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The Slow and Steady passive portfolio update: Q4 2019

The Slow and Steady passive portfolio update: Q4 2019 post image

Last year felt leaden with dread and anxiety, yet as investors we were walking on sunshine. Our Slow & Steady passive portfolio rocketed up 16.3% in 2019. That’s its second-best year ever!

Perhaps the global markets don’t know that we’re sleepwalking towards disaster, or maybe things aren’t as bad as they seem?

  • Our Developed World equities performed best – up 24% this year, with the US to the fore but other regions buoyant, too.
  • Global Small Cap grew 22%.
  • Even the dear old FTSE All-Share soared 20%, enjoying a late bounce from the election result.
  • Emerging Markets and Global Property both scored above 17%.

Our defensive bond holdings hardly embarrassed us, either:

  • UK Government bonds (conventional) rose 7%
  • Global inflation-linked bonds (index-linked) managed over 4%.

Nine years in and the portfolio has grown at 9.4% annualised per year. Call it 7% after inflation.

Here are the numbers in SuperDuper Spreadsheet-o-vision:

The annualised return of the portfolio is 9.4%.

The Slow and Steady portfolio is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £976 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and catch up on all the previous passive portfolio posts.

If you’re 100% in global equity trackers then your portfolio probably returned north of 20% this year. That’s worth celebrating. Equities have had a stunning decade. You may well have notched up a return of more than 25% in 2016, and another 10% in 2017.

Understand that this isn’t normal. A stretch like this isn’t unprecedented, but it is extraordinary.

The bull run may well have changed your life. You may now have pushed so close, or so far beyond, your original objective that your eyes are on stalks and your ambitions on stilts.

The danger lies in pushing your luck. Forgetting you can lose after an amazing run. Reaching for more, when you already have Enough.

If your portfolio has grown far larger than it was say five years ago, then cool your jets and chill your spine with a few thought experiments.

How badly would a 30% loss hit you?

When we started this portfolio, a 30% loss would have cost us £900. We’d have replaced that with four months worth of cash contributions.

Now we’d lose over £16,000. That’d take fours years to replace with our current contributions, if the market stayed down – as it easily could.

How about you? Maybe 30% would cost you £50,000, or £100,000, or £500,000. It all depends upon where you are in your journey.

How long would it take you to make up for a 30% correction, if the market afterwards stayed flat?

The probability of loss is much the same in any given year. Our portfolio will be invested for 20 years. We roll the dice every year –and sooner or later it will come up snake eyes.

If an unlucky roll of the dice would now hurt you badly, then maybe you should think about easing off the accelerator if your equity asset allocation is highly aggressive.

I’m not predicting bloodshed in 2020. But I do like to think about the downsides before they happen.

  • To keep partying like it’s 1999 turn to page 666.
  • To manage your risks, turn to page 999.

You have chosen wisely

We built risk management into our Slow & Steady plan by committing to selling 2% of our equities every year, and using that money to increase our defensive bond allocation by 2% every year.

This year’s rebalance will give us an asset allocation of 62:38 equities vs bonds.

That compares to our original asset allocation of 80:20 back in 2011, when we felt young and invincible.

More precisely, our model portfolio had no skin in the game back then and time was on its side.

As the years slip by, we’re less optimistic about our prospects should the market crush our portfolio for half a decade or so. Hence we dial down the risk every year while remaining pro-growth.

We haven’t really lost out either in comparison to a high-risk 100% equities strategy.

The Slow & Steady’s 9.4% annualised return compares nicely with the 10% annualised you’d have earned from global equities and the 9.5% you’d have earned from the FTSE All-Share over the last nine years.

Portfolio maintenance

Here’s the changes we’re making to our asset allocation as of the end of 2019:

  • Emerging Markets -1%
  • Global Property: -1%
  • Global Inflation-Linked bonds: +2%

I’ve reduced Emerging Markets because we try to keep our equity allocations in line with global market allocations. Star Capital helps us do that with their regular updates on the weights of world stock markets.

The current weight of the Emerging Markets on the global stage is 13.4%.

13.4% x 62% (our new equities allocation) = 8.3% portfolio asset allocation.

Strictly speaking I should have trimmed Emerging Markets from 10% to 8% and been done with it. But emerging economies are under-represented by the capital markets and valuations seem decent, so I’ll knock ’em back by 1%.

