I do like pulling together these monthly updates. It’s a chance to reflect on the past 30 or so days and make sure I’m in check against my long term goals. The over-riding goal being “Financial Independence”, the point at which work becomes optional. Either when passive income (e.g. from dividends/interest) is in excess of expenses, or when 4% of my investments is greater than my annual expenditure.
I set myself some goals at the start of the year, to entice myself towards this over-arching destination. Trying to aim for just a single goal, potentially a decade off, will have painfully slow incremental progress. Which will only be demotivating. In the mean time, a few smaller mini-goals will hopefully keep me focused and motivated.
And obviously it’s a chance to listen to some music whilst doing so. This month I have the pleasure of Deafheaven’s new album, New Bermuda, shattering my eardrums (in a pleasant way of course).
The first goal is to achieve an average savings rate across the year of 60%.
This is going to be a tough one to achieve this year, what with a wedding to pay for. This Zombie likes a challenge so I’m going to give it my all. We’ve been paying off the wedding as we go along to some extent, so last years savings rate of 59% had already been adjusted for wedding costs. There’s some pain coming my way though on this front, starting with this month.
A bill for the venue costs was paid in the month, dropkicking my savings rate in the teeth and knocking it down to 53.7%. A better start than last January, but it means starting behind the mark again. I sure like to make things tough on myself.
Target: 60% savings rate
The second goal is centred around growing my NetWorth, which is admittedly driven by progress on the first goal. The target for 2016 is to increase my NetWorth by 45%, I don’t include the equity of my house for the purpose of this goal (other than overpayments on the mortgage, see Goal 3 🙂 ).
I needed to start the year with a 3.14% increase in NetWorth for January to be on track. With tumbling markets I have started the year by going backwards 2.26%. Nothing like making it challenging.
Never feels nice to have piled a slug of hard earned cash into the markets to see you NetWorth go backwards. Yet, this can and will happen. The more often it can happen early in the accumulation phase the better. It will help with the sequence of returns and harden up my soft new mind a little bit. The accumulation phase is your investing boot camp;
Once you’re through boot camp, you are ready to accept the volatility that comes with living off your investments. I am still firmly in Mr Zombie’s Accumulation Boot Camp, being belittled by the drill sergeant. The passing out parade is a good few years in the future.
Target: 45% increase in NetWorth.
Actual: Annualised projected growth of -24.03%.
Goal three was to overpay the mortgage each month. Not by a fixed amount each month, but just to get into the habit of hoovering up a bit of spare cash each month and knocking down ol’ Jimmy Mortgage by a peg or two. My mortgage doesn’t penalise for doing this, and the effective interest rate is better than the majority of savings accounts. The real penalty being a reduction in my liquidity (cash being more liquid than home equity).
In the current low interest rate environment, the cost of borrowing is low (although some of the real benefit of that is offset by low inflation). In theory I should be able to generate greater long term returns than I am paying in interest to service the debt. Still, there’s something to be said about the peace of mind that goes with paying off a mortgage.
January’s payment was a debt crushing £10. But I want to make sure it does actually get allocated against my mortgage before committing any more of my hard earned little soldiers to it.
Target: Overpay mortgage
Actual: £10 overpayment
I also set myself a January Mini-Experiment, to not drink caffeine or alcohol for the month. Going cold turkey on caffeine was really tough…for the first couple of days. Turns out you get flu like symptoms when you go cold turkey. Who knew? After the first couple of days the headache and sleepiness went away, I swapped tea or coffee with a cup of hot water (mmmm delicious) and that was that.
Having a cuppa is just a habit, once I was over the first couple of days I didn’t really miss the caffeine. I did feel more alert for longer during the day and slept better, lovely.
Roll on the 1st of February and I smashed a cup of coffee in the morning, thinking it would be blissful. It was
amazing not so great. My toxin free body was overwhelmed by the caffeine, my eyes felt weird, stomach began gurgling and I threw a printer out of the office winder. A cup of hot water, please.
The alcohol ban was easier and tougher at the same time. For Mr Zombie a beer isn’t so much a habitual thing as it is a social thing. I wasn’t cracking open a beer at 7am with my breakfast like I would have been with an espresso. I never craved a whisky with a slice of cake, like I did with tea. When sitting down on a Sunday morning to update my NetWorth tracker I wasn’t looking for a nice glass of red wine, rather a nice steaming latte.
That said, I will admit to missing a few beers on a social occasion. And I did break the embargo in the middle of the month. *GASP*! It was Mrs Z’s 30th and it felt a bit tight not to have a couple of drinks to celebrate. 😀
So what of the challenge? Without a doubt I felt better for not drinking caffeine or alcohol…yet I don’t think I will completely cease. I could live without tea, but I love the taste of coffee. That said, it’s been resigned to the weekends. I’ve trained my body to be happy with hot water during the week, so I’ll stick with that. Alcohol wise, it’s all about moderation. There’s no doubt that Mr Zombie likes a drink every now and then, or that alcohol can provide some much needed social-lubrication to make evenings flow a little better. Limiting myself to 4 drinks a week seems about right. A drink each evening for a few nights, or all together whilst watching a live band (heavy metal or hard-core punk preferably 🙂 ).
I’ll take the Mini-Experiment as a pass.
What about February’s Mini-Experiment? Glad you asked friend, glad you asked. In the spirit of being a bit more frugal before the wedding it will be an experiment to help hone my Not-Spending muscles even further. I went to my local bank for about the first time in a decae and took out £100 in £1 coins. That’s all I can spend for the month (excluding all the normal bills, as much as I’d like to send the energy companies a bag of pennies, I doubt they’d accept it graciously). I’m not sure if you ever seen what £100 in £1 coins looks like…;
Haunting, isn’t it?
It’s going to be an interesting Mini-Challenge in February. One to keep the spending a bit more concious and as low as possible (up yours Valentine’s Day). Anyone have any ideas for future challenges? I’m going to try and do something each month, doesn’t necessarily have to be finance related either.