A dream life: now and then

One of the first questions people ask themselves on the financial independence journey (after ‘where on earth does all my money go??’) is – why? Why would I go against the grain of consumerism, spending, striving? What do I want for my life instead?

Some people like to get crystal clear about their dream life. Dave Sawyer talks about finding what matters to you – he and his wife have a vision of their future selves in Andalusia. And fair play to them.

For me it’s crucial to think of a dream life, now and in the future. I want to spend more time with my kids, but working like crazy to save for ten years means I’ll have time to spend with them when they are in their late teens and probably less keen to hang out with mum. Plenty of FIRE people manage both of course, and with two incomes you can make a whole range of choices: share the childcare or have one parent stay at home for example. Living off one income is naturally promoted as a path to saving money. For the single parent, there is only ever one income. I need to be able to make choices which give us quality of life now, whilst preparing for that imagined future.

In these crazy times where keeping on with saving, looking after the children and generally keeping the wheels on with life, it can be easy to lose sight of the ‘why’. Whilst I am clear about my Big Dream, and about the small steps I need to take this week, the middle bit is hazier. So in the spirit of remembering the way, I wanted to share my dream.

I’ve had the same one for almost 20 years and it still delights me every time I think about it. My plan, with the kids, is to move back to Kenya (I am not from there but spent many happy years – so this is caveated with the need to fulfill the residency requirements which is helped in most countries, including Kenya, by being financially independent). We’ll build or develop a house with a stunning view, acacia trees, the Rift Valley to wake up to. Interesting occasional work (that I can say yes or no to); sundowners on the balcony with fantastic company; friends around a huge dining table. Somewhere stable the kids can always call home. Bliss. And well worth walking this path, especially if I can do it whilst cherishing every day.

One foot at a time

A friend from the original Brilliant Ladies Handbag Club sent me the photo below this week, during a week of self-doubt and anxiety and general woe. Not from anything major, just the current lockdown, working at home, kids having a tricky time sort of stuff.

This helped me for two reasons: one, that someone was thinking of me. Two, that I have been things so many things before, this is just one of many. And it’s not always necessary to do something momentous – rather, just to keep plodding on.

So that’s it for this week. Turn up, do the things you need to. Meal plan, shop, use up leftovers. Hug the kids, make time to play with them, don’t feel bad about putting them in front of the TV when it’s all a bit much. Have a walk, have a nap. Have a little cry in the bath. Then get up and carry on. Remember what you have, how hard some of it might have been, how you have always made it through. Keep going. You got this.

So I panicked – just a little. Here’s what I learnt

Sigh. So it’s been a month since my last post since I needed a little time to adjust to the new normal. Homeschooling my two kids whilst working full time from home (and since my job is in the field of humanitarian response, my day job has become way more hectic) is exhausting: add to that worrying about elderly parents in another country and just trying to keep the wheels on our daily life and I didn’t have much energy to spare.

After my last post, I spent another week watching my funds crashing, and it felt like my dreams and plans were crashing too. I think being so early on in my journey made this pretty scary – like watching someone lop off branches which are just starting to blossom. I was awake every night for about two weeks obsessing about what to do, and in the end, I sold.

I sold two-thirds of my savings portfolio and put it into a savings account. My savings overall took a huge hit. I know, I know: selling when the market goes down only converts paper losses into real losses. But it was almost worth it to get the decent nightly sleep I needed to face my daily litany of tasks.

So here’s what I learnt:

  1. My risk tolerance looks different to what I thought. The ability to tolerate risk is a huge part of making financial decisions. It turns out that risks feel different when they are really happening compared to how I thought it would feel (uh, duh). The COVID pandemic also meant that I had my first taste of realising risk as an investor when nothing is stable – people’s jobs, my family’s health, the general sense of how close we are to The End Of Days… Risk wasn’t just something that related to my emotions about my investments, but to the sense of stability in the world at large.
  2. My long-term game is stronger than my short and medium term. As well as my stocks and shares ISA (where I pulled money from) I have three pension pots, plus I have been working on kids’ savings. I didn’t touch any of this, or even look at the balances. These feel so long term that the crisis NOW doesn’t affect them in my mental planning.
  3. That does mean I need to work out my investment policy statement. This is a relatively simple document which sets out, why, what, how, for how long, and how you will know your approach is working. I realised that whilst in my mind I was investing for the long term, my mental planning around the ‘what next’ in my life saw me spending that money earlier than makes sense for it to be in funds. Once I understood this disconnect I gave myself permission to pull funds. But setting out a clearer strategy would have given me metrics to work through options rather than just relying on my need to sleep.
  4. Having an emergency fund really, really matters. Before I started investing, I had created an emergency fund. I have this set out to two accounts: my usual bank where I pay my mortgage, bills and whatnot has an attached savings account where I have three months of those expenses. Then I have a separate savings account (so I don’t see it and am not tempted in case I feel the need to slide money around) which has another three months plus additional in case I struggle to cut costs I anticipate would be possible if I lost my job. In total I have four months of take home pay which should cover seven months plus of all our costs. Knowing that money was there is making a huge difference to my emotional well-being. Without it, I might have felt the need to pull all my investments.
  5. It’s my money, and to some extent my decisions are therefore always the right ones. From the point of Kantian moral philosophy (bear with me) I am not a means to the end of a successful financial future: I am an end in myself. Whilst this might sound like the noise of me disappearing up my own jacksie, it is a reminder that I am more than the sum total of my financial decision making. During the obsessing, twisty turny evenings of trying to work out what to do this became super helpful. I had to stop listening to all my favourite podcasts, because they were all screeching about not selling, and I had already done so. Remembering what it’s all about, and who is in charge, for was crucial.

