In this latest instalment of our regular series we meet a reader who made themselves effectively financially independent in some distant corner of the world – long before they’d heard of FIRE. Discover how Mark left work to travel on the back of an actively-managed portfolio that continued to grow.
A place by the FIRE
Hey Mark! How do you feel about taking stock of your financial life today?
Great! I’m hoping to demonstrate that a person with a relatively modest income can achieve Financial Independence given time, determination, and a healthy dose of luck!
How old are you?
I’m 59. My partner is a bit older. We have been together since I was 25-years old.
Do you have any dependents?
Once I discovered what I wanted to do with my life, I realised having children was incompatible with the goal of long-term travel. My partner had kids from a previous relationship so was fine with that.
Whereabouts do you live and what’s it like?
We live in a seaside town on the North Sea coast and like it immensely.
When do you consider you achieved Financial Independence and why?
I was never really thinking about Financial Independence as a concept. I just needed to make sufficient returns to finance my life of travel.
When we set off in 2004, my net worth was £210,000. We were spending £10-14,000 per year so I would have been pleased to cover that.
In the event I was lucky to compound my capital over the years to reach a comfortable position, but it could so easily have gone the other way.
What about Retired Early?
We were travelling around the developing world for 14 years. I considered myself a professional investor, but I looked retired to everyone I met.
I still spend hours a day reading and researching investments. But I imagine most of my neighbours think I live on benefits.
Assets: equities and more equities
What is your current net worth?
My net worth tipped over the one million quid mark in 2021, dropped below in 2022, and I am back in a similar position today.
I don’t follow it throughout the year. There were many occasions when I took a kicking during the year only to be fine at the year-end. I don’t think there is much value in obsessing over share prices.
What are your main assets?
My house (8%), shares (89%), and fixed interest (3%). There’s no mortgage.
The shares component is highly-diversified and reflects my biases. I don’t hold any index trackers.
What’s your main residence like?
We own a modest but surprisingly spacious terraced house along the North East coast – bought for £83,000 in early 2019.
Do you consider your home an asset, an investment, or something else?
We were looking for somewhere to settle down.
I don’t really think of the house as an investment because I’m not looking for a return.
Earning: financially unrewarding
What was your job?
I graduated with a degree in Biology in 1984. I had a couple of jobs as a laboratory technician earning modest amounts (£7-12,000) until I took a year out to go travelling from 1990 to 1991.
On my return I took jobs in laboratory management starting at £16,000 in 1991 and ending on £32,000 in 2004, at which point I quit that job to go travelling on a permanent basis (I hoped).
How did your career and salary progress over the years – and to what extent was pursuing financial independence part of your career plans?
I was continually dissatisfied throughout my career, largely because although I was successful in my roles I was unsuccessful in translating this into a decent income.
After taking the year out, my ambition became to save up as much as possible to enable me to go travelling for the long term. I recognised my only chance of doing this was to make money on the stock market. I began to save obsessively and put all the money into a few investment trusts to start with.
Did you learn anything about building your career that you wished you’d known earlier?
Before I started working I assumed that achieving targets and getting results would lead to career progression. It took me a long time to work out that making your boss look good is much more important.
Do you have any sources of income besides your main job?
Since leaving work in 2004 my income has been derived exclusively from cash thrown off by my portfolio through sales, takeovers, and dividends.
Did pursuing FIRE get in the way of your career?
As I said, I never consciously pursued FIRE. It occurred as a side effect of what I was trying to achieve. In fact, I never even heard the term FIRE until I was well into my travels.
Saving: fuelled by frugality
What is your annual spending? How has this changed over time?
When we were travelling we would typically spend £10-14,000 per year between us. At some point my partner’s pension kicked in and she became able to cover her own costs.
We settled back in the UK in 2019 and my personal spend has yet to reach £10,000. Fortunately we don’t have a mortgage or rent to pay.
Incidentally, any tips for would-be global nomads?
A good proportion of the problems we encountered were to do with banking and plastic cards. I’ve arrived in a town to find all of the ATMs out of order or that my bank has unilaterally cancelled my credit card through security concerns.
A digital nomad definitely needs a backup plan in place.
Do you stick to a budget or otherwise structure your spending?
Not at all. I can now afford to do anything I want, but my wants are few and far between.
What percentage of your gross income did you save over the years?
From the point I decided to save as much as I could to when I left work, I estimate my savings rate was about 65% of my net income.
As well as saving out of my earnings I also paid the maximum allowed into a pension and AVC fund1 and had mortgage payments on a house.
I sold the house when we were preparing to go travelling. A few years later I transferred the deferred pension and AVCs into a SIPP with a surprisingly high out-turn, due to declining interest rates.
What’s the secret to saving more money?