That means I can cut Global Property by 1%, too. I’m happy to do that because I’ve uncovered evidence that the diversification benefit of REIT equities is marginal. My plan is to reduce the portfolio’s property allocation over time.

Some people disagree with this move, some claim it’s active investing, and The Investor pushed back, too – cautioning that the evidence and my personal experience over the last decade could all be wrong. He may well be right and I could just leave things alone.

Some believe that a passive investor must leave things alone. But I disagree. Even a passive investor must make decisions as the situation changes.

Here’s what I think about when constructing a portfolio:

  • Is there a good case for including the asset class?
  • Do the available investment vehicles adequately capture the benefit of that asset class?
  • Are the characteristics of the asset class right for my investment objectives / risk profile?

The reason I included REITs in the first place was because the weight of expert opinion in favour of them as a diversifier at that time was near-unanimous. The evidence is mixed now, and that’s causing me to reconsider the size of my allocation.

Why not ditch global property entirely if I’m so convinced? Well, I’m not convinced. Evidence has emerged which suggests a new course, but I’m gonna take it slow. As is my way. In matters of finance (if not the heart) I proceed with caution.

The purchases are more straightforward. We’re underweight inflation-linked bonds so the 2% goes there. There isn’t a default fixed-income asset allocation that passive investors can live and die by. I’ve seen arguments for:

  • 50% inflation-linked bonds.
  • 100% inflation-linked bonds.
  • 100% total bond market.
  • Manage in line with your duration.

And that’s not an exhaustive list.

My conundrum is that with 11 years to go for the model portfolio, the main purpose of holding high-quality government bonds is because they’re my best buffer in a recession.

Conventional bonds have historically done a better job in that situation than inflation-linked bonds.

In contrast, index-linked bonds are our best protection against rampant inflation.

I currently fear a recession far more than runaway inflation. I concede that I am making an active decision here. I haven’t got a strong rule that determines my fixed income allocation and that’s giving me license to ‘read the game’ rather than play the percentages.

Apologies for thinking out loud. I hadn’t recognised this until the thought came tumbling out of my typing fingers. It’s too late now so let’s chalk this one up to The Accumulator stumbling over a flaw in his plan. I’ll resolve to come up with a stronger rule to manage the Slow & Steady fixed income allocation over the course of the year. I’ll set out my thinking in a future Slow & Steady post, make the changes necessary, and stick to it.

Okay, to finish off the maintenance section: our annual rebalance means selling a little from all of our surging equity positions to top up our allocation to bonds. In particular, we need to transfer a wedge of our Developed World wealth into weakening UK Government bonds, just to maintain our existing allocations.

Repeat after me: “Sell high, buy low.”

One final cheery note: our average portfolio Ongoing Charge Figure (OCF) has dropped to 0.15% (from 0.17%) due to cost-cutting from Vanguard and Royal London. The portfolio’s OCF has been stuck at 0.17% for over four years, so, like the Swiss flag, this is a big plus.

For perspective, that saves us £2 per £10,000 in our portfolio, or around £10 a year at the mo’. We smash costs for kicks, but there comes a point where it’s not worth the trouble obsessing over what fund is topping the best-buy charts.

Increasing our quarterly savings

Now to face the dreaded inflation beast. We must increase our investment contributions in line with inflation to stop the money monster munching away our wealth like sugar puffs.

We use the Office for National Statistics’ RPI inflation report to tell us how much less money is worth this year. Turns out RPI inflation is 2.2%. In 2011 we invested £750 every quarter; that’s £976 in 2020 money.

You could use CPIH as your inflation measure, but RPI is usually worse. Therefore I use RPI because that’s the fun kind of guy that I am.

