David Sawyer didn’t read the small print. Having written a guest post for us a year ago after publishing his debut financial independence bestseller, RESET, we’ve harassed him into writing a follow-up. You know, like The Godfather 2. Only with (slightly) fewer flashbacks.

These days it’s all about the data. Or so they tell us. But what part-time author has time to get into all that?

When you finish writing a book, the last thing you want to do is work on the manuscript full-time for another six months before it’s ready to publish. And the very last thing you want to do is spend aeons writing the index and doing the Notes section. Many don’t bother.

However, I’m glad I did with my own book, RESET – albeit 511 footnotes over 28 pages was perhaps taking it too far.

Tracking reader curiousity

Of the thousand-odd messages I’ve received from readers post-publication, one common thread has emerged.

“Thanks for all the references, Dave, they’ll keep me going for months.”

People like knowing where your thinking comes from and finding sources of further reading.

It’s proved handy for me, too – or at the least intriguing.

I employed short URLs to make it easy for paperback readers to type in the links, which means I can track how many people click each one.

Which brings me to that data and the other reason I’m glad I included a Notes section.

Around 6,500 people have clicked the 500-plus links in RESET’s Notes. That gives us a unique insight into the UK financial independence seekers’ hive mind.

Click for more: The top ten references in RESET

RESET is aimed at people aged 35-60 who are stuck in a bit of a rut and looking to reset their lives halfway through.

It’s a UK take on US financial independence. Although some topics might not seem core to financial independence (such as decluttering or going digital to future-proof your career), I’ve found the majority of the book’s readers are drawn from the FIRE1 community.

So, with this lengthy preamble over, let’s look at the top ten most popular links – ranked by click volume – and reflect on what it tells us about the UK’s FIRE enthusiasts.

(After that I’ll throw the data overboard and outline the top ten things I’ve discovered about the FIRE community since writing my book. And in between there’s a special intermission, so look out for that!)

1. Candid Money’s ‘How long?’ investment calculator

An online calculator where you can plug in figures to find out when you can retire/reach financial independence.

Purpose, values, vision, decluttering your home, mind, and technology are all topics covered in RESET. But when it comes down to it, the primary concerns of most mid-lifers is: “When can I stop working. When can I put my feet up? When does day-to-day reality not include 9-5?” This is no surprise.

2. How rich are you?

An article looking at how rich you are compared to everyone else living in the UK.

We’re human. We want to know where we fit in the world. And we often measure our success – our rank in the pecking order – by how much money we earn. In his excellent book Status Anxiety, Alain de Botton writes: “…the hunger for status, like all appetites, can have its uses: spurring us to do justice to our talents, encouraging excellence, restraining us from harmful eccentricities and cementing members of a society around a common value system. But, like all appetites, its excesses can also kill.”

3. Pakt

An expensive life/travel bag produced by The Minimalists.

People like the idea of owning one bag for all needs. It’s the holy grail of travel. We chase efficiency, and will pay a bit extra for something endorsed by the kings of minimalism.

4. Osprey Porter 65 travel duffel

A less expensive and more durable travel bag produced by Osprey.

Err, people really like the idea of one-bag-for-all-needs. This is the one I use. Seriously, I’m scratching my head here! I’m all for minimalism and use this bag a helluva lot, but why it and Pakt come out ahead of other links in RESET, I don’t know.

5. How much will you need to retire?

Which? magazine’s annual reader survey to find out how much annual income after tax the average UK couple need to retire on.

FIRE is a lot of things to a lot of people. But boiled down to its essence, you need a firm grasp of your numbers. This link is popular because it’s a shortcut to the in-depth planning and future-gazing one would have to do with one’s partner to come up with an annual retirement spending figure for yourself. Which? magazine is a trusted and reputable source and the fact it has surveyed 6,000 of its members makes the research robust and believable. (You can complement with this data with the recent study by Loughborough University.)

6. Tim Ferriss’s Five-Bullet Friday

A weekly newsletter by all-round self-help guru, podcaster, and author Tim Ferriss.