I was completely motivated by having a goal. Every spending decision can be framed as “Does this move me closer or further away from my goal?”
That’s not to say we didn’t have holidays and so on. But we didn’t push the boat out.
What about spending less?
I quite enjoyed being frugal and finding new ways to be even more frugal. It can become habit forming.
For example, once I started saving, I virtually stopped drinking alcohol.
It’s important not to take it too far. When we were travelling we would typically be eating out two or three times a day. I was always aware that I was arbitraging costs between the two countries and usually left a decent tip. In the instances where I failed to tip, I would always carry guilt for the rest of the day. So it was better for my psyche to keep it up.
One of my favourite concepts is to become best friends with your future self and then act in their best interest.
What was the psychological transition like going from earning and saving 65% of your salary to spending – even in low-cost countries?
There are loads of psychological aspects of my story that I have pondered, but this isn’t one of them. (I must admit that for my first six months abroad I did wonder what was going on at work.)
We were spending what we needed to on a daily basis, but not much more. There was no point buying more stuff to carry around. Even as I came to feel financially secure in the second half of the period, there was still no need for egregious spending.
I can trace a psychological shift from ‘doing’ to ‘being’. But that is actually very cost-effective.
Do you have any passions or hobbies or vices that eat up your cash?
As a motorcyclist, I have a modest but fun machine that is not expensive to run. I fill the tank every couple of weeks.
Investing: the evolution of a stockpicker
What kind of investor are you?
My intention is to have core holdings of a few investment trusts and then satellite holdings of selected shares. In practice, I always have more ideas than cash so the number of individual shares has multiplied over time.
My approach has changed over the years. I started out buying bulletin board favourites, which worked very well indeed. As I learnt about investing I moved to a Ben Graham value-style which, applied inexpertly, picked up a fair number of value trap losers as well as re-rating winners.
After the GFC2 I developed a spreadsheet method based on Earning Power Value. Filling in the data was very labour intensive, but I learned how to interpret accounts in detail.
The results here were fairly decent. I have never heard of anyone else following this approach as a core strategy, possibly allowing me to have the fabled ‘edge’.
Since moving back to the UK in 2019 I found that I had lost my motivation for data entry and, anyway, my thought process had been moving towards ‘strategic’ positioning for a while.
These days there are a host of reasons to expect Armageddon some time down the track. I have been rebalancing in a defensive direction over the last few years at the expense of my small-cap portfolio. I now find myself to be an increasingly cautious capital allocator, having been far too gung-ho over the years.
I am also aware of the anti-doomsters who forecast a future of abundance. Should that come about I am sure I will benefit along with everybody else. I’m not going to gamble on it though.
What was your best investment?
I bought my first computer in the year 2000, got on the internet, and discovered The Motley Fool website and, in particular, the company discussion boards. I was soon spending a few hours there every evening.
I opened a Stocks & Shares ISA and began buying various bulletin board favourites.
My first three shares were called Emblaze, Geo-Interactive Media, and Soco International. The first two quickly petered out. But Soco International went on to be a 24-bagger3 for me over the next few years. Of course, I was not clever enough to get out at the top but fortunately managed to sell off a decent amount on the way down, between £14 – £17. The remainder provided a headwind to my returns over the next decade. My numbers would look a lot better if I had managed to sell the lot.
The best performer in my portfolio currently is Burford Capital. Unusually, I bought a double allocation to this company at £1.20 when I first looked at it in 2014. This was because I was excited by the clearly compounding business model. From there it rushed up to a high of £20 in a few years. I toyed with the idea of top-slicing for a while but never executed. Then in 2019 a short seller issued a report which caused a deluge of sales, dropping the price to below £7.
I lost over £100,000 before lunch that day. I read the short report and thought it was a bit thin so I held on to the shares. Looking at the graph they bottomed around £3 on the Covid drop and have had a volatile journey back towards £11 today.
Psychologically, I haven’t suffered much from all this as I was following the company rather that the share price.
Did you make any big mistakes on your investing journey?
Where do I begin?
I remember hearing around the time of the GFC that Warren Buffett had never had a total loss. I had already had about five, so I decided I must have been too adventurous. I can’t remember having any more since then – mainly because I’ve got better at selling the losers on the way down.
Whilst investing is about looking to the future, most of my losses have come from putting money into companies where the future looks particularly bright. Even if it comes to fruition, something could well come out of the woodwork so that the investor is not the one to benefit. Lowball offers, political interference, and management greed and incompetence are a few examples.
What has been your overall return, as best you can tell?
I have calculated my net worth annually since I became dedicated to saving and investing. My portfolio now has a 28-year IRR4 of 8.25% with a fair amount of volatility.
With hindsight, I would probably have done better sticking with my original line up of investment trusts. (But then I wouldn’t have the thousands of hours of reading and research to reflect on!)
