September 2016 – NetWorth and Savings Rate Update – Cashflow Diaries

Dear Savings Diary…

Another month rolls by and another wedge of my earnings was piled into savings.  Earn.  Save.  Repeat.  That’s the cycle of the FI seeker in the accumulation phase.

I’ve set myself some financial goals around NetWorth growth and a targeted Savings Rate, the idea being they will be the carrot to ease me towards financial independence.  That’s the real goal here, Financial Independence.  Thing is, trying to aim for just one goal that is potentially over a decade away is exhausting and terribly demotivating.  The progress is just too incremental for our recently evolved brains to comprehend.  

Let’s see how old Mr Zombie got on in September.

The first goal for 2016 is to try and hit an average savings rate of 60% across the year.  A lofty goal when the average savings rate for the US is just 5.7% (UK data seems a little sparse in this area).

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.

It seems that the last couple of years have really embedded some sweet frugal habits, the habit that just keeps on giving.  Mr Z’s savings rate for September was 71.%, that’s a savings rate of around 70% for the last three months!

Heading over to the calculator at NetWorthify and plugging in a 70% savings rate gives me 8.8 years until Financial Independence is reached.  Alright!  And that’s assuming I’m starting from a NetWorth of £0.  Playing around with the starting values gives me some timescales;

  • Cash & ISA only: 7.6 years
  • Cash, ISA & Pension only: 6.3 years
  • Cash, ISA, Pension & House Equity: 4.8 years

Make of the differences in timescales what you will.  One things for sure, they are all remarkably close for someone who is 34! 😀

Thing is, I think there is still a bit of fat that could be trimmed around the edges.  If I updated the estimates above, to represent Mr Z absolutely scraping the savings barrel, it would reduce the middle estimate from 6.3 years to 4 years.  That’s with a savings rate of about 78%.  Incremental differences have huge impacts with saving rates above 50%.

Living at the saving rate limit I used above wouldn’t really be sustainable, it would just plain be miserable.  Yet it shows how close FI could be.

Finance Zombie - Savings Diary - September 2016

Savings Rate September 2016

Average savings rate for the year is slowly creeping back up, hopefully I can keep my savings rates around 70% for the rest of 2016 🙂

Target: 60% savings rate

Year to Date average: 51.4% FAIL 

In month: 71.8% PASS

My second goal is centred around growing my 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 32.1% from the start of the year to the end of September.  I actually saw an increase of 36.2%.  So far so good. 

Saving Diary Mr Zombie September 2016

NetWorth (Savings & Pension) September 2016

Look at that graph.  If I extended it further back in time it would show me taking about 10 years to get to the position I was in at August 2014.  Then the FI light sparked into life and it’s been climbing steeply ever since.  It’s the result of spending less than I earn and saving the difference.  No get rich quick schemes, no fancy-pants investment strategy and no incredible 6 figure salary.  Just a bit of hard work and some considered spending.

It looks like all this saving is actually fucking working.

Interest and dividends this month covered our mortgage payment on Chateau Zombie.  Now, this needs to be with a pinch of salt.  It’s the combination of a low mortgage payment and some annual/quarterly dividends coming in, but by the holy powers of Mr Money Mustache it looks like Mr & Mrs Z are on their way.

Target: Annual 45% increase in NetWorth.

Actual: Annualised projected growth of 51.0%.

Result: PASS

Goal three is simply to overpay the mortgage each month.

Mrs Z and I carried on overpaying the mortgage this month, upping it slightly from £200 to £250 each.

Target: Overpay mortgage each month.

Actual: £200 overpayment each.

Result: PASS

Keep on saving people, FI is just around the corner.  Admittedly the corner is a few years away…

All of my prior months updates are here, if you just.  Need.  More!

Spend Less, Save More & Escape the Horde

Mr Z

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11 thoughts on “September 2016 – NetWorth and Savings Rate Update – Cashflow Diaries

  1. London Rob

    Hi Mr. Z

    Congratulations on yet another great month of savings rate! It must be great to see those numbers of years left, and knowing you could retire in the not too far distance, I just wish my FI light had gone on as early as yours did!
    For what its worth – I track as you do on years to FI’dom on all of the above, but the one that I mostly focus on is pure “Liquid” stuff – so ISAs and Cash. I can’t access my pension until I am a lot older (and hopefully already FI by then!) – so I use that as my backstop, knowing with certainty that I will be able to retire when I can access the pension which I keep topping up to make use of the tax rebate that is still around…

