Stabilising – musings on 2022

I was not going to write this 4 years of FIRE post but I’ve had a number of requests for it which made me do a little thinking.  In the end I thought it might add a little value as it’s no secret that my FIRE journey has been a roller coaster of ups and downs around the personable side of FIRE with the financial side in hindsight actually being the easy bit.  This is in stark contrast to many of the FIRE blogs out there which mostly just show the ups.  So here goes…

Location

We are still in Australia and loving it.  Thank-you FIRE.  In fact we’re loving it so much that I can’t see us ever returning to the UK.  Some day we might return to Europe, well the Mediterranean, but it’s nothing more than a reflection that in hindsight Cyprus was a wonderful experience where we (well I mainly) just didn’t give it enough of a chance.  The lifestyle available to us here in Australia is just too good and continues to improve almost daily as we build friendships and integrate more.  We just love the weather which allows a more outdoors life that suits us and we love the lack of crowds where we live.  It’s also many little things like where we are we can get a GP appointment either that day or if not the next morning.  Something that was never possible where we lived in the UK.  Oh, and can you believe in many of the parks here they have free electric barbecues…

Work

As I closed out 2021 I was working 4 days per week.  Closing out 2022 and that is now down to 2 days a week.  Purpose outside of my ‘career’ was something I really struggled with and so a gradual reduction in the hours of a day job, while I build a great life outside of it, is something that has been really working well for me.  Slow and steady is winning this race.

Also what helps immensely is the role I now do is 100% work from home, 99% no stress and also because I’m FIRE I don’t have to take any bullsh*t.  The problem is this helps make me very successful in my role which means for my 2 days of work I now make more than the Australian average weekly ordinary time earnings for full-time adults.  I am truly blessed.  The only negative is this results in periodic requests to increase my hours which is about the only pressure I get in the role.

2021 also saw me close out my professional registration.  Surprisingly, there was not a single piece of sellers remorse associated with this action which I think means this part of my life is now closing in a positive way. 

Transitioning – musings on 2021

2021 has been my third year since I took that initial leap into the FIRE unknown and for me it’s been my biggest year ever for change.  Some good and some not so good.  So with the sun fast setting on 2021 I thought it was time to take stock and write some of this down.  Warning: If you don’t like blog posts that jump around this one may not be for you but if you want to know what FIRE can truly do to a person then I hope you find it helpful.

COVID-19

One of the 2021 elephants in the (influencing my life) room has of course been COVID-19.  What I’ve found interesting is that it’s not the virus itself giving me mortality concerns.  After all I’m a late 40’s healthy person who drinks very little, eats nutritious food, now has little to no stress, exercises regularly and doesn’t smoke or party hard so that part of life will probably turn out ok if it happens.

What I have however started to become concerned about is watching what a mix of a virus + power + politics + money + mainstream media selling fear + no real debate let alone scientific debate can turn the world into.  

For example here in Australia I watched many Victorians being coerced into vaccination not because they thought it was the right thing to do for their and their fellow citizens health but because without it they’d lose their jobs and ability to feed their families.  Coercion is never right in my books. 

Another example is that I am truly shocked at what seems to be going on in Austria where very soon if you are an honest law-abiding citizen who just wants to live in peace you will soon find yourself having committed a crime punishable by large fines or imprisonment.  It really does feel like we’ve regressed as a society significantly.

My COVID-19 coping mechanism is to minimise my contact with those selling fear, notably the ‘news’, which has resulted in a significant improvement in my wellbeing.

Housing

Housing has been a big topic for us this year.  Firstly, let’s cover our current living arrangements.  We are still renting in a beautiful part of the world close to the ocean (including visible sea life and plenty of water sports) and forests (including up close wildlife like kangaroos and plenty of trails) which we are absolutely loving.  We’ve invested in some new bicycles and are really racking the miles up.  So far so good.

Toto, I’ve a feeling we’re not in Kansas anymore and 2020 in review

Usually at this time of year I publish a year in review which covers a little of the qualitative and a lot of the quantitative.  Given the year we’ve just had, along with quantitative needs now being significantly lessened given the stage of my FIRE life I’m currently in, I feel it’s worthy to flip that weighting as it really has been a year to both remember and to forget.  Additionally and hopefully once you see the qualitative you’ll understand why it’s been a long time between blog drinks.