We’re all searching for something, and followers of the financial independence movement more than most. Tim Ferriss is an anomaly. Through hard work, dedication, and being in at the ground level when blogs and podcasts were becoming a thing, Tim Ferriss has grown his email list subscribers to more than a million. He’s an anomaly because there are tens of thousands of people trying to become the new Tim Ferriss, working their socks off, but only he has succeeded. Every Friday he issues his Five Bullet Friday newsletter, sharing what’s on his mind. I seem to remember first reading about the Osprey bag here. Ferriss gets the world’s best thinkers on his podcast, notably including Mr. Money Mustache, Marie Kondo, and Walter Isaacson.

7. Blogs don’t tell the full FI story

A blog post written by US blogger and author Tanja Hester exploring how US FI bloggers make money from their activities.

Many people who read RESET are already familiar with FIRE. Others are exploring the concept for the first time. Either way, if it grabs you, if you start viewing the world differently, or even if it just gives you a conceptual framework on which to pin information you already understand, it’s only natural you want to pick holes in it. After all, we’re only human, eh? This blog post scrapes the surface of an interesting topic that divides FIRE bloggers, podcasters, and authors on both sides of the Atlantic. There are scores of people in the US who make a tidy living out of FI-blogging, what with product referral fees, affiliate advertising on their blogs, books, appearance fees, coaching practices, and so on. Fewer do so in the UK – and none, as far as I know, fully fund their lifestyle off the back of it. I don’t object one bit to people making money from their creative work. But I do think people have a right to ask whether they’re preaching mung beans on air but eating caviar off it.

8. Global Rich List

A website where you can type in your annual after-tax income and see where that places you in the global rich list.

Back to that status anxiety again. We want to see where we rank, and it’s a nice and surprising feeling (for those living in the UK) when we find out.

9. The Feynman technique

A technique to enhance learning, named after Richard Feynman: once you learn something, explain it to someone else. This helps you retain the information.

Seekers of information apparently revere Nobel prize-winning physicists. Have you read Surely You’re Joking, Mr Feynman!? A great man, clearly, but also an arrogant bore. Or an alternative explanation would be that people find it difficult to remember information, and Feynman’s technique is one I use, usually on the kids, or unsuspecting friends over a pint of Brewdog’s Elvis Juice.

10. Emotional value headline analyser

If you do any kind of writing and want to make a snappy heading/title/email subject line, this tool rates how emotionally appealing it is.

People love a good tool and like communicating well. Everybody writes these days, and this tool is useful. It’s also intriguing. Imagine if you could write an important title in ten different ways and then pick the one that’ll work best.

Intermission

How are we all faring? In need of a pause that refreshes? A cup of tea? A comfort break?

Suspecting as much, I’ve smuggled in an excerpt below from my new audiobook version of RESET. It’s eight minutes long and is taken from Chapter 21: Financial Independence and F.U.Money.

And yes, that’s me narrating!

[Note from The Investor: If you’re reading via email and no SoundCloud player is visible above, you can listen to it by visiting this post on the Monevator website.]

Conclusion

And back to our story – and to the conclusion. What, in a nutshell, do those 6,500 clicks really tell us about RESET and UK FIRE? What does the data reveal?

Well, aside from a couple of outliers (travel bags!), there’s a fair bit of crossover with the Monevator post I wrote at the turn of the year, which was also about tools.

People love tools and it seems that even we FIRE enthusiasts can’t resist using them to compare our lot with others’.

Data, schmata?

Perhaps data can only take us so far in understanding the needs and wants of FIRE pursuers in the UK, why they read books like RESET, and what the UK FIRE community looks like as we reach the tail end of 2019?

In the last part of this post then, I’ll list 10 observations from someone who 15 months ago knew no one in the UK FIRE community but has immersed himself in it ever since.

These observations reflect my own experience. They’re also based mainly on the thousand-plus conversations I’ve had with RESET readers – in person, through LinkedIn, on Facebook and most of all via email, where people feel most comfortable sharing what they really think.

