent £600 and gave our family member £1,000. That means we saved £400 out of £2,000, meaning a 20% savings rate. In June 2022, let’s assume the whole amount is repaid and we still spent £600 without the repayment. That results in a negative spending rate of £400, which will result in a savings rate of 120%!
That’s why I want to show the two scenarios. If we ignore the money we gave to our family member, we would have a savings rate of 70% each month. I hope that made sense.
May 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?
A lot was different this month!
In short- childcare, annual bonus, tutoring income, money to a family member, and prepaid holidays
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. May was one of those months. Paying for childcare this month affected our savings rate and our May 2022 results.
Last month I said “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.”
I now know the answer, it will be two different months each quarter. I’m happy with that as it will help smooth the results.
Once a year, my employer pays an annual bonus. This is not mandatory, some years can have no bonus. However, this year it was more than a whole salary, which resulted in the highest income we had in one month since I started tracking. That, of course, helped our May 2022 results.
Most of my clients pay 1-2 months after I finish the course so there’s usually a delay. I got paid by a few clients this month. This also helped the May 2022 results and the record-breaking income.
Money to a family member
I’ve written enough about this already, let’s move on. I mention it here as well as it’s one of the main reasons we had a record-breaking month on the expense side as well.
Yes, “holidays”, the plural, not “holiday”. In May 2022 we prepaid for flights to Israel (for my brother’s wedding, which I mention in last month’s results). I’m very happy to announce we also booked another visit to…drum roll, please… Center Parcs! I wrote about how much we loved our last visit in a separate post. We’re going back later this year.
I told you a lot was different this month.
May 2022 results- Net worth
In May 2022, our net worth decreased by 0.70%. The 0.20% is made of two parts:
- Our actual savings increased our net worth by 0.60%
- Our investments went down in value (again), which decreased our net worth by 1.30%.
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 May 2022, our net worth is 29.35% (April 2022: 30.19%) of that number.
Damn it, we’re once again below the 30% mark
The 0.85% decrease in our FI journey (as a percentage of our FI number) from 30.19% to 29.35% means a real (inflation-adjusted) decrease of 2.79% (29.35 / 30.19 – 1)*, which can be broken down into these two parts:
- Our nominal net worth decreased by 0.70% as mentioned above.
- The CPIH index increased by 2.15%, which decreased our real (inflation-adjusted) net worth**.
That’s a crazy inflation rate for one month. Until not too long ago, this would be a normal ANNUAL inflation rate.
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 a 16.52% savings rate is not so impressive, I know this will reverse next month. I am still optimistic about meeting that 40% ambitious target and maybe even 50%.
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 49.85% FI by April 2026. We are now officially below the 50% mark here as well, boo.
As a reminder, this number is based on our UK level of expenses. I 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 paid this month. 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 to “realistic” and having to deal with unforeseen issues.
Well, that’s our May 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.