How do you calculate your returns?
At each year end I calculate my NAV and then calculate the % change over the year – after taking account of my spending – using the XIRR function in Microsoft XL.
XIRR doesn’t work for a negative year, so on those occasions I had to work around a little bit. That might add a slight error.
Note that I am not withdrawing £10,000 to £14,000 spending on top – that’s included in the return calculation. I’ve also added some chunks of capital to the portfolio from when I sold my house and later monetised my company pension.
I put all those annual results into a formula to calculate the geometric mean return (IRR), which comes out as 8.25%.
I know it is Round Number Illusion, but I felt strangely satisfied when my net worth passed £1 million in 2021. I was not surprised to see it drop back a little in 2022. Hopefully it won’t be for long!
How much have you been able to fill your ISA and pension contributions?
Despite having no earned income I’ve been allowed to contribute £2,880 into my SIPP every year since I opened it. I have had a policy of moving value from my trading accounts into ISAs to the extent that I am pretty much 100% tax-free on any returns these days. I’ve never been liable for capital gains tax.
To what extent did tax incentives and shelters influence your strategy?
Only to the extent that they were available, so I used them.
How often do you check or tweak your portfolio or other investments?
I follow the results and reports for all my holdings but I don’t check the share prices except by chance.
When I buy a share I then forget about it until the RNS start coming through. I don’t want to make decisions based on share prices but on company performance.
I do an annual review and at that point I decide where to mould my asset allocation for the forthcoming year. I then keep my eye out for investment opportunities in those areas. I rarely sell positions, so this is more of an incremental course correction that will play out over the years from cash generated within the portfolio.
I also have to take my living expenses from this cash.
Wealth management: steady as she grows
We know how you made your money, but how will you keep it?
I rather hope that my portfolio will continue to gently compound without much input from me. Mathematically, it’s unlikely that the long run result will veer much away from the 8% mark without a few big outlying individual yearly results.
I will continue to develop my portfolio with an eye to reducing equity risk over time.
It’s remarkable how your portfolio compounded even as you lived your dream. I guess you hadn’t heard of the 4% ‘rule’, given FIRE was unknown to you. But did you have any particular thinking on managing cash withdrawals? Or was it all ad hoc?
To be honest I was just hoping for the best. It felt like the right time to be getting on with my plans, but I didn’t know what my spending would be in relation to my pot.
Things were obviously more expensive by 2004 than they’d been in 1990, but still manageable in developing countries. We’d typically pay £11 for a double room, and £5 between us for a main meal.
At first I had the cash from the house sale to spend and invest. By the time that was used up my withdrawal rate was already below 4% (not that I monitored it).
To answer your question specifically, I never had a cash policy. By the time I’d used up the cash reserves, the portfolio was generating enough cash to cover both my spending and capital recycling.
When we left the UK my assets were all in cash and stocks to a total value of £210,000. To risk it all to go travelling at 40 seems foolhardy, seen from today. But you can’t live your life in a spreadsheet!
Fortunately I was completely ignorant of Sequence of Returns Risk, which was considerable at that point.
I thought the main risk was just spending down the capital until the lifestyle became unsustainable. So I’d simply need my stock market returns to cover our ongoing spending over time.
In reality, if I’d got the same returns I achieved but in a less favourable order, then I would have been back and on the dole queue in year two.
So you saw big early wins that enabled you to sustain your traveling lifestyle?
In the early years of travel, I didn’t realise that we were in the late stages of a boom and initially my stock market returns were very gratifying.
At one point in 2007 I was worth half a million quid! Largely thanks to the progress of Soco International. I sold down some of my investment trust holdings and put the cash into small cap value choices.
Then came the Global Financial Crisis. For me it was also a gut-wrenching personal crisis, as my portfolio value tumbled back to where it had started.
My dream looked like it was going to collapse in ruins and I updated my CV to prepare for the worst. But the next year saw a bit of a bounce and by year end 2009 my NAV5 was back over £300,000.
I felt I was still in the game but my confidence was severely damaged. It took about six years to I regain my pre-Crisis asset value.
Has your investment strategy changed with the end of your travels?
These days I’m more concerned about the risks in the markets. I’m moving towards large caps, preservation funds, and even some commodity and fixed interest holdings.
My withdrawal rate has hovered around 1% for the last few years and I still have the State Pension to look forward to – hopefully!
My National Insurance contribution record is somewhat woeful. I’ve bought six years worth of Class 3 contributions and this year I’m experimenting with registering as self-employed to become eligible to pay Class 2 contributions.
Which is more important, saving or investing, and why?
I was a compulsive saver, but a know-nothing investor. In the early years I just chucked the money at the stock market hoping for the best. I then spent 20 years trying to pick winners before I realised that I should really be focusing on building a compounding machine.