Living life in these hard times with a little bit of grace and forgiveness is more important than ever. As a single mum with lone and total responsibility for my household’s finances, it’s only my permission which is needed and me who has to clear it up if it all goes wrong. So whilst I panicked (a little), I am also proud that I had my emergency fund in order as well. And I learnt a huge amount that I can apply to get financially even stronger moving forward.

An attitude of gratitude – grin and bear (market) it

Just a month ago I was jauntily planning my future, posting about dreams of building on my small but proudly created foundation. Since then the Bear Market and general chaos-fest of COVID-19 has arrived, and my savings have lost almost 25%. I wrote last week about carrying on with good habits: this week we are on lockdown from schools, the office and all public institutions are closed, and the world feels like it holds a number of possible, uncertain and potentially Armageddon-esque, futures.

So, what are we to do? Other than keep on keeping on?

For this week, I am going to concentrate on all the other things. Firstly, counting my blessings. Yes, I am somehow supposed to home-school the kids whilst continuing to work from home full time. But what is also true is that I will get to spend some much-needed time with the children; that we are well resourced (internet, craft supplies, a garden etc) to manage this.

I also recognise how lucky I am to have a job. I spend a lot of time fantasizing about living with more freedom and growing my side hustles, but right now I am just glad to have a job with a great boss who understands my circumstances and can be flexible whilst I juggle working and having the kids at home. And whilst I appreciate you can never rely 100% on employment, right now I am pretty damn glad to be here.

I have been thinking a lot about people who don’t have this security – the small business owners who can’t open during COVID restrictions; the almost 1 million people in the UK who are on zero hours contracts who won’t get paid if the can’t work. Drops in the stock market and a huge rise in financial uncertainty is likely to hit charitable giving and make 2020 bumpier than it is already. One in 50 families in the UK uses a foodbank (with numbers continuing to increase) but if donations significantly slowdown then foodbanks will be unable to cope and help people in need. Already vulnerable populations are likely to be the hardest hit, so as well as counting my blessings, trying to keep the kids calm (and doing something that isn’t watching TV or shrieking) I’ve donated to Age UK.

Stay healthy and happy, people!

Playing the long game

A lot of working on finances is about playing the long game. What do you want now, vs what you want later? What does choosing to spend that money – on a latte, a pair of shoes, more expensive rent – mean for the future?

For me it has also been about learning patience. Being able to create new habits, and do the same good things day in and out even when I feel like I really deserve a break. Making daily good choices: packing a lunch for work, checking bank balances (but NOT my savings – more on this later), looking up free events so I can take the kids out at the weekend without blowing the bank.

The monthly good choices are easier because they’re automated: bills, savings, mortgage over-payments, pension – they’re good habits because I don’t get a chance to overthink them. There’s lots of good information about automation in the FIRE movement: as the Mad Fientist says, “Figure out your investing plan… then take yourself out of the equation as much as possible so that you don’t get in your own way”.

Photo by Elena Koycheva on Unsplash

They are good habits that have taken a while to form, and I will talk about how in coming posts. This week I have been reflecting on them in the middle of the stock market freefall where my savings (that I have proudly scratched together in the years before my salary increased) lost 10% during about ten days. I know, I know – they’re only losses if you realise them by selling out too early. And you should only invest money if you plan to spend it in a long enough time frame to see it through ups and downs.

So I have tried to add some more good habits. Leaving the money alone, not even opening the lid to peek in and see what’s going on. Carrying on investing and saving, and planning for a brilliant future – even if this week it feels a little bit further away.

You need a budget…

So last week I set out my goals for paying off my mortgage, and working on savings for my FIRE life, and for retirement later on.

But reaching those goals is going to require a reorganisation of my current finances – making my money work for me, rather than just letting it wander off without notice.

I’ve been reflecting this week on my attitude to money and what needs to change for this to be a success. And I have concluded that I’m fake frugal. I think of myself as not really being a spender; there are no cupboards full of shoes and feather boas in my bedroom; Starbucks rarely gets my cash. And yet hundreds of pounds per month slip through my smug little fingers and off to goodness knows where. Thinking of myself as frugal is quite dangerous because it means I have been assuming things will just work themselves out.

So the answer to this is mindful spending, or ‘setting a budget’. Budgeting is the first step to making the most of what you make: whether you are struggling to pay debts and need a Dave Ramsey style kick in the pants or if you need some help with working out what’s possible.

There’s also a real value in appreciating what you have – being grateful for the money you have, and taking care of how you spend it.