All that best-practice jazz means we’ll invest £976 this quarter and throughout 2020. These are our trades, taking into account our annual rebalancing move:

UK equity

Vanguard FTSE UK All-Share Index Trust – OCF 0.06%

Fund identifier: GB00B3X7QG63

Rebalancing sale: £22.74

Sell 0.103 units @ £221.42

Target allocation: 5%

Developed world ex-UK equities

Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.14%

Fund identifier: GB00B59G4Q73

Rebalancing sale: £862.99

Sell 2.179 units @ £396.06

Target allocation: 37%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.29%

Fund identifier: IE00B3X1NT05

Rebalancing sale: £96.92

Sell 0.309 units @ £313.89

Target allocation: 6%

Emerging market equities

iShares Emerging Markets Equity Index Fund D – OCF 0.18%

Fund identifier: GB00B84DY642

Rebalancing sale: £466.39

Sell 267.116 units @ £1.75

Target allocation: 9%

Global property

iShares Global Property Securities Equity Index Fund D – OCF 0.17%

Fund identifier: GB00B5BFJG71

Rebalancing sale: £495.87

Sell 212.544 units @ £2.33

Target allocation: 5%

UK gilts

Vanguard UK Government Bond Index – OCF 0.12%

Fund identifier: IE00B1S75374

New purchase: £1,595.88

Buy 9.124 units @ £174.91

Target allocation: 31%

Global inflation-linked bonds

Royal London Short Duration Global Index-Linked Fund – OCF 0.27%

Fund identifier: GB00BD050F05

New purchase: £1,325.04

Buy 1261.94 units @ £1.05

Target allocation: 7%

New investment = £976

Trading cost = £0

Platform fee = 0.25% per annum.

This model portfolio is notionally held with Cavendish Online. Take a look at our online broker table for other good platform options. Look at flat-fee brokers if your ISA portfolio is worth substantially more than £25,000.

Average portfolio OCF = 0.15%

If all this seems too much like hard work then you can buy a diversified portfolio using an all-in-one fund such as Vanguard’s LifeStrategy series.

Take it steady,

The Accumulator

{ 52 comments }

Weekend reading: 2020 hindsight

Weekend reading logo

What caught my eye this week.

I hope you all had a great Christmas and a suitably anti-climactic New Year. But there is something firmly transitional about that strange two weeks, isn’t there?

A friend sent me Private Eye’s video recap of 2019, and it already seems incredibly out-of-date. Jokes about Boris Johnson and Jennifer Arcuri? So last decade.

However a relic of 2019 that I’m not yet completely over yet (bar the ‘B’ word!) is the recent debate I had with the rest of the band about financial independence and early retirement.

Partly that’s because you guys have delivered some excellent follow-up comments to continue the conversation. (Link below!)

But it’s probably also because it’s been a while since I mentally visited some of the wider themes – living for today versus tomorrow, how to best spend 8am to 11pm, and on – and despite my rhetorical posturing for debate purposes, the pushback from The Accumulator gave me plenty to think about.

If you’re still kicking it over, too, then there are two relevant reads in The Guardian this week.

First off, Oliver Burkeman asks whether you’re living too much in the future at the expense of now. He has wider themes than just saving for retirement in mind, but it’s still a relevant read:

The problem with treating every year (or week, or hour) as something you’re supposed to put to use is that you end up living permanently focused on the future.

The more strenuously you try to get something out of life, the more emotionally invested you become in reaching the point at which you’ve succeeded in doing so – which is, necessarily, never now.

One of my arguments was that some FIRE-seekers seem too happy to slog through a bad existence now because they’ve pinned their hopes on a far-flung retired future. There are counterarguments in our debate so I won’t rehash it, but I will flag up this second interesting article on learning to love the job you have now:

There are simple steps we can take to start rebalancing this relationship with our workplace.

Researchers have found that even the most miserable job can be redeemed by taking back a little control.

That word ‘control’ is key. Several people in the comments to our five-part barny said they were all-in on early retirement because they don’t want to be told what to do.

I can fully understand that.

My own solution was long ago to become my own boss, and to work generally out-of-office. As I’ve written before, you don’t have to go nuclear on working for a living.

The one thing we all agreed on is that pursuing the financial independence part of FIRE is almost a no-brainer, whatever your future aspirations. And we plan to chip in over 2020 (and beyond…) with more articles and insights on Monevator as to how to best achieve it.

Happy new decade!

[continue reading…]

{ 19 comments }

Debating FIRE: the final conflagration (Round 5)

Debating FIRE: the final conflagration (Round 5) post image

Round 4 saw The Accumulator and The Details Man exchange gestures of peace and understanding. But now The Investor looms in the doorframe. His eyes are glazed, perhaps he’s been drinking heavily? The Accumulator’s eyes narrow like his options. There’s no other way out. He spits on his palms and drops to a crouching position. There’s only one way to finish this: with a quickfire response round – TO THE DEATH!