1. Investing is simple, but you have to learn such a lot of information to make it so. Investing knowledge among the UK populace is still woeful.
2. The single most important quick win for anyone living on these isles is to max out their employer match and intentionally pick which fund/s their workplace defined contribution scheme invests in. Then consolidate the rest of their funds into one SIPP, and, again, invest the money intentionally. Despite all the information out there, the amount of people who’ve thanked me for giving them a process and detailed step-by-step instructions to “sort their big money” is unbelievable.
3. People in the FIRE community are bright, knowledgeable, adaptable, and open to new ideas.
4. While not mainstream as yet, FIRE is now definitely a recognised thing, as the smattering of UK national newspaper and broadcast coverage over the past 15 months attests. There are around 20 decent bloggers, a (European, but based in the UK) podcast, a handful of extremely active Facebook groups (most notably ChooseFI London, Financial Independence London and Financial Independence UK) and regular meetups across the UK (not just in London).
5. Most FIRE enthusiasts are different from the norm, and dissatisfied with what society/media/advertising holds up as success. Some have just discovered FIRE but many RESET readers I chat with are a fair way along the journey and are just looking for a bit of reassurance that they’re on the right path and haven’t missed anything.
6. Financial independence can be a solitary pursuit – there’s all those spreadsheets for one thing! In Quiet, Susan Cain reports that two-thirds of the populace are extroverts, one-third introverts – but I believe you can reverse this for followers of financial independence.
7. There’s a swathe of FIRE enthusiasts living in the UK who follow all the American blogs and have read all the American books but haven’t connected with the UK FIRE movement. As a bare minimum they should follow Monevator, The Escape Artist, join the Facebook groups mentioned above, and read or listen to my book.
8. Of the 1,000-plus messages I’ve received, three words stand out: resonate, connection, vision. FIRE enthusiasts want to be connected with others, they want people to articulate the way they are feeling, and they want a clear holistic path of how to change their lot. The messages I remember are the ones that connected with me: the guy contacting me through LinkedIn while at Center Parcs with his kids, the woman who’d stayed at the same place on Loch Coruisk in Skye where I’d bivvied-down with my brother-in-law 20 years ago, and the many people who spend some of their year in one of those white towns in Andalusia (the vision my family is aiming for). In this yearning for connection we are no different from other members of the human race. Yet if there’s one thing the past 15 months have taught me it’s that making online, email, face-to-face, phone, and Skype connections with like-minded people is far better than lurking in the background. You learn more and it’s fun, too.
9. Financial advisers/planners are not to be avoided at all costs. There are exceedingly good ones out there. Some, such as Pete Matthew and Andy Hart at Maven Money, have covered FIRE extensively on their podcasts in 2019.
10. My final observation is this. The more books, podcasts, blogs, seminars, coaches, meetups that spring up this side of the pond, the better. Compared to the FIRE community’s size in America, we’re a barnacle on a whale’s nether regions.

The more people put their heads above the parapet and share their brand of FIRE, the more others will find stories and life experiences that resonate with them – and so the more UK folk will pursue financial independence.

David Sawyer (47 this month) is a United Nations award-winning PR man and author, who has written several posts for Monevator. He lives in Glasgow with his wife, Rachel, young kids (Zak and Jude) and pet – Hamsterdam. RESET: How to Restart Your Life and Get F.U. Money is priced £0.99 for the Kindle version this month only. If you buy the Kindle version you can also get David’s newly published audiobook at just £3.492.  AND THERE’S MORE! David is giving away 10 copies of his new audiobook to Monevator readers who can answer the following question: David’s pet is named after a European city. What is the name of the city and what sort of animal is his pet? Email your answers to dave@zudepr.co.uk (subject line “Monevator Competition”) by midday Friday 22 November – stating whether you’re from the UK or overseas – and he’ll be in touch if you’ve won. Or perhaps even if you’ve lost? A maverick, is David.

1. Financial Independence Retire Early. [↩]
2. Full price £22.89 [↩]

Nowadays I am a big fan of rules of thumb when it comes to asset allocation strategy – although initially I spent a long time agonising over what my ‘optimal’ asset allocation should be.

I knew there had to be one, because so many learned sources talked about the efficient frontier. A fabled place, where, if I could only reach it, my blend of equities, bonds, and other asset classes would function with perfect potency to give me the highest risk-adjusted return possible.

I spent a long time wandering the desert trying to find that place, seemingly getting nowhere.

Meanwhile, all around me were these little rules of thumb. Handy guidance tools that seemed to point away from asset allocation paradise and towards the quick departure lounge to ‘that will do’.