In this analogy, savings is the fuel, investing is the engine, and compounding is the outcome. It becomes useful to consider the ins and outs of compounding alongside the factors of successful stock selection.
Do you have any further financial goals?
As I approach 60 I’m a lot more comfortable reaching old age with a secure pot of assets behind me. I would not want to be relying on the government for my future care, so I think financial security in old age is more important than at any other time.
However, it is not as important as living an interesting life on the way there.
Is the hardcore traveling done for now? How do you plan to keep busy for the next 30 years?
When we returned to the UK it felt like ‘turning the page’ on long-term travel. Now I won’t mind if I never go into an airport again.
In my daily life I now struggle to find enough time to do things which were previously on the backburner. I want to focus more on friends and family. And hopefully go hill walking and volunteering on farms.
What would you say to Monevator readers pursuing financial freedom?
Whenever I read articles about FIRE, there is always someone in the comments who declares that it is impossible for ordinary people. What they are really saying is that it impossible for themselves.
It takes time, application, and a fair wind but, barring disaster, the worst that can happen is that you end up with a decent chunk of capital. And you might just end up living your dream!
Not another day at the office: Mark at Machu Picchu on his 50th birthday.
Any other business?
When did you first start thinking seriously about money and investing?
I always had to save up out of my pocket money if I wanted anything as a kid. I guess that set me up well for adulthood when I began to think about my goals.
I made my student grant last throughout the term and into the holidays. I wondered why many of my associates couldn’t manage their funds well enough to prevent running out two weeks before the end of term.
We all had the same grant so, to me, it was simply a case of dividing the grant by the number of weeks of term and aiming to have a bit left over.
Can you recommend any favourite resources?
I currently follow about 200 blogs and websites. It is remarkable how many super-intelligent people are keen to share their thoughts and insights with the world at large.
Some of my favourites are:
- Vishal Khandelwal at safalniveshak.com. He distils the common sense lessons from the hubbub of investment noise. A bit of an Indian Jason Zweig.
- John Maudlin writes a weekly newsletter, Thoughts From The Frontline, which provides a helicopter view of the developing investment landscape.
- Victor Hill at MasterInvestor provides us with deep understanding on a wide array of subjects affecting the economy.
- Pippa Malgram has insights on geopolitics which often confound the top-level view.
- Morgan Housel, a sort of modern-day Plato.
What is your attitude towards charity and inheritance?
When travelling, we found many opportunities to help people out. We tended to hang around for ages in our favourite places and we were always open to making friends with outgoing local people.
Once we knew them a bit, we would easily notice ways we could help out with their daily lives. Being involved with people on a one-to-one basis is much more rewarding than sending off a donation to a good cause, which we do nowadays.
I can’t claim much interest in thinking about what’s left over though. Having a capital sum in case of care home fees seems prudent. The remainder might well be left to Comic Relief, if I’m the last to go.
What will your finances ideally look like by then?
If the compounding machine works and Armageddon fails to arrive, I expect my portfolio to last longer than I do.
I see some of myself in Mark’s unusual story – I found the Motley Fool just a couple of years before him, and we’re both active investors for our sins – and it does make wonder whether I too might have left the grid a decade ago and ended up in almost the same place. What about you? Questions and reflections welcome, but please remember Mark is a reader sharing his story, not a seasoned blogger. Constructive feedback is fine. Personal attacks will be deleted. See our other FIRE case studies.
Thanks for this – by far the most interesting fire-side chat of the series. Many similarities with the Early Retirement Extreme approach, which is almost lost these days to most FIREs wanna-be.
Great to hear another story.
Few things stick out
1. You’re brave!
2. Empathise with the career disillusionment.
3. House for £83k !!
4. Class 2 self employed NICs. I really need to educate myself on this so any further detail would be amazing..
Thanks for sharing
Great article @TI …
And Mark. Well played sir!
JimJim
Thank you, Mark, for another of the FIRE-side chats. Though none so far directly relate to my position, I think yours runs the closest: salary-wise we’re in the same bracket; and I’m into my hill-walking too.
All the best.
Some real wisdom there, thank you!
@Rhino:
Re: “Class 2 …”
There are a huge number of sources on the web.
IMO, an interesting take is available at: https://simplelivingsomerset.wordpress.com/2016/10/19/investing-in-the-state-pension/
Thanks AC – it was Ermine who first brought it up on my radar so that link a great reminder!
Thank you for sharing your story. I find these fireside chats really helpful even when the journey described is v different from my own.
Very interesting, I started out very frugal but have been fortunate that investing returns have been good over the years. I’ve taken the view that enough is enough and not being afraid to spend a surplus.
As in the article I don’t think you can obsess too much about spending rules in FIRE , just get it right averaged over a few years.
