Dear Savings Diary…
Another month rolls on, I saved some money and the world inched forwards. Well, maybe it inched backwards following the Brexit result. Sad times indeed, but as The Escape Artist points out the world continues and it’s not the coming of the Fourth Reich.
Indeed, it seemed to have a positive impact on many people’s NetWorth, if we ignore the weakening of the £-Sterling. R.I.T. even crossed over into the ‘double comma’ club, a culmination of nearly a decade of focus, awesome stuff.
So Sunday rolls round, meaning it was time to open the NetWorth spreadsheet methodically update it with a cup of good coffee and, of course, some good music. Another trip back in time, right back to 2003 to listen to Jack Johnson’s ‘On and On’ album. Sure, now you hear Jack Johnson’s tunes being played as background music in waiting rooms and even the odd guy who walks to the office with no shoes on has heard of him. That’s no reason not to listen to him, the lyrics are still relevant;
Look at all those fancy clothes,
But these could keep us warm just like those.
And what about your soul? Is it cold?
Is it straight from the mould, and ready to be sold?
And cars and phones and diamond rings,
Bling, bling, because those are only removable things.
And what about your mind? Does it shine?
Are there things that concern you, more than your time?
Seems old Mr Johnson was hinting at Financial Independence years ago.
I set myself some goals at the start of the year, some temporary carrots to entice myself towards the over-arching destination of Financial Independence. My overall goal is Financial Independence, which I am defining as when the total return on my investments more than covers day to day living expenses.
Trying to aim for just one goal that is potentially over a decade away is exhausting. Months roll by and it can appear that very little progress has been made. Which would be terribly demotivating. Our brains just aren’t wired to keep track of such distant things.
So in the mean time, like running a marathon, it’s better to chop the journey up into smaller and more manageable chunks.
The first goal for 2016 is to try and achieve an average savings rate of 60% across the year.
Developing the habit of consistently hitting a high savings rate is the biggest driver in hitting that overall goal of financial independence, especially at the start of the journey where your contributions will have a much larger impact than any investment returns.
60% is looking less and less achievable for the year, due to wedding costs which pulled my average savings rate down in the first part of the year, and even into negative territory in some months. It’s tough to hit 60% consistently, even tougher to hit higher than that in order to pull the average back up in the remaining second half of the year.
With that said, June was a good month for the tightly run Mr Zombie Limited.
The bulk of my savings is made up from pension contributions, monthly ISA contributions and monthly payments into a share options scheme with my employer. In a strange mix of happy and sad emotions I sold my motorbike, the proceeds of which were piled into savings and so boosting the savings rate for the month. Mrs Z and I also decided to tighten the savings nut another quarter turn, and overpay the mortgage a little bit more each month.
All of this means the best savings rate in The Finance Zombie’s near two year history. A savings rate of 78.3% was reached.
The average savings rate for the year is slowly creeping back up from the barren valley that was March.
Some quick sums shows me that an average of 78% is needed for the rest of the year to hit an average for the year of 60%. Looking pretty unlikely!
Target: 60% savings rate
Year to Date average: 41.9% FAIL
In month: 78.3% PASS
My second goal is centred around NetWorth growth. NetWorth growth will be driven primarily by progress on the first goal, and the whims of market movements. But it’s more fun to track and provides a representation of progress towards Financial Independence. Tracking it is my savings diary.
My goal for 2016 is to increase my NetWorth by 45%, I don’t include equity on my house for the purpose of this goal.
To be on track I needed to increase NetWorth by 20.4% from the start of the year to the end of June. I’ve actually seen an increase of 19.9%, the gap is nearly closed! 😀
My NetWorth has really reached for the stars this month, increasing by nearly 8% in the month alone. Having a bit of a dig around in the numbers there are three legendary drivers behind the increase;
- My legendary, and likely one-off, savings rate of 78.3%
- Some legendary share options maturing and being in the money
- The majority of my equity being in legendary global trackers which increased following Brexit.
At first glance posting my NetWorth may appear a bit narcissistic and showy, “Hey Internet passer bys, I’m amazingly epic, check me out, my NetWorth is growing”. But if I can make a few lifestyle changes that positively impact my NetWorth, so can anyone.
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.
Target: Annual 45% increase in NetWorth.
Actual: Annualised projected growth of 43.8%.
Result: A very narrow FAIL
Goal three is simply to overpay the mortgage each month.
Mrs Z and I ‘Zombied up’ in June and doubled the amount we are overpaying, throwing £200 each against the mortgage in overpayments. Lovely.
Target: Overpay mortgage each month.
Actual: £200 overpayment each.
I really am a fan of setting a few goals and tracking progress towards them, it’s certainly helping my journey towards Financial Independence.
How was everyone’s June?
All of my prior months updates are here, if you just. Need. More!
Spend Less, Save More & Escape the Horde
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