The Investor: You articulate the reasons for financial independence very well. However, I feel like I’m one of those explorers in the desert who keeps walking past the same sand dune. Haven’t I seen this wadi before?

There’s almost no point making the case for financial independence because we both agree!

We have a disagreement about the mentality of the movement, which I believe tends to say “suck it up, work sucks, keep your eyes on the horizon” far more than it says “you’re right, 20 years of your life is far too long to stay somewhere mediocre when you only have maybe 40 healthy years left – get a new job first, your house is burning down!” which would be my response to someone who hates work but is getting through the day with dreams of early retirement.

The Accumulator: Come in from the desert, my weary friend. We agree that no-one should stick out a hateful job for 20 years. I’d note that job satisfaction surveys show that millions of people do not enjoy their jobs despite ‘get a new job’ being a well known option.

My conclusion: people don’t get stuck because they’ve read a few FIRE articles. I trust that people will get a new job if they can, but the FIRE movement can open people’s eyes to more unconventional possibilities and sources of strength.

The Investor: We also seem to disagree about timescales for the average person, but I’ve already given you my maths on that. The readers can decide!

Also, you have alluded to my rhetorical tricks but I feel you have something of the wily barrister about you, too TA… Money is a fallacious consumer narrative that is bought into, while a frugal FIRE-life is a life focused on friends, family, and experiences.

But as you know, money can help you make more of that, too. To return to my example of someone working an extra day or two a week post-FIRE for an extra £10,000 spending money above their reasonable FI requirements, that ‘fun’ money could be used to:

  • Go on two to five swanky holidays abroad with a partner.
  • Take your nieces out to dinner twice a week every week.
  • Do two to ten adult education courses every year.
  • Indulge a five-year project to buy, restore, and then use a six-person narrowboat for weekend adventures.
  • To travel to see old friends and to take them out to dinner every month or two.
  • Mix and match a myriad other options and combinations!

Money isn’t just for misers, in other words. Sure work is a sacrifice of time but by keeping your hand in indefinitely, you do get something back for your pains. (I’d agree that if it just goes on a bigger mortgage or a new car, then you’ve probably snatched defeat from the smiling face of freedom!)

I’ll conclude though by focusing on something I stated at the start that has been glossed over afterwards: paid work isn’t just about money or filling your hours. Paid work isn’t just about being massively happy at work, or middlingly happy, or miserable.

No, paid work is what makes our world go-around today. Anyone saying breezily that they are going to walk away from that at, say age 45, for various substitutes, probably hasn’t thought it through enough. Why should this be such a shock to us?

There’s plenty of evidence that being unemployed is bad for mental health and well-being, for instance, and also lots of studies that show that feeling important and useful in a community is healthy. So how best to keep enjoying those side-benefits of earning money in our society as constituted?

Not to denigrate people volunteering at the local half-hearted charity, but few of us in our early 20s would think most such operations were more than half-arsing it, frankly. Is the sort of focused / high achiever who is actually capable of hitting FIRE fairly young really going to be satisfied bickering about the posters for the village hall? Colour me deeply sceptical!

Someone will say they will do it at a higher level than that. Fine, but look through the Guardian adverts. Those higher-level jobs are hotly contested and come with decent salaries. Indeed, if this is your aim I say apply for them post-FIRE…!

The Accumulator: Two cunning sleights of hand got smuggled in there.

  1. If you’re not doing paid work, you’re effectively unemployed.
  2. Paid work equals feeling important and useful in a community.

Neither of which are true and overlook the billions of pounds generated in the economy by people who give their labour to worthwhile and personal causes for free, and which contribute to their wellbeing, sense of purpose and standing in their community.

You have a different relationship to money than me. I’d guess it’s more important to you as a measure of self-worth. This might help explain why earlier you seemed to buy into visions of a purposeful FI life disassociated from financial reward, only to fall back on these claims that paid work is vital for mental health, before moving on to slag off the charitable sector, and skipping the fact that there’s plenty of half-arsery in the private sector. I’m also pretty sure that with enough effort we could find voluntary work that meets your need for ‘action’.