Thank you for sharing Mark. It is inspiring to hear how you did it.
Great story. Being able to live modestly clearly a key component but amazing really how your net worth grew while you did what you wanted. I would guess absent prolonged care costs you really aren’t going to ever run out of money.
The more sources I read it seems to me that the key to successful FIRE depends on the spending side of the equation and taking pleasure in the simple things.
What an interesting article
also a timely reminder for people like me with a net worth similar to you now in my 40’s and still somewhat anxious about spending of the power of compounding .
Its really hard to wrap your head round I think even if you know how it works
Admittedly my spending goals are higher but it shows what’s possible on even a relatively modest capital sum if you want to make it work
Interesting article as always.
The FIRE community does tend to attract those without kids because, broadly speaking, kids are expensive….
So when it’s mentioned that ordinary people can’t manage to achieve FIRE it’s likely that their incomes are not high enough, the sacrifices to achieve FIRE are too great or their lifestyles mean working until they are older.
Also to some giving up work in their 30s or 40s is deviating too far from the crowd or finding they have no purpose for their free time when everyone else is working.
The older I get (early 30s) the more I understand why people hang on to their jobs. If not for themselves then perhaps partly for their kids.
AndyD4
PS I know you have profiled people with kids in the past!
It’s true that kids are both a geographic and a temporal anchor for most. Which makes the least friction decision for most to not contemplate RE until kids are in late teens/approaching independence at the earliest.
Obviously those who’ve made their nut in high reward careers or have other health related drivers might be exceptions.
Wow! This guy is almost my twin! I graduated with a degree in Biology in 1984 and, like him, discovered investing via TMF. I was earning a technician’s salary which was absolute peanuts. But then I went abroad, France, Germany and Italy.
Maybe the biggest difference is me having two children, large house in Italy and an expensive wife. 🙂
I really am starting to regret my decision in not retiring earlier, but I’m sort of convinced that it will be/must be next year. We can easily afford it but I’m a big softy and hate leaving my colleagues in our under-staffed offices. I often wish that I weren’t so thin-skinned and could just pull the plug. Three months notice is all I need.
Steve
Really interesting blog, thanks for sharing. The fact Mark and his partner lived off around £14k a year is quite eye opening, esp. with all the travel. I worry I’ve started late in the game (nearly 48, only started pension 10 years ago) and I’ll struggle when I retire, but actually I should be fine. I loved travelling but I’m also sick of the “getting there” aspect that I’m not sure I’ll actually want to travel as much as I thought I would, so I’ll be able to live off less. I’m much less enamoured with “stuff” either, which helps
Fab article. Shows what can be achieved through a good plan and a decent dollop of determination. It’s not about pulling a big wage, or keeping up with the Joneses, or following a set path. You get one crack at life. You definitely don’t want to leave it too late. You do need to be a little selfish.
‘…making your boss look good is much more important’ has got to be on the Monevator shortlist for quote of the year. It’s so true. Give them an armchair ride and they will tend to look after you. So many don’t get the basic principle of how rewarding being a little like Mr Smithers can be. Maybe as important as actually being good at your job. Yes it’s woefully sad, but on the flip side it’s really easy.
Great read, different from most Fire stories. I’d love to know where Mark went travelling and what he thought was the best places he visited.
Very different but very interesting story, congrats on a great journey so far and charting your own path. Nothing like mine but variety is the spice of life after all. Have to admit the low living costs over such a long time are staggering to me.
@steven “The fool, with all his other faults, has this also—he is always getting ready to live.” I’m not calling you a fool I hasten to add, I certainly don’t have a large house in Italy after all 😉
But one of the lines that really struck home from Monevator (Or a link I forget) is that you will likely be totally forgotten about within 6 months of leaving your job, the company will roll on and you’ll never know who your replacement was. If you die tomorrow will your immediate family forget you within 6 months?
I guess there’s your answer to do you jump now or never…
Really lovely and inspiring, and very easy to identify with. Thank you for sharing Mark, and thanks also to @TI for doing the interviewing.
Found travel aspect especially fascinating.
I have thought about, and done a little bit of early doors preparatory research into, the possibilities for retiring to ‘the Global South’ (as I believe is the preferred PC term these days).
Mrs TFI is a very capable linguist, myself sadly much less so.
Bolivia, Panama, Costa Rica, Vietnam, Indonesia and Morocco are all scoring very well presently on Top 10 or 20 online lists of high quality and affordable overseas retirement destinations; alongside the usual line ups in Europe (led by Portugal, Malta, Cyprus, Greece and parts of Spain, Italy and France).
Amazing to read of the ups and downs of the actively managed portfolio. Not sure that I’d ever have the confidence, competence or time to research individual companies; and I’m in awe at what Mark has achieved here.