So let’s get the quantitative stuff out of the way.  In my purist FIRE plan I was aiming to spend the lesser of:

• up to 2.5% of initial FIRE wealth plus investment expenses of around 0.2% uprated for inflation annually.  For 2020 that gave me a drawdown target of around £26,084 plus investment expenses.
• up to 85% of my annual dividends.  Dividends were a car crash this year. Once the laggards make their final payments I expect them to be down around 29% year on year.  For 2020 that gave me a drawdown target of around £19,848

Click to enlarge, RIT Annual Dividends

In comparison, during year 2 of FIRE, I withdraw from my wealth a total £19,022.  I met my FIRE goals but boy did it occur unconventionally.  So let’s switch to the story to explain that which is hopefully the interesting bit.

Obfuscation

I’m not sure if it’s the COVID-19 lockdown affecting me, or whether this is really a thing, but over the past month or so I’ve started to really notice companies stretching their take on integrity.  Maybe I was just in a bubble before but for me if you don’t have integrity I don’t want to be anywhere near you.  Let’s look at a few examples that I’ve personally come across.

BT this week published their 4th quarter and year end results.  Within that were these pearls of wisdom - "In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter.”

Now I know that lots of businesses are currently doing it tough but I just cannot see how BT can be worse off because of COVID-19 given we are currently in a world where the majority of communication can only be done via telephone or electronic data transfer.  My view, without having any knowledge of BT, is that the COVID-19 situation is just obfuscation from the fact that the board can’t figure out how to set pricing and manage their cost base to enable investment to stay competitive and give some cash back to the owners of the business.

I also take issue with term “re-base”.  It’s cut or reduce.  I’ve never heard anybody say I’m going to “re-base” my grocery bill.

Fortunately, other than in my FTSE100 tracker, I don’t own BT.

RateSetter is another.  When I first started investing with them they had products called 3 Year, 1 Year and Monthly.  Since then they’ve moved away from that model and amongst a few new products introduced a product called “Access”.

Given the current climate it’s no secret that P2P lenders are doing it tough.  I can accept that it’s so tough that lenders like me might start taking capital losses or even lose the majority of it.  After all with peer-to-peer it’s always stated that “capital is at risk”.

Rebalancing vs taxes vs expenses vs life

With us now being only a single working week away from the new UK financial year and the investment world still feeling the impacts of the COVID-19 situation I thought it might be worthwhile sharing a little about how my portfolio and life is changing given where we currently find ourselves.

Let's start with what my investing strategy, something I first shared way back in 2009 but wasn’t really finalised until 2012, tells me to do.  For this post there are three important pillars:

• If any of my assets, diversified by country and by asset class, gets more than 25% away from the plan then I will either sell or buy as appropriate to move that asset class back to plan
• Minimise taxes meaning I keep more of my wealth for myself
• Minimise investment expenses also meaning I keep more of my wealth for myself

It’s also worth sharing some other information that helped inform my recent decisions:

• My gold had become 25% overweight
• My bonds while not 25% overweight were well overweight
• The UK 2019/20 capital gains tax annual exempt amount is £12,000.  It’s also worth adding that I believe if you sell assets worth more than £48,000 or have gains before taking off losses of £12,000 then you will also have to complete the tax return capital gains summary pages.  Not a financial negative but a time waste worth avoiding if it sensibly can be.
• Once this COVID-19 problem passes it’s looking more and more likely that we’ll be Asian bound for the next part of our FIRE journey.  We’ve still not finalised plans, as we’ve learnt we have no need to rush these types of decisions, but we’re confident enough to start (continue?) shifting our asset allocation over the coming 6 to 12 months.  That involves moving our equity investment bias (may be controversial for some but it’s always been part of my strategy so I’m not changing it) from the UK (HYP, VUKE, VMID) to Asia mainly in the form of the Vanguard FTSE Developed Asia Pacific ex Japan UCITS ETF (VAPX).
• VAPX only went ex dividend/distribution on Thursday with all my Vanguard equity dividends/distributions being paid on the 08 April 2020.
• Within my portfolio I have pensions (all SIPP’s), an ISA, NS&I Index Linked Savings Certificates (ILSCs) and plenty of non-tax efficient investments.