It could also be that you compare yourself to a different peer group than me, or are influenced by the gold-paved standards of your fancy London life – stop hanging out in those Mayfair Clubs!

From my perspective, “thinking it through” doesn’t mean concluding that only paid work will cut it in the 21st Century. It means bending the bars of the mental prison that instructs me to value life in pounds and pence. Neither money nor time are enough. It’s what you do with both that counts. Your £10K extra revenue stream sounds great for so long as the time spent earning it is traded for a reward you truly value.

Productivity is obviously a non-negotiable human need. FIRE blogs are full of that. I think of productivity as making progress in every important aspect of life:

  • Physical
  • Communal
  • Familial
  • Spiritual
  • Financial
  • Intellectual

I’ve thought more than once during this debate of Keynes’ prediction that we’d all be working a 15-hour week by now.

Why aren’t we? Some people don’t want to stop working – fine. Some people just can’t get enough of the goods and services conjured by today’s economy – fine. Some people are driven to compete – status, position, housing, schools – fine. Some people have no alternative, don’t realise there is one, or can’t imagine it – not fine.

If the competing and materialism is wearing thin for you then the FIRE movement offers an alternative approach that might just change your life.

Going to the dogmas

The Investor: Imagine if FIRE dogma had it that you had to abandon relationships with a significant other, or you could never have children, or you could only see your friends at weekends. Most people would understand that these were all alienating behaviours and at least think harder about whether that trade-off was worth it.

Well, I am saying the RE bit of FIRE is similar. And I stress AGAIN, because we seem to keep debating it, not the FI part! No, the RE part. That’s the bit I want to throw down a well.

I agree 100% that someone can become FI, then float in and out of work and do myriad other things along the way. And I certainly agree that a radical career change towards something more enjoyable, even if it means a big salary cut and a big reduction in hours can get you most if not all of the benefits of working.

The easiest way to get what I’m suggesting is simply to achieve FI then cut down your hours dramatically and work a couple of days a week.

My experience is that people can definitely do this. I see it all the time. You probably have to put yourself in the right position before pulling the rip-cord, sure, but that’s why I am saying think about it now.

The Accumulator: There is no dogma! The community is highly diversified despite mainstream efforts to portray it as otherwise. It’s a small, loosely-affiliated band challenging convention – it’s not a cult of brainwashers.

On the thinking front, I came across three excellent questions that can help you evaluate how you want to spend your time:

  • How would you live if you were financially secure?
  • How would you live if you had five to ten years left to live? What would you change?
  • What would you wish you’d done if you only had one day left to live?

The Investor: I’m happy with radical changes of direction. To give one example, with my aquarium hobby since childhood, I can well imagine going from being a pretty busy higher-rate tax paying type to doing three days a week on £10 an hour.

This would make very little financial sense given I’d be financially independent – I’d earn much more in a morning doing what I’m doing now as a contractor – but it would bring me a community, a role, regular contact with customers with a passion I share, further interesting avenues to explore (writing a book about aquariums? Hunting for fish in the Amazon?).

Most people can think of examples that work for them.

Bottom line, I am arguing against the RE part of the FIRE hegemony on the grounds of (a) the evidence from other bloggers and from people who financially ‘make it’ in real life, who very often – if not quite always – continue to work (b) a clear-eyed look at how the world is constituted (c) the science, that suggests being engaged is important to mental well-being and so on (d) the benefits of playing with a spreadsheet while assuming you’re going to do some work indefinitely, which can bring you most of the benefits of the FI part of the equation (security, the ability to ‘walk’, flexibility) far sooner than pinning your hopes on the distant and potentially nebulous benefits of full-time never-working.

People are going to say “but what is to stop me doing some work in retirement, like Mr Money Mustache?”

Well, I’ve already had the retirement police label slapped on me once in this debate! So fine, let’s embrace it. If early retirement actually means “probably continuing to work in some form” (as opposed to volunteering at the local X or Y once a fortnight) then by all means keep saying you’re aiming for early retirement, and then do your work in retirement.

To me all you’ve done is condone a useless label, taking a perfectly good word – retirement, meaning the end of work – out of circulation for no reason except to support a snappy acronym. But all cults have their catechisms I suppose.

The Accumulator: Excuse me while I pop on my crash helmet and beat my head against the wall. It’s like listening to Boris Johnson argue his opponents are raving Marxists because they’re in favour of protecting worker’s rights.