The relevant URL for class 2 NICs is https://www.gov.uk/voluntary-national-insurance-contributions which explicitly says:
“Self-employed people with specific jobs
Some people do not pay Class 2 contributions through Self Assessment, but may want to pay voluntary contributions. These are:
//snip
people who make investments for themselves or others – but not as a business and without getting a fee or commission”
This seems pretty clear cut, or am I missing something?
Regarding one’s value in the organisation ….
A poem “The indispensable man” by Saxon White Kessinger
Sometime when you’re feeling important;
Sometime when your ego’s in bloom;
Sometime when you take it for granted,
You’re the best qualified in the room:
Sometime when you feel that your going,
Would leave an unfillable hole,
Just follow these simple instructions,
And see how they humble your soul.
Take a bucket and fill it with water,
Put your hand in it up to the wrist,
Pull it out and the hole that’s remaining,
Is a measure of how much you’ll be missed.
You can splash all you wish when you enter,
You may stir up the water galore,
But stop, and you’ll find that in no time,
It looks quite the same as before.
The moral of this quaint example,
Is to do just the best that you can,
Be proud of yourself but remember,
There’s no indispensable man.
@Hariseldon — Wow, that’s an excellent metaphor and image, thanks for typing it out!
@all — Cheers for the comments, glad it’s gone down well. Like others I saw a lot of myself in this one, so it’s nice to do something off the passive index beat for variety. I’ve asked Mark if he’d like to come back and follow-up but perhaps he’s still exhausted by the over-sharing/interview process! (It’s a pretty big back forth/ask). Also he’s a regular reader but not a regular commenter so maybe a long shot. 🙂
Hello Mark, really interesting chat, appreciate you sharing. I know it can be a little daunting putting your story out there. My own FIRE path was featured in the second FIRE-side chat back in February (domestic geo-arbitrage made it possible).
Reading your chat made me think of my early days when I started out as an active investor with no experience, no knowledge, and no strategy. I never mastered the art of selling losers on the way down.
As you are further down the path than I am, I was intrigued to read about your experience before, during, and after the Great Financial Crisis and the effect it had on you and your net worth. I am only in my first year of FIRE so have not experienced a shock to the system on that scale yet. It is early days in my de-accumulation journey, but I have recently added a brief update in the comments section of my FIRE-side chat in reply to a request from a reader.
Thanks for sharing your story Mark and TI. Very inspiring. I think there is nothing like a goal to really fire you up and to get you to stay the course. Yours is different to my own strategy; there are many different ways to skin a cat, which comforts me. (But doesn’t comfort the cat, boom-boom)
All the best.
Really great article. I’m planning on being a Digital Nomad in the not to distant future.
I hadn’t realised that you could contribute the £2880 into SIPP while not being tax resident. That’s good.
Unfortunately, my estimated Digital Nomad yearly cost is coming out at about 4x what Mark is saying….
@Hariseldon #22: A beautiful poem. Thank you for sharing. For all us still working for ‘The Man,’ at ‘The Firm’ it resonates profoundly.
Hi Mark, I was going to ask you a couple of questions about your investing journey but see @TI has said you aren’t too keen on follow ups, so I won’t.
But I just want to say I admire your courage in throwing in the towel at only 40 and going travelling – wish I’d had half the guts you have to do that – hugely jealous as that’s when you want to be travelling at 40 and not 60/65 when you probably can’t be bothered with it anymore and likely don’t feel as up to it as you once did!
You have clearly done very well with investing actively – even though we’re told most of us will come off worse with this approach – something I wouldn’t have either the time or knowledge for so stuck with global index funds.
I know you said you are now placing your assets more defensively but in past you said you were quite “gung-ho” and 89% equities – that’s pretty brave as well when you went through those big drawdowns which you say nearly wiped you out. I was intrigued to know why you didn’t go more defensive then with bonds or similar after your first or second crash. I don’t know whether you’re just brave or it’s you just prefer all in equities like myself pretty much. I am heavy in equities but now I am older I find myself worrying more about crashes/sequence of returns and so thinking about bonds myself now (mainly after what I’ve read here on Monevator).
In awe of your frugality as well! I thought I was – but surviving on <10K PA is outstanding work.
All the best Mark, hope it continues to go well for you – both in life and investing!
Thank you for sharing Mark. You have a fascinating story, so different to my own, but wow, sounds like you have had some adventures.
Like others I am completely stunned by your house price!
Another great fire-side chat, thanks @TI and Mark.
Forks in the road – I find it fascinating to see/hear/compare what others chose to do in similar circumstances.
I also found TMF around that time, and also dabbled in buying some shares. But I didn’t get the ‘bug’ and after a year or so lost interest.
I moved onto mutual funds via a large(ish) fund provider, but didn’t know what I was doing. The funds did ok(ish), but the fees negated any significant gain.