It took me a while to realise I’d actually reached my destination – the understanding that there is no right answer when it comes to asset allocation.

It’s a standpoint summed up by passive investing sensei Rick Ferri as follows:

All of this nonsense about finding the ideal allocation is nonsense. The ideal portfolio can only be known in retrospect. We can only know what we should have done, not what will happen.

So, choose a few low cost index funds in different asset classes, rebalance occasionally, and forgetaboutit.

The big decision

How much of my portfolio, then, do I fill with the rocket fuel of equities versus the parachute braking capabilities of bonds?

That’s the main question that your asset allocation strategy will settle.

The answer resides in the nature of your financial goals, your needs, and your ability to take risk – a bunch of difficult questions that can only be answered with a personal examination so intimate that it’s probably best to wear rubber gloves.

However, rules of thumb can be used to set the guidelines you’ll probably be working within once you pass the exam.

No idea what your risk tolerance is? Not sure what difference a long time horizon should make to your plan? Then the following rules of thumb can grease your understanding.

(By the way, none of the authors of the rules of thumb that follow actually named them! I’ve made the names up to hopefully make the guidance a bit more memorable.)

The ‘100 minus your age’ rule of thumb

This rule of thumb is so old it belongs in a rest home. But it’s still got legs because it helps you to work out how your age affects your pension portfolio decisions:

Subtract your age from 100. The answer is the portion of your portfolio that resides in equities.

For example, a 40-year-old would have 60% of their portfolio in equities and 40% in bonds. Next year they would have 59% in equities and 41% in bonds.

A popular spin-off of this rule is:

Subtract your age from 110 or even 120 to calculate your equity holding.

The more aggressive versions of the rule account for the fact that as lifespans increase we will need our portfolios to stick around longer, too, and that often means a stronger dose of equities is required.

Following this rule of thumb enables you to defuse your reliance on risky assets as retirement age approaches.

As time ticks away, you are less likely to be able to recover from a big stock market crash that wipes out a large chunk of your portfolio. Re-tuning your asset allocation strategy away from equities and into bonds is a simple and practicable response.

This is the strategy we employ in our model Slow & Steady passive portfolio.

The Tim Hale ‘target date’ rule of thumb

What if you’re not saving for retirement? What if you’re going to need all the money on some very definite date, perhaps for a college fund or a mortgage pay-off?

We’re looking for a rule that gives us the courage to be relatively aggressive early on and then manage down our exposure to risky equities as the happy day approaches.

Tim Hale’s suggestion, in his UK-focused investment book Smarter Investing:

Own 4% in equities for each year you will be investing. The rest of your portfolio will be in bonds.

If your investment horizon is 10 years then you’ll hold 40% equities. When you’re T minus nine years then you’ll rebalance to 36% equities and so on.

I like this rule because it’s a reminder to rein in adventurism if you want to use investing to achieve a short-term goal (say five years or less) but it takes the shackles off if your horizon is 20 years or more.

The Larry Swedroe ‘come out punching’ rule of thumb

US-based passive investing champion Larry Swedroe has come up with a similar guideline in his book The Only Guide You’ll Ever Need for the Right Financial Plan, except his recipe is far more aggressive in the early years:

Investment horizon (years)	Max equity allocation
0-3	0%
4	10%
5	20%
6	30%
7	40%
8	50%
9	60%
10	70%
11-14	80%
15-19	90%
20+	100%

This is an asset allocation strategy that is gung-ho for growth over 20 years, before embarking on a steep descent out of risky assets that turns into an equity-free glide path in the last few years.

Essentially, this rule of thumb is pointing out that market convulsions in the early years may well play to your advantage as you scoop up cheap equities, but don’t dance with the bear when time is short.

The Larry Swedroe ‘NOOOOOOOO!’ rule of thumb

So far we’ve looked at asset allocation strategy from the perspective of the need to take risk. This next rule considers how much risk you can handle.