As you’ve invoked top communicator and cross-cultural phenomenon Mr Money Mustache (MMM), let’s hear what he has to say on the topic:

“Everybody uses the FIRE acronym because it is catchy and ‘Early Retirement’ sounds desirable. But for most people who get there, Financial Independence does not mean the end of your working career.

Instead it means, “Complete freedom to be the best, most powerful, energetic, happiest and most generous version of You that you can possibly be.”

Doesn’t sound so awful.

The FIRE acronym stuck because it sounds cool. We can probably agree that ‘Early Retirement’ became the banner call because it was a good way to get the community’s ideas noticed in a crowded media landscape.

I agree that closing in on financial independence doesn’t half sharpen the mind on what your new life could look like. I’ve found that liberating.

There’s also a segment of FIRE-ees who’ve used the core principles to carve out a middle way. They start out thinking, “Screw work, I’ll make full FIRE in ten years”. They cut spending in line with their values, build savings and investments, then realise that they can happily live on the money from doing their job three days a week, plus a side-hustle.

They’re now living a life they enjoy, full FIRE goes on the backburner and you should be thrilled! Except that FIRE ideas empowered this group to redesign their lives, FIRE didn’t stop them.

As community figurehead MMM articulates, the movement barely recognises the distinction between FIRE and FI, and neither do I. It’s not important to me, but obviously it is to you.

You already solved the problem though. Here’s some alternatives to the FIRE acronym that you and a merry band of Monevator readers proposed a while back:

  • FILF – Financial Independence, Loving Freedom.
  • FISH – Financial Independence Seeking Happiness.
  • FITS – Financial Independence Taking Sabbatical.
  • FIBS – Financial Independence Blatant Salary.
  • FIEF – Financial Independence Extreme Freedom.
  • FIND – Financial Independence, New Direction.
  • FIDMOT – Financial Independence, Doing My Own Thing.
  • FIFO – Financial Independence, please go away.
  • FILL – Financial Independence, Loving Life!

The Investor: Hah, quoting my own article to end with an olive branch – well played sir. Well good luck to everyone pursuing financial independence and whatever comes next to them. I’d just conclude by saying please keep an open mind!

The Accumulator: Hear, hear. Now climb out of your Christmas trench and come have a game of football with me in No Man’s Land.

Wishing all Monevator readers a bright and rewarding New Year.

Please let us hear what you think in our poll below and in the comments, if there’s anyone left out there!

Exciting interactive democratic vote opportunity

You’ve heard the debate. Then you heard it again. And then again! Would they ever shut up?

Well now they have and it’s time to vote for your future of FIRE:

Which definition best fits your vision of FIRE for you?

 

{ 95 comments }

Debating FIRE: breathing FIRE (Round 4)

Debating FIRE: breathing FIRE (Round 4) post image

In a tempestuous round 3, The Investor basically1 told The Accumulator he’s wasted his life then invites him to trade blows rather than shares. Will The Accumulator take this personal stuff personally? Will he explode in the face of The Investor’s ceaseless attacks on his FIRE (Financial Independence Retire Early) beliefs? 

The Accumulator: TI, you can make it as personal as you like, me old jackfruit. Or, we can talk about Brexit if that’d be more fun?

One of the straw men you’ve sent to fight me is that FIRE advocates advise sticking with a miserable job for a couple of decades.

This ain’t so. If you can find a better situation then FIRE-ees won’t burn you at the stake for dropping your savings rate.

FIRE is a movement for people whose nagging doubts about the hedonic treadmill have become a clanging alarm bell. Maybe they find themselves among the majority of the population who rate every job somewhere on a scale between ‘hate’ and ‘meh’. Maybe they once liked their job but the shine wore off. Maybe they like their job but don’t think the money-time trade-off is worth it forever. Maybe they regularly change their job to keep things fresh but still maintain FI** as a long-term goal. All these things are possible!

The community offers an alternative to the conventional consumer narrative of work for 40 to 50 years, buy as big a house as you can ill-afford, stuff it full of crap, get promoted to your level of incompetence, and beat those pesky Jones’s at all costs. Should this narrative ring hollow for you, the FIRE community is full of bright ideas on how to redesign your lifestyle – as much or as little as you want. From extreme to work optional.

