With the end of month, comes the end of the summer – it seems.
It’s been a great month in terms of weather and also a good month in terms of finances. Despite higher than normal spending due to a new wood burning stove being put in (and paid for), the Gentleman’s Family Finances are looking strong with a further marching on of our net worth to over 85% of Net Asset magic number. However my FIRE requirements are only at around 45% of target – due to having a lot of money tied up in the house and in SIPPs/LISAs/Pensions.
- Liquid cash = 0.1%
- P2P Lending= 7.5%
- ISAs = 4.6%
- Non ISA investments = 11.0%
- EIS = 3.5%
- VCTs = 14.7%
- Housing Equity = 5.6%
- SIPPS = 21.0%
- Final Salary Pension = 22.4%
- Other = 2.2%
- Total Net Assets = 85.5% of FIRE Goal*
- Increase on Month = 1.2%
- Time to FIRE estimate = 13 months
- 1 – Annual increase in net worth = 15.5% (y/y)
- 2 – Annual increase in net worth less income = 2.3% (y/y)
- 3 – Annual increase in net worth less income and spending = 8.4% (y/y)
- Percentage of Pensions of Net Worth = 50.8%
So, the way things are going it shows that FIRE could be just about a year away. However with a large amount of my money tied up in the stock market, who knows what that will mean if we get a correction?
I keep a track of how much money I have in pensions and that has hovered around the 50% mark for some time now. It’s made up of my old company final salary pension (valued at 20x) and SIPPs and LISAs. This doesn’t include the state pension.
The rest of the money is then what I can access before 55/58/60 and includes the housing equity (value less mortgage/any debts)
It’s nice to see consistent increases in net worth. The three measures that I have are for:
- Showing the increase over the year (net worth now less net worth 12 months ago)
- The increase if I stopped my income (#1 less income for the year)
- The increase if spending is removed (#2 less spending for the year)
Number 3 is sort of like my ROCE – the difference in my net worth if income and outgoings are excluded. Some of my assets don’t change much (old company pension) while others generate stable(ish) returns (EIS, P2P lending) while the value of others goes up and down (ISAs & non-ISA investments, SIPP). A ROCE of between 5-10% (which is what I’ve had for the last 3 years or so is good.
Number 2 is the Personal Withdrawal Rate. Akin to the SWR but this is actually what I’ve managed to steer this into positive territory since birth of the Master by cutting down on spending and running a tighter ship at home – this despite huge monthly costs from childcare and others.
Just to clarify, a positive PWR means that my Net Worth has increased despite spending. So if I was tartgeting a SWR of 3%, then I would be trying to stay above -3% long term.
My hope is that this continues into the future (although, better value stock markets would be better for me now).
Managing the PWR will be key to FIRE – that’s why I track it now.
And this all means that we’re getting closer to our FIRE destination.
*Net assets do not include the UK State Pension