I sold it all a few years later to help with a house purchase.
Many, many years later I found Monevator et al and began to make significant progress with investing.
Hi Monevator readers,
Many thanks to all those who took the time to comment after reading this article
Whilst not a keyboard warrior, I wouldn’t leave you hanging for too long:-)
Hopefully I can add some value to the points made:
@Rhino ‘You’re brave!’ Actually, this must be the key to having a life of meaning. ‘Feel the fear and do it anyway’, ‘The obstacle is the way’ etc.
@Rhino ‘House for £83k !!’ There is no shortage of solid pre-war terraced housing around this price still available in the UK for those prepared to look at the Northern half of the country. There is an active retirement arbitrage market for those wanting to escape the overbuilt southern counties (I am originally from Reading).
@Andy D4. @BBBBobbins. Good points. I guess it’s all about choices and priorities. I always expected to have a ‘normal’ life with wife & kids etc. It wasn’t until I was 26 that it became apparent that things were heading in a different direction.
@ Lea The Pea. The slower you travel the cheaper it becomes. You could spend a few months in a mountain village or a tropical beach for a few pounds a day and make lots of friends with the locals.
@WCTL Flashheart. 100% agree.
@Des. I did blog at TMF and online, but won’t link here ‘cos it’s anonymous. I always recommend Cappadocia in Turkey as somewhere amazing and not too far away.
@Xeny. Qualifying self employment means getting paid to do something useful. It’s my first year, but I’m hoping that a few little jobs here and there will be sufficient.
@Algernond. You need to be resident for tax in the UK to contribute to SIPPs and ISAs. Since the last budget you can now contribute £8000 to a SIPP without any earnings. They will contribute another £2000. However, if the state pension converges with the personal allowance it might be difficult to withdraw it tax free once officially retired.
@Algernond. In my experience people have no idea that the difference in the cost of living between the developed and the developing world is so vast. Whilst it is nice to have the opportunity to arbitrage the cost we should recognise that the global exchange rate system keeps the South poor whilst the North buys their labour and resources.
@J. I don’t suppose an IRR of 8.25% would compare well with a global tracker over the period, though I don’t think that these existed in the early days. I have been getting more defensive in recent years but that hasn’t included bonds because, in general, they have been ‘no return’ items until recently. I bought some Lloyds banks preference shares during the GFC and a linkers fund during the Truss debacle, but that was just opportunistic trades. I am much more interested in Gilts at this moment in time, but they still have to compete with other ideas.
@J. Just to clarify, my annual spend has been under £10k in recent years, but I share the bills with my partner so our household spend is around £20k and we don’t have any accommodation costs. It wouldn’t be possible to live this cheaply on my own. We are not trying to live frugally. I don’t really understand these articles which suggest you need an income of £40k+ to retire, particularly if you own your own property. What are they spending it on?
Finally, thanks to Monevator for running this series. It certainly give people food for thought. I have been following the site for years so was happy to have the opportunity to contribute.
I love reading these stories. Mark does seem to be outlier in a number of regards, but one thing that stood out is I bet there are not many UK millionaires (excluding multi millionaires/billionaires) who live in a house worth a single figure % of their net worth.
It has been one of my FIRE failings to have too much net worth tied up in our home, and this year we took drastic action when it became clear I was going to have to work well into my 60s if we stayed put, to pay off an “asset” very, very likely to depreciate markedly in real terms over the coming years.
Sold a place worth about 10x the number mentioned (not flexing here just highlighting how skewed our net worth was to primary residence) and currently renting while we search for a place to downsize to.
Still a battle to work out how much we will agree to compromise on, especially given the high property prices of the county, but at least we will be mortgage free and able to massively increase savings rate.
Previously I had been planning on using my PCLS to pay off the mortgage, but that is just robbing Peter to pay Paul really as it drops your income by 25% (in fact it drops your net income by even more) and moves FIRE even further away.
Another key driver here is the ability to be able to travel and do stuff that will be physically impossible if left until your mid 60s or beyond.
When I read stories like this it makes me realise how much we have already missed out on travel wise.
Really interesting article and one that resonates with me as someone who has been bitten by the active investing bug. I’d be really interested in finding out more about your Earnings Power method of investing – is it a similar to that detailed in ‘Where the Money is’ by Adam Sessell?
As someone who is 40 and with a similar net worth to what you had when you left work behind it is encouraging to hear your journey, as FIRE seems like a long way off yet for me. I hope that the compounding gods will be good to me over the next 10 years, but perhaps I’m closer to FIRE than I realise…
A most fascinating story, thanks for sharing Mark and as someone on a more average salary than most FIRE followers, I thought your story was really inspiring.