So, with that in mind here is my approximate monthly budget. I will set one monthly as well but this is the big picture and includes annual costs which will often come out in one month. It’s a pretty fair whack, and whilst it represents a reduction in most areas of spend (see what I mean about being fake frugal?) it still includes money for holidays, eating out, and a whole host of areas I could cut back on further. The plan below equals 60% of my income and I hope, during this year, to work on my priorities and cut it back further. But for now it feels like enough to make a difference without sending me screaming for the hills.

Charity £       30.00
Insurance £    277.00
Rent and utilities £ 1,500.00
Childcare £ 1,000.00
Groceries £    300.00
Holidays £    300.00
Transport  £    300.00
Entertainment £    200.00
Eating out £    175.00
TOTAL £ 4,082.00

This means I can pay  £ 1,500 into a stocks and shares ISA, and  £1,200 as an over-payment on the mortgage, in addition to a pre-tax pension contribution of  £ 1,250. This means I’ll be on track to my goals. Woohoo!

Let me know what you think!

Perchance to dream…

Sometimes the daily grind of being a full-time working single mum can mean that I can feel that I don’t deserve to dream big – I can barely make it to bedtime without letting something drop. And when I read financial independence blogs about ‘living on one partner’s salary whilst saving the other’, it seems so unlikely that it’s a path for me. But this blog is born out of hope, and out of the belief that if I can have got this far, then frankly anything is possible.

So – what is the dream?

If my year of avid podcast listening to the FIRE (Financial Independence Retire Early) crew (more on the background and where to find inspiration – and, let’s be honest, advice about how to do things properly, later) I found two key starting questions:

Why do you want this? What’s your goal?

Yesterday, the fact that my day in the office was rough enough to take the skin off my nose, was enough for me to want to have F-You money. As J L Collins notes in that article, “I may not have known what it was called, but I knew what it was and why it is important.  There are many things money can buy, but the most valuable of all is freedom.  Freedom to do what you want and work for whom you respect”. F-You money means the freedom to make choices; to take time out before burnout, to spend time with my kids when they need me, to pursue other projects. It means taking a job because I want to, not because I have to in order to get the bills paid.

Right now, I can’t see a way on one income to become totally FI. I don’t know if that’s just me being a weenie, or if there is some rational logic in there. But I know that working toward having enough financial security to make different work choices would transform my life, and in working toward that – taking control of my money and making it work for me – is a great place to start. And a place which makes me feel less like a rabbit-in-the-headlights who has to do all or nothing.

How do you think you’ll get there? The five year plan

My five year plan feels ludicrously ambitious (though when I look at FIRE extremers it looks more like someone saying ‘I’m saving up my 20 pence pieces in a jar!’ and blogging about it). A lot of these goals are based on a long back-story which will come in other posts, but for now I want to put these out there. By July 2024 I intend to:

Be mortgage free. I have been overpaying for a while and have £78,120 left. I will also be debating (at length, probably) the reasons to overpay a mortgage rather than invest given low interest rates – and how this relates to my risk tolerance as a single parent.

Have enough in pension funds to bring in £12,000 per year. I paid in two year’s pension contributions at 23-24, then nothings for 12 more years. Partly this was due to free-lancing/taking time off to have kids/being broke, but I could kick myself. More on the detail of this to come, but the figure is based on the small defined benefit pensions I have and pension calculations rather than a ‘sum in the bank’.

Have £120,000 in low cost index funds. This is the combination of my current savings nest-egg – £40,000 – plus maxing out the £20,000 tax free stocks and shares ISA contribution per year.

Achieving these goals means saving about 40% of my income.

So, there are the reasons, and the ambition. Next week, the plan of how to get there.

Wait, what? Handbags?

The idea of the Brilliant Ladies’ Handbag Club comes from an all-women group I used to attend. It was created to help women set and achieve their goals, from cleaning out the attic to getting their start-up on the road. That group was called something else, but my then 6-year-old son renamed it to the BLHC, because just attending made me brighter, happier, and more focused. Since then, I have focused on working out what I want to do with my one wild and precious life – and it turns out the answer isn’t ‘work for a salary’. It probably isn’t ‘do yoga on the beach’ either to be fair – but wouldn’t it be great to choose?

I love the image of the handbag: full of useful tools; creative things like books, postctards, dried out daisies, and colouring pens; somewhere to dive in and finding things I didn’t know were there but turn back up just at the right time. My handbag always has nourishing snacks (and plenty of sweets, because you never know – also spare underpants, because you never know) to keep you going on the way. And a phone and a list of contacts in case I get lonely on the journey.

I’ve spent a year diving into a brilliant community around FIRE (financial independence, retire early) and whilst it’s becoming more diverse, as s British single mother there is only a small amount of it which resonates – which feels like me. So the Brilliant Ladies’ Handbag Club is an online place for me to chronicle my journey, reflect and store all the nuggets of wisdom along the way and share them with like-minded people. If you’re interested in FIRE; taking control of your money, even when things get tough, and in doing so stick it to the consumerist man; dreaming and building a different life; or just looking for some company, then come on in. Amongst the sweeties and the underpants, might be your tribe.