Dear Savings Diary…
Work has ramped back up again and it’s been another month of 12 hour days working for that bastard, the SalaryMaster.
Got to keep your priorities, though. I’ve still been getting to gym nearly every work day. The one-handed handstand edges ever closer.
Across the bank holiday weekend this zombie spent his time ripping up carpets and skirting boards and then laying down some new laminate flooring. It was hard but enjoyable work, and you get paid for it. If you count the labour savings from doing it yourself as being paid. I’d been putting it off for ages, to realise the only thing stopping me was not having the right tools.
Now I’m left with some nice new tools, a collection of new skills, new flooring and a load of old materials to try and make something on Etsy. But most importantly a boost in confidence, that will be used to sort out some other shit around the house. Door frames need replacing, some custom shelving for the spare room and a new kitchen is on the horizon.
Another month has rolled by and another chunk of my income has been deposited in savings, edging me ever closer to FI, ever increasing the pile of money that offer me precious life optionality.
I’ve set myself goals around NetWorth growth and a targeted Savings Rate for the last couple of years. 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.
These intermediate goals have done their job, to set up the effective habits that I need to complete this long journey. Now, it’s just about keeping it up.
The first goal for 2016 is to try and hit 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.
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.
August, much like July, was an average month for Mr Zombie Limited, money came in, bills got paid and money got saved. At least that’s how it felt and yet the savings rate was 69.7%. Things are certainly beginning to trundle along nicely nicely.
Another cracking month for the in-month savings rate, I am slowly pulling that average back up. The graph does highlight just how important consistency is, a couple of bad months and it takes a long time to recover.
If I calculate my average savings rate for the last couple of years it is only 55.5%. Still, I had an awesome time at my wedding.
Target: 60% savings rate
Year to Date average: 48.9% FAIL
In month: 69.7% PASS
My second goal is centred around growing NetWorth.
NetWorth growth, in the early accumulation years, will be primarily impacted by my Savings Rate, i.e. my first goal. Mr Market will try to have his wicked way with things as well, but until savings become more substantial, market movements will have less of an impact compared to me piling in hard earned cash each month.
Tracking NetWorth is my ‘savings diary’, and it will ultimately help me decide when the time has come to change employment. Be that to early retiree or into another career with the supple and supportive cushion of a weighty NetWorth.
My goal for 2016 is to increase my NetWorth by 45%, and I don’t include my home for the purpose of this goal.
To be on track I needed to increase NetWorth by 28.1% from the start of the year to the end of August. I’ve actually seen an increase of 33.8%. Lovely stuff.
Spending less than I earn and saving the difference is all I’m doing. No fancy-pants investment strategy and no incredible 6 figure salary.
The three main things that are allowing me to achieve a normal savings rate nearing 70% are;
- Not buying a new car every three years.
- Living in a smaller house than I could afford if I maxed out on the mortgage.
- Walking/cycling to work.
Pretty fucking boring, but it works. I could look to trim some fat round the edges of my expenses to eek out a few more percent. But that looks like really nasty work that would need a sharp chisel and to be honest it seems to be happening over time naturally.
Thing is, I’m in the groove now, and that groove is firmly pointed at destination FI. Out of the way mother fuckers, Mr Zombie is on a one way train to FI-ville!
Target: Annual 45% increase in NetWorth.
Actual: Annualised projected growth of 54.8%.
Goal three is simply to overpay the mortgage each month.
Mrs Z and I carried on overpaying the mortgage this month, to the tune of £200 each. Simples.
Target: Overpay mortgage each month.
Actual: £200 overpayment each.
Another good month, on the savings front.
How was everyone’s August?
All of my prior months updates are here, if you just. Need. More!
Spend Less, Save More & Escape the Horde
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