Dear Savings Diary…
The weather is heating up a treat, enough to have spent some time out on the bike, spinning out some nice 50+ milers at the weekend and even a couple of cheeky 30 milers before work.
Roll on Sunday and the NetWorth spreadsheet is opened up and methodically updated to the background noise of some good music. As seems to be the trend of late, it’s a trip back in time to listen to Kyuss.
I set myself some goals at the start of the year, to entice myself towards the over-arching destination of Financial Independence. Trying to aim for just the single far out goal of financial independence, potentially over a decade off, will have appear to have painfully slow progress. Which will only be demotivating. Our brains just aren’t wired to keep track of such distant things. So, in the mean time, a few smaller mini-goals will keep me focused and motivated.
The first goal is to achieve an average savings rate of 60% across the year.
This is looking less and less achievable due to wedding costs in the first part of the year, which pulled my average savings rate down to 29% at the end of April, following a negative savings rate in March.
There was actually a fair amount going on in May, with a Regular Saver maturing, the last payment being made on share options at work and some back dated pay finally coming through. This combined with some more straggling payments for the honeymoon means Mr Zombie Limited hit a savings rate of 57.1% in the month.
The average savings rate for the year is slowly creeping back up from the barren valley that was March.
May wasn’t as good as April’s 70%+ savings rate, but still in excess of the 50% savings parity mark.
Target: 60% savings rate
Simple average: 34.6% FAIL
In month: 57.1% FAIL
My second goal is centred around NetWorth growth, which is admittedly driven by progress on the first goal and the whims of market movements. But it’s much more fun to track and a much more visual representation of progress, kind of like a savings diary. The target for 2016 is to increase my NetWorth by 45%, I don’t include equity on my house for the purpose of this goal.
I needed to increase NetWorth by 16.7% from the start of the year to the end of May to be on track to grow by 45%. The year started off with a timely reminder from the markets that investing isn’t all plain sailing, but there has been some recovery in the markets since.
Although May’s savings rate was the best in terms of a relative percentage, in absolute terms it was a bit of a beauty as my income included some back dated pay. This combined with a bit of help from Mr Market leaves me with an increase of 11% since the start of the year, a near 5% jump from April to May.
11% increase in NetWorth year to date is some way off my desired growth of 16% but I’m closing the gap 🙂
At first glance posting my NetWorth may appear a bit narcissistic and showy, “Hey Internet, look at me, my NetWorth is growing”.
But the near doubling of my NetWorth since starting to track it is simply the result of few small lifestyle changes. Consciously looking for the best deal has turned to an unconscious habit. The two coffees a day from a barista has turned to no coffees a day. Not every single fucking social engagement is blindly accepted. A shift from eating and drinking out and about to hosting parties or going to friends houses instead.
Most importantly, simply spending less than I earn and saving the difference. And with this a slow shift from 10% of my income being the norm for savings towards a 50% savings rate feeling more normal.
Tracking your NetWorth is helpful to look back on. Remember January all those months ago, when markets came tumbling down. I simply cracked on since then, and look, my Networth recovered nicely. Perhaps this will serve a nice reminder, with the Brexit vote looming on the horizon like some beast.
Target: Annual 45% increase in NetWorth.
Actual: Annualised projected growth of 28.6%.
Goal three is simply to overpay the mortgage each month.
In Mat Mrs Z and I each threw £100 against the mortgage in overpayments. Lovely.
The graph above shows the progress of our mortgage, each step representing a payment. Then in January we started overpaying by £200 a month and the lines begin to diverge.
I find visual stimulus like this very motivating, it’s confirmation that what I’m doing is actually having an impact (even when I already know it is. Us humans are strange beasts.
Target: Overpay mortgage each month.
Actual: £100 overpayment each.
How was everyone’s May?
All of my prior months updates are here, if you just. Need. More!
On a final note I have been getting a bit of traffic from fiassembly, an FI aggregator site that Alex set up. Check it out, you might find a sweet new blog over there. But don’t forget to come back!
Spend Less, Save More & Escape the Horde
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