I’m obsessed with personal finance at the moment. The first thing I do when I wake up in the morning and the last thing before I go to sleep is check up on my favourite personal finance blogs to see whether there’s anything interesting to learn. There usually is. I’ve read so much information and learnt so much in the last few weeks. Some of the ideas are fairly common and most of the different articles offer similar opinions on what the best way to tackle debt is. As far as I understand, most people suggest that one follows Dave Ramsey’s baby steps. As I have no mortgage currently, this is what my version looks like:
- Step 1: Create emergency fund (circa £1 000)
- Step 2: Pay off all debts
- Step 3: Save 3-6 months of expenses in emergency fund (~ £8 900)
- Step 4: Invest 15% of income in retirement
- Step 5: Tennis academy fund for nieces (don’t know if their ma knows I’m serious about this)
Having read millennial revolution and how they eschewed traditional advice to invest in bricks and mortar, I’m convinced that skipping the step to pay off my house early would be best for me. All my dreams involve travel and with family/friends in various parts of the world I can imagine that my FIRE would be better served by staying flexible about where I live.
I’ve followed the frugalwoods, Mr money mustache and a couple of other people who have aimed or are aiming for early retirement though and this is my main goal. I’m being extremely ambitious and have set my expected date for financial independence as September 30th 2028 – shortly before my 45th birthday. This assumes the following:
- All income and non-debt expenses stay roughly the same as today (including ~ £250 side hustle income monthly) till end of current housing contract in March 2018.
- Debt pay off (£22 388.41) by December 2017
- Emergency fund fully maxed out (~£8 900 ) by December 2017
- Travel / giving / gifts savings pots funded monthly – by December 2017
- Net income – expenses gap widens by £500 (raise at work or raise in side hustle income or combination of both) per month after March 2018, ensuring post tax investments of £18 000 a year
- Finding a partner with the same outlook on life
- “Retiring” somewhere I can spend £1 000 a month on living expenses post September 30th 2028 until my official pension kicks in at 67 (meaning I could choose to work if I wished but my savings/investments/passive income by this point should allow me to live on this amount)
- Drawing ~£3 500 from my savings per year to supplement the national pension and stay within my £1 000 monthly budget
This is all very exciting, eh? I do, however acknowledge that everything depends on how willing I am to stay within budget for the next year or so. I’m still tracking my spending weekly so that when I’ve got 3 months of data, I can properly budget and assess the likelihood of following through on this plan. As motivation to carry on goes though, this has been a brilliant morning of working out possibilities!