I agree that ‘rapidFIRE’ is hard. Even opening your mind to the possibility seems hard, if the vitriolic comments underscoring every mainstream article about FIRE are any guide.

But that doesn’t mean the minority isn’t on to something.

Just walking the path for a while can have massive benefits even if you don’t make it all the way, as TDM mentioned. Let’s say that you’ve convinced me. Tomorrow I wake up and realise I’ve been pursuing a fairy story. What have I gained for my trouble?

  • No debt.
  • FU money to fund retraining or a bout of unemployment.
  • Less stress at work because I have more options.
  • Dotage sorted.
  • Mrs Accumulator is financially secure should my clogs pop tomorrow.
  • A healthier relationship with consumerism and careerism.

I’m happy with that even if I retire from work only to return 12-months later because I need more structure or money in my life than I thought.

Let’s talk about that. I don’t think I need to work in the conventional sense to maintain my sense of worth, purpose, need for challenge, or sense of engagement with the world. I won’t truly know until I get there and I accept I could be wrong. I’ve seen the same people crash out of FIRE that you have but I’m also aware that plenty of FIRE-ees report that they are loving life.

I agree that those who’ve publicly talked about their struggles have done us a massive favour. Now that I’m close to the line, about 90% of my FIRE bandwidth is spent thinking about what my RE life will look like, and about 10% to the FI side.

FIRE drill

I’ve tried to learn the lessons of others, and I’ve picked up on a few things:

Don’t change too much at once! Don’t go from doing 80 hours a week to zero, then move away from family and friends within months. Take it slowly. (For me, I think it’d be sensible to shift to part-time employment before leaving the workforce altogether).

Don’t trust the initial euphoria. Most FIRE-ees report feeling amazing for a few months, then they adapt… and demons return. (I’ve been putting time into identifying my demons and how I can control them.)

Don’t freak out if you feel sad, listless, adrift. You’re going through a massive emotional upheaval. This too will pass.

Retire to something. Don’t retire and then try to work out how to fill the hours. Have outside interests, passion projects, and hobbies already on the go, then expand on them when you have more time.

Think hard about how much of your identity is bound up with work, striving and earning money. SexHealthMoneyDeath comes to mind here. SHMD readily admitted that he struggled to value himself when he was no longer a breadwinner. (TI and TDM you obviously recognise this pitfall already. I think I’ll be okay with it but I’m not certain.)

Read books by those who’ve been there and done it. Retirees (both early and conventional) have written about the joys and hazards in store. I take heart that none of them wish they’d spent more time in the office. I guess the ones who do are too busy to write books?

Sidenote 1: @TI:

“I’m not sure how personal to make this; I don’t want to get noses out of joint, but you’re now explicitly saying you’re okay with your job. But many times you’ve said, on this site, that getting out of that job is a goal because you don’t like it.”

Maybe you can point me to the pieces you have in mind? It’d be interesting to see if my thinking has evolved more than I realise. There have always been aspects of my job I’ve liked and disliked. FIRE is my goal because I want time back to do more with my life. I’m no poster boy for early retirement. At best, I’ll be 49 by the time I pull the trigger. That said, three things in my work life have much improved since I began my FIRE journey:

  • My work environment is a lot better than it was, say 10 years ago. Personnel changes have helped but also personal changes – I’m more experienced and resilient than I was.
  • Greater financial security has given me more confidence and peace of mind.
  • I’ve improved my mindset. I’ve come to own problems I once blamed on my job. I’ve come to accept problems that are beyond my control to change. This is a domain that overlaps with the FIRE community if you dig deep enough.

Sidenote 2: @TI:

“I know you’re very thoughtful about all this. But if I may, five years ago you borderline dismissed such talk.”

Do you mean I rejected the notion of a retirement that included paid work? I don’t remember this but it’s possible. I think you were always clear that you didn’t want to stop work. I’ve always wanted the option to never have to work again.

As a society, I think we’d be happier if we were less materialistic and obsessed with financial status. I’ve got nothing against any individual who wants to work until they drop, and if I can envisage myself working in some capacity for longer than I once thought, then you can chalk that up to your nefarious influence.

Sidenote 3: @TI:

“You then say putting up with it for “a decade”. I think that’s generously short. If we assume someone earning £40,000 a year gross, saving £15,000 a year – already big numbers for most – then it’s going to take them over 20 years by my reckoning.”

