Thoughts and reflections about the past week or so from my own financial independence campaign.
I appreciate that this is publishing mere days after the last update, but it was actually written a bit longer after it. I couldn’t really publish while on my sailing travels, so even though I’d written the first draft of update 61 in time it was late onto the site. Oh well.
Progress on my goals
Boat life
Some cheesewire labelled as a “windscreen removal tool” on Amazon has been delivered, so over the next week we’ll re-attack the stuck-in water tank.
So I guess there’s no real progress on boat life today. Come back later, we’re chilling out.
Lady SierraWhiskyMike leaves full-time employment
This week is Lady SierraWhiskyMike’s last week of full-time employment! She’s going to switch to part-time for the rest of the year and use the extra capacity to build her own business(es). I keep telling her that this is probably a two-year project, but she keeps saying “I’ve got six months”. The gods love an optimist.
While this means that she’s no longer making big contributions to the investment pot, I see this is a better investment in the medium-long term. If she can build one or two income streams that she controls (probably a combination of consulting, lecturing and IP/content) and that could travel with us then this frees up a whole world of sailing opportunities in the future.
Basically she’s investing sweat equity rather than capital from earnings.
I reckon that this will be more lucrative than her maintaining her current role and simply investing into public equities. There is a lot of risk of failure, but she could try and fail many things without serious impact to us.
In the meantime, I’m still plugging away and making the bulk of our investments.
Minor change in portfolio allocations
Ignoring Lady SierraWhiskyMike’s investments – which, in any event, are all in equities and bond funds via Wealthify or left in a Vanguard SIPP back in the UK at the moment – my invested/saved assets by percentage look sort of like this:
Wealthify = 33.2%
Lloyds Sharedealing = 17.8%
Bitcoin = 14.7%
Misc. other crypto/ freebies = 0.6%
Gold = 3%
Vanguard SIPP (UK – can’t make contributions) = 9.9%
Scottish Widows pension (UK workplace pension) = 11.2%
Workplace pension = 9.5%
I haven’t included my military pension as I really don’t know how to measure it. I know that I can go and get an approximate valuation, but it’s a massive chore so I mostly just ignore it and accept it as the “bonds” part of my pension pot for if/when I actually hit UK national pension age.
I’ve also completely ignored any private equities, since they’re basically unable to be sold and the start-ups may just fail to deliver any return., and there’s no cash showing because that’s not in my “investment portfolio”, even though it’s part of my net worth.
“Net worth” doesn’t matter to me.
I don’t really care about net worth as a calculation. It’s not helpful for me to know that if I sold my boat and really went for broke I could gain a couple of years’ cash liquidity.
Back in the early days, sure, I thought about this; but now I’m looking at being financially independent rather than financially resilient, and part of that if still having a home of some sort.
Quick analysis
As we can see, around 30.6% of my portfolio is basically inaccessible pension investments. The Vanguard SIPP is a hangover from my first year or so of the financial independence campaign, when I followed conventional FIRE wisdom and used pensions as my main investment vehicle but also earned half as much as I do now.
This allocation will slowly decrease as I invest, but as I pay in enough to get my employer matches (see my recent post on investing and pensions) it’s still going to be a good 20-30% of my invested assets at all times.
The vast majority of it is liquid and immediately available, which is my preference.
So much Bitcoin? Really?
That’s by happy accident rather than design.
I’d been buying Bitcoin for a while. My pitiful UK ISA was liquidated when I came to Guernsey, and I used that to buy more Bitcoin because my investment contributions basically quadrupled – basically, a the short0term overexposure at that time was offset within 6 on this of making regular investment pot contributions. The last year or so of gains more than doubled this amount in fiat cash terms, so I sold enough by cash value to remove the initial capital contributions (and put it into Wealthify at the time) and still it makes a large part of the portfolio.
I’m not currently buying Bitcoin because I’m over-exposed, but unless it double in value again (possible) I’m not selling any of it either. I’d like Bitcoin to succeed as a project, but I already work with digital assets as a lawyer and I don’t want to deal with the consequences of having all my eggs in the same basket.
My BTC is pretty much just going to sit there for a while doing sod all. Over time, it’ll either (a) drop to a tiny fraction of my assets or (b) grow purely because Bitcoin’s capital value grows.
Change in allocation
With so much of my assets being either paper or digital and presently being fairly correlated by price in the open markets, I’m concerned that I’m only ever one big systemic issue away from being temporarily broke.
Obviously, if you invest for the long term in indices and hold long enough through any bear market, you should be fine. However, I like the reassurance of physical assets so that I’m diversified away from digital and paper.
If I had a lot of cash available I’d be looking at real property.
Thing is: I don’t have that ready wedge of wonga to drop into a property, and I’m not willing to leverage myself up to the eyeballs and/or liquidate everything else to do that right now.
As an aside: I hate debt.
I wasn’t always able to invest thousands of pounds a year. I’ve been chased by debt collectors before, and every day during that period sucked. No thanks, I would rather not give banks any money that I don’t absolutely have to.
This makes real estate investing a bit of an emotional problem for me, even though logically I can see why you’d want to do it and wouldn’t blame anyone for looking into doing so.