Swedroe invites us to think about how much loss we can live with before reaching for the cyanide pills:

Max loss you’ll tolerate	Max equity allocation
5%	20%
10%	30%
15%	40%
20%	50%
25%	60%
30%	70%
35%	80%
40%	90%
50%	100%

I’m always amazed by the number of people who believe that their investments should never go down. It’s a valuable exercise therefore to be confronted with the idea that you are likely to be faced with a 30% plus market bloodbath on more than one occasion over your investment lifetime.

I found it next to impossible to actually imagine what a 50% loss would feel like, even when I turned the percentages into solid numbers based on my assets.

At the outset of my journey, my assets were piffling, so a massive hemorrhage didn’t seem all that.

Experience is a good teacher though, and it’s worth reapplying this rule when your assets amount to a more sizable wad. You may feel differently about loss when five- or six-figure sums are smoked instead of four.

The Oblivious Investor, Mike Piper, uses a slightly more conservative version of this rule:

Spend some time thinking about your maximum tolerable loss, then limit your stock allocation to twice that amount — with the line of thinking being that stocks can (and sometimes do) lose roughly half their value over a relatively short period.

The Harry Markowitz ‘50-50’ rule of thumb

If all that sounds a bit complicated then consider the oft-quoted approach of the Nobel-prize winning father of Modern Portfolio Theory.

When quizzed about his personal asset allocation strategy, Markowitz said:

I should have computed the historical covariance and drawn an efficient frontier. Instead I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret, so I split my [retirement pot] 50/50 between bonds and equities.

The Accumulator’s ‘rule of thumb’ rule of thumb

Here’s my contribution:

Rules of thumb should not be confused with rules.

I have to say this, of course, lest the pedant cops shoot me down in flames, but it’s true that rules of thumb are not fire-and-forget missiles of truth.

They are exceedingly generalised applications of principle that can help us better understand the personal decisions we face.

(Hopefully our long grapple with the 4% rule seared that into our brains!)

The foundations of a proper financial plan are a realistic understanding of your financial goals, the time horizon you’ve got, the contributions you can make, the likely growth rates of the asset classes at your disposal, and your ability to withstand the pain it will take to get there. Amongst other things!

But rules of thumb can help us get moving and, as long as they’re tailored, can help us answer questions to which there are no real answers like: “What is my optimal asset allocation strategy if I wish to be sitting on a boatload of retirement wonga 20 years from now?”

Take it steady,

The Accumulator

What caught my eye this week.

I stuck my oar into a Twitter debate this week, after economist Julian Jessop produced a graph purporting to show that the UK has not grown much more unequal post-Thatcher:

I responded that if we assume the data is right, then it’s still interesting that things don’t feel that way. So why the disconnect?

I am sure one reason is house prices. Those who have been on the housing ladder for decades – especially those who can help their own kids on – don’t seem to understand how un-affordable prices for the young have fractured society.

Perhaps that doesn’t show up in overall statistics of inequality because older would-be poorer citizens were made richer by rising house prices? I don’t know.

The other reason I put forward was Instagram. The fabulous lives of celebrities, influencers, and the several thousand photogenic cats and dogs made famous by social media cast a pall over our realities.

In the old days the Jones’ lived next-door, or perhaps across the street. Now they’re in your pocket, for many people day and night.

On the spectrum

It all points to new, technology-enabled (or perhaps enfeebled) ways of feeling rich or poor, which reminded me of an excellent blog post by US writer Morgan Housel.

Commenting on how the super-rich can’t help but make even the ordinarily rich feel poor, Housel writes:

Past a certain income the most difficult financial skill is getting the goalpost to stop moving.

And today’s level of global wealth has moved it a town over.

Housel then proposed a new spectrum of financial wealth, described by words, not numbers – because numbers don’t seem to tell us the whole story anymore.

While there are categories on the list I’d feel prouder to belong to, I plumped for ‘Health Wealth’ as my current status:

You can go to bed and wake up when you want to. You have time to exercise, eat well, learn, think slowly, and clear your calendar when you want it to be clear.

…which is gratifying, because I’ve been reading Why We Sleep? by Matthew Walker, and it’s life-changing enough to have seen me buy some new blackout curtains!

Where would you place yourself on Housel’s spectrum? And are there any categories he’s missing?

Have a great weekend!

p.s. Monevator has been ranked as the #1 UK personal finance blog by Vuelio. Several other good blogs on that list, too.

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