    Fingers crossed for the year end and hitting your lofty goals, I have faith 🙂 Question is how fast will you know pay off your mortgage? I did a simple spreadsheet to chart the progress to clearing ours, so each time I tick a little of overpayment I see my monthly cost go down, or the number of years come down, its a really nice feeling, I highly recommend it for a regular monthly buzz!
    London Rob

    Reply
  2. WestCountryEscapee

    Your mortgage overpayments look quite hefty – with interest rates being so low have you thought about diverting the money into ISA’s or the work pension scheme instead?
    There is a peace of mind advantage obviously but we’re planning to downsize in the long term at which point the remaining loan will be paid off. In the meantime I quite like the FS-DAIR approach:
    http://www.financialsamurai.com/pay-down-debt-or-invest-implement-fs-dair/

    Reply
  3. London Rob

    Haha talk about timing 🙂 I think its a difficult one on which to do – overpaying the mortgage brings down what is likely to be the largest monthly overhead, but I wouldnt want to pass up the opportunity to put as much as possible into an ISA – its got to work for the individual 🙂
    Cheers
    London Rob

    Reply
  4. Team CF

    A deep bow to you sir. A SR of 70% for three months in a row is nothing less than spectacular! Congrats on this impressive achievement! Your stash is also growing nicely.

    Reply
  5. weenie

    Hey Mr Z

    Firstly, well done on a fantastic savings rate and wow, you must be so chuffed that you didn’t even need your usual salary to cover your mortgage payment – nice one. There’s every chance that you’ll do a ‘Huw’ and be FI before you’re 40!

    London Rob mentions liquidity (and TFS did too recently) and it’s something I need to look at myself – my portfolio isn’t very liquid, since most of my investments are in pensions or fixed long-term investments. Chances are that by the time I’m FI, I’ll be at or close to pension drawing age but ISAs should provide me with flexibility tax-wise. Some rejigging needs to be done methinks.

    Keep up the great work.

    Reply
  6. MrSLM

    Congrats on an awesome savings rate, over 70% is intense. You mention looking at a goal that’s a decade away as demotivating, hopefully you’re enjoying the day to day and not sacrificing too much in the pursuit 🙁

    Reply
  7. Organised Redhead

    Hi Mr. Zombie,

    Another cracking month in terms of savings rate..well done. Looking at your net worth graph, I think my net worth is roughly the same (also excluding house equity). It’s really nice to be able to follow someone at a similar stage of the journey to FI. Though whether I’ll grow at the same rate as you I don’t know! Not sure I could manage a 70% savings rate…I guess I’m pinning my hopes on side hustle income to hopefully speed up my journey.

    Keep up the good work!

    OR

    Reply
  8. ermine

    I also wonder about that mortgage overpayment at this stage, because liquidity is at a premium until you get to 55/56/whatever to use the pension. That’s at least 20 years away, so you have to divide your assets into before ~55 and after. The after can rely on pension savings, so you’d tend to run your ISA savings down post FI, ie deliberately erode the capital for several years. I did this with my post-retirement cash savings, running down before I accessed my pension.

    So you can’t, in practice, threat this all as the same pot. Mortgages are usually designed to be paid off around 60, so not overpaying and carrying the mortgage across your early retirement but before pension access age could give you more flexibility. yes, you’ll be paying a mortgage from your savings after retiring, and interest rates may go up. But paying up front now is taking optionality off the table for you.

    I discharged my mortgage early, and was poorer in the before pension access period (and richer now) because of that constraint. I only had three years of that. Ten or fifteen could be tough 😉

    Reply
  9. Mustard Seed Money

    Awesome job over the last three months!!! 70%+ is amazing. I came a little late to the FI community when it came to 2016 goals but will definitely be putting together some goals for 2017. Thanks for the inspiration!!!

    Reply
  10. theFIREstarter

    Brilliant stuff Mr Z! *stares from a distance in envy* 🙂

    I keep thinking about overpaying the mortgage but as others have said it just doesn’t really seem worth it at this point in time. Just locked in 2.49% for 10 years so would rather have the liquidity to pump into other investments and/or matched betting funds which are returning me around 10% ROI per month (with some work off my own back of course)

    Have to admit I didn’t really get this bit:
    Cash, ISA & Pension only: 6.3 years
    Cash, ISA, Pension & House Equity: 4.8 years

    Why would including house equity mean you are nearer to FI?

    Cheers

    Reply

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