As a result of all this I’ve decided to make a bigger allocation to gold, at least for a few years, with the aim of having c. 1 year’s expenses ultimately held in it.
How I’m executing this
After my pension has been taken from my pay and I’ve been taxed, I currently invest 44.4% of my take-home. Fortunately, because I’m presently earning a fair bit as a lawyer, this is quite a significant amount.
All of this is going into the Lloyds Sharedealing account.
The plan is to reduce this equities investment to 35% and use the remaining bit (plus a few extra pennies) to buy physical gold each month. My plan is to buy physical gold sovereigns, which I store in a secure location away from my home (because, you know, I don’t want to suffer robbery or be tortured by thieves!).
Obviously I’m in a very fortunate position and many of my readers will, temporarily, not be in the same place. Paying a post-tax 35% investment allocation from wages is still some serious investing power.
My costs are super low because I live an unorthodox and minimalist lifestyle. I’ve worked my way into a lucrative career field, at the cost of the stressors that I’ve reported previously. In exchange for being uncomfortable most of the time I gain the ability to make such a large investment allocation.
When I started this blog I was living on lentils, walking or cycling everywhere, side hustling and still barely saving £300 per month.
My point is: if you’re not there yet, don’t worry about it. I didn’t get here overnight, and if you keep making little steps in the right direction you’re going to find yourself in similar circumstances eventually.
I’m expecting the allocation to gold to be a drag on my portfolio. Typically, gold isn’t a dividend-paying asset, so unless we hit a sustained bear market for equities (such that no company pays any dividend or makes any big price-affecting leaps of progress) then I reckon the other investment accounts are going to grow much faster than the capital appreciation of any gold.
However, I really believe in the Morgan Housell approach of the best investment plan being the one you can live with. Having physical assets in a time of everything being digital is reassuring to me, so I’m doing it.
Distractions and detours
Watching this week
I don’t often get time to watch TV or films, but I’m on holiday so I’ve done both!
We’re part-way through the latest season of The Boys on Amazon Prime, thanks to a free trial we got while ordering the cheesewire to attack the boat’s water tank. Gory, puerile and dark. Love it.
Speaking of superheroes: last night Lady SierraWhiskyMike also treated us to seeing Deadpool & Wolverine. It’s a fun film, we had a great time, but it’s objectively a bad film. Really loved it and yet probably won’t watch it again. I guess that’s a classic Marvel film formula?
Non-FIRE goals
My guitar rock god quest (AKA learning to play)
Have been playing more, a little rusty after neglecting guitar for a week. I’m sure my teacher won’t notice, right?
The thing that’s actually hardest is overcoming the friction to start practicing. With all my kit packed up in the chaotic aft cabin, getting it out and folding up the saloon table to free up space is a real psychological hurdle, even though it ought to be so trivial. I guess friction really is the biggest problem in all things.
Fitness
Still running. I’m developing a hint of plantar fasciitis, but it’s clearly linked to having stiff calves and hamstrings so that’s easily fixed by incorporating more stretches. I’m now obsessively stretching off after every run.
I’ve tried to do this “Zone 2” cardio thing. Depending on which formula I use, my Zone 2 heart rate is either 110-120bpm (seems low, doubt it) or 120-140bpm (much more likely!).
Zone 2 training sucks by the way. It’s like running but really really slow. The idea is that you’re convincing your body to focus entirely on exercising the aerobic (as opposed to the anaerobic) system, which hypothetically improves your aerobic base and therefore endurance.
Sounds like nonsense but all the long-distance runners swear by it. The mantra is “run slow to run fast”, the idea being that I can have Zone 2 workouts and a few faster-paced runs to give me a net faster running speed.
I’m skeptical but my marathon isn’t until April so I have lots of time to switch back to good ol’ fashioned “just f***ing go!” if this doesn’t seem to be working by end of December.
Final thoughts
I really need to sort out that water tank! Running out of excuses. Bugger.
It’s an exciting time for our household (boat crew?) with Lady SierraWhiskyMike’s new venture kicking off this month!
Part of me is a little nervous about changing my portfolio allocation. I’m pretty close to £100k in personal investments (i.e. excluding Lady SierraWhiskyMike’s) and there’s bit of me that thinks “if it ain’t broke…”.
On the other hand, what got me here isn’t necessarily what I need to get me to where I want to be.
I want to be financially stable enough to travel around the world some day without having to worry too much about my financial future at the end of my travels, so that I’m not compelled to return but instead have freedom of choice whether to return or not.
I reckon that this plan and defensive allocation will not only allow me to do that but will give me the best chance of doing that. By having the gold reserve I’ve always got something to sell if I need or want liquid capital to, say, buy property to live in after our travels, regardless of what is happening in the markets. It’s also highly liquid and not confined to any one country, so I could easily liquidate the gold sovereigns and use that capital in any country, not just the UK or Channel Islands. With Lady SierraWhiskyMike going into business for herself, she should be able to make her earnings independent of geography, so even though we’re following two different approaches we’re working to the same overall intent.
My financial independence campaign continues!