Your comment about not minding if you never see another airport again was interesting – airports are tiresome now and I can only imagine they will be even more so when I’m older so perhaps travelling won’t feature so much in my FIRE plans as I had originally thought.
Thanks for sharing Mark, I love these fireside chats and I always learn something even if the situation of the interviewee is completely different to my own.
re Mark’s comment in #31 that, since the budget, non earners can now contribute £8000 into a SIPP with a government contribution of a further £2000. Just wondering if this is correct as everywhere I look still has the old figure of £3600 per year for non earners. Can anyone confirm please?
@ Stonefen
Perhaps it’s the MPAA that increased from £4K to £10k in the last budget. Allowing a fair amount of pension recycling for those 55+ who have accessed their DC pot?
@No Smog Without FIRE. I first read about the Earnings Power Value method of investment in a book called Value Investing – From Graham to Buffet & Beyond by Bruce Greenwald. (I haven’t come across the book you mention). Briefly, it describes a method by which you can determine how much you are paying for future growth in the current share price of a company. If you are paying around nothing but you think the company will grow then you may have an interesting investment opportunity.
The funny thing about trying to compound your net worth is that you can spend years feeling like nothing is happening and then a couple of good years can give you a real boost.
@ stonfen, Boltt. Thanks for your comments. I have double checked and I am disappointed to find that the allowance increase only applies to pension recyclers and not non-earners, which seems very strange to me.
Thank you for taking the time and care to reply to so many comments @Mark. Mrs TLI & I are both in awe and admiration of your amazing FIRE achievement.
EPV is a really interesting idea. I wonder if it’s something that an outfit like Fundsmith look at as part of their free operating cash flow yield analysis?
I also started to wonder if one could maybe combine the EPV Equity figure with the Growth At Reasonable Price approach of Jim Slater and Peter Lynch?
A shortcoming of GARP is that it only uses conventional P/E.
A shortcoming of EPV is it is conditioned upon the business operations remaining constant, ignoring future growth or risks from competitors.
Perhaps these issues with EPV and GARP could both be resolved by replacing the P in GARP (current P/E) with EPV Equity, with the G still being the growth rate of profits after tax.
Great article. Didn’t realise you can still pay 2880 into a SIPP post FIRE.
Based on this gem, I have a quick question if anyone knows the answer I’d be truly grateful. I retired this year, 51, achieving FIRE. I do not plan to work but will have saving income that will push me into the higher tax bracket next year (let’s say 50k for ease). I read that there are limits you can put into a SIPP depending on how much you ‘earn’. Does savings income count as earnings? Ie would i be able to pay more than 2880 in?
Thanks for any insight anyone can offer.
@Time like infinity. I think you are referring to the PEG ratio when you talk about GARP. Bear in mind that this is based on the rate of change in earnings wheres the EPV is a figure derived from one set of accounts. Yes, the EPV is it is conditioned upon the business operations remaining constant, but that is the point. I used to compare the EPV to the market cap to see how much was in the price for growth.
I think it would be simpler to use the two tools side by side, but would love to see any algebraic workings you can come up with :-).
PS- whilst I said my approach was based on EPV, I was using the whole array of fundamental analyses in my spreadsheet and, ultimately, still guessing the future like everyone else.
@James. Interest & dividend income do not count as earnings. Anybody can contribute the £2880 annually to their personal pension, you may be able to contribute more if you have any earned income above this figure.
Once you turn 55 you will be able to start to withdraw from your SIPP at which point you will also be allowed to put £8k into it. I think this is to allow retirees who continue to do some work to carry on contributing to their pension pot but the way it is set up also enables recycling. Pension recycling is when the retiree withdraws a sum only to contribute it later to gain the tax break. Officially this is frowned upon but allowed.
It would be interesting to know if one can put a SIPP into withdrawal mode without actually withdrawing anything and then use this increased allowance.
I think this is an obvious tax loophole and could be stopped by the government at any time.
I am not a tax expert (as previously demonstrated). All AIUI.
My understanding is that the MPAA places an upper limit of £10k gross on DC contributions, but you can only contribute that amount if you have net relevant earnings of that sum. Otherwise you are limited to the greater of 100% of net relevant earnings (plus the tax relief), or £3600 gross. See attached https://www.fidelity.co.uk/retirement/money-purchase-annual-allowance/
Thanks for that Mark. I think I’ll just keep it at 2880 and worry about it aged 55!
Although my £50,000 savings/ dividend income is not ‘earnings’ (i will have no employment earnings), I am assuming it will put me in the higher tax bracket
Do you know if that means my 2880 pension contribution will get 40% tax relief? Don’t worry if not, i assume it will all come out in the wash when i do my tax return, but just curious.
Thanks Martin T. This reminds me not to start pontificating online as I have got all my facts wrong so far 🙁