I’m on course for 13 to 14 years, if you include the period when I hadn’t even heard of FIRE and just wanted to pay off the mortgage. I earn more than you quote above but still mid-five figures. Mrs Accumulator is on substantially less. Soooo, nothing like the DINK six-figure sums brought in by some of the US bloggers who checked out in under 10 years. Some Early Retirement Extreme types can make it in five years or so, earning modest five-figure salaries, admittedly with considerable sacrifice.

FIRE is not a prescription. It’s a broad church. I can admire and learn from people into geo-arbitrage or living on boats. Their lifestyle isn’t for me but it could be a lightbulb moment for someone else. The ideas are the important thing. And for sure, you could be at it for 20 years or more, but that’s still better than the conventional 40 to 50 years, if you never do find your dream job.

New thread – the influence of partners

TDM, your dearly departed old blog featured regular posts from your partner. I got the impression that your wife wholeheartedly supported your FIRE experiment but wasn’t sure whether it held any answers for her. Is your partner still pursuing FIRE? Did her uncertainty contribute to your decision to abandon FIRE?

The Details Man: My wife has strengthened her quest for FIRE over time. It wasn’t a thing for her when we first met. Although she knew it was for me. I’d say right now, she definitely wants to reach FI and is aiming for early retirement. The difficulty she has is working out what comes after.

I think there were two eye-openers for my wife. First, her colleagues earning hundreds of thousands a year but still living month-to-month in their late-30s and 40s. Second, the power of investing to compound your money. Together, those things show that it’s foolish to whittle away all your money in your 20s. Even saving and investing small amounts will start the metaphorical snowball.

Moving on, as you mentioned earlier TA, a great deal of our identity is wrapped up in the work we do. Especially those with professions like my wife and I. Jim of SexHealthMoneyDeath is another classic example.

Even at my (relatively) tender age, I’ve spent almost all of my adult life working towards and being a chartered accountant. When I retire, I’d be a retired chartered accountant. Much the same, I suppose as if you were a doctor, solicitor, electrician, and so on.

My wife’s uncertainty about what comes next didn’t affect my decision at all. Perhaps the opposite. My wife talked me into pulling the trigger – which I wouldn’t have done otherwise. However, going back into part-time work definitely came from me and my internal desire to get back to doing something I enjoy, though over a more reasonable proportion of my life. Finding that balance is challenging. I feel that I’m getting there. I’m thankful that money is simply part of the equation I don’t need to worry about.

The Accumulator: Heh, if there’s one conclusion we can draw from this debate, it’s that the difficulty lies in working out what comes after. TDM, it’s good to hear that your wife has been inspired by the possibilities of FI** and is carving out her own path. I really enjoyed her posts. 

Mrs Accumulator is the classic vocational professional… she got into it to help others and is inspirational in that respect. But her profession has been systematically hollowed out by cuts, targets, reviews, performance management, and the rest. The workforce is demoralised and prevented from focussing on what matters by counterproductive and politicised decision-making. So yeah, she’s pro FI**. And more frugal than I am. It’s hard to imagine making it work if we weren’t on the journey together. 

Even at my (relatively) tender age, I’ve spent almost all of my adult life working towards and being a chartered accountant. When I retire, I’d be a retired chartered accountant.

This is fascinating, TDM, I would never think of myself as a ‘retired [whatever the hell I am]’. I’ve spent most of my career resisting self-identification with my work. Inwardly I raise my eyes to the heavens whenever somebody asks me the: “What do you do?” question. Especially when it’s within the first 60 seconds of meeting somebody, as happened just the other day.

On the surface that question should open up the field of conversation, but usually it’s designed to narrow it down. I get it, I understand that’s the world we live in, but I chafe against it. It’s another reflection of our obsession with labels… speaking of which, oh god, he’s back…

Will The Investor be pacified by this late outbreak of moderation and affectionate talk of partners from The Details Man and The Accumulator? Is his strange, uncomprehending look the face of a combat vet struggling to realise the war is over, or the mask of an implacable warrior who must crush all opposition? All will be revealed in Round 5 – the final conflagration! Comments are turned off until the final post. 

  1. Reading between the lines. []
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