December 2022 Update (and EOY Review)
Merry Christmas you filthy animals and a Happy New Year (when it comes).
This festive period comes approximately 5months since I started blogging on here - it has been great so far. I don’t think I have many avid followers of my blog but if there are any out there I really appreciate you reading my rambling on here!
Living Life
Well December brings with it a lot of hustle and bustle - in the run up to Christmas particularly. Both the Mrs and I worked all the way up to Christmas Eve this year. It was a hectic end to the work year for me with quite a few deadlines falling early in the new year (typical!).
In terms of living life, I guess we both tried to catch up with as many people as possible. Work Christmas parties, drinks with friends and a few nights eating out.
We had a leaving dinner with our lodger that moved out at the end of August. He is leaving with his girlfriend to do a year of “house sitting”. This looks really cool - you basically live rent / bills free by looking after random people’s pets in their house when they are away on holiday. I hadn’t really heard about it before. They have planned a year of it - for a period of time they have also locked in a house sit in California. I will report back on his experience but they are planning to use this website. Could be a good way to be able to travel the world on a budget!
The Mrs and I hosted our first Christmas together - we had the Mrs’ sister and partner round with their kids. Since the Mrs is Polish, they celebrate Christmas on Christmas Eve so we had a Christmas Eve supper. I ended up spending most of the night showing the kids how to play Crash Bandicoot while the Mrs and her sister were busy slaving away in the kitchen. I did help with a lot of the preparations before hand so I felt less bad!
On Christmas day, we drove up to Scotland and had our second Christmas dinner with my family. It was great to just be able to chill and enjoy some family time. Although I have to say one of my brothers in particular went a bit overboard buying Christmas presents. I feel we are all of an age now that we could probably start winding down the Christmas presents a bit but I just need to be bold enough to be the one that suggests that.
For Hogmanay, we are planning to sit by the fire with a takeaway with the lodger.
Unfortunately (again), I didn’t take a lot of pictures this month - I will try better going forward.
Spending
As probably is to be expected, December has put a dent in our wallet to end our year!
Too much spending on gifts and Christmas food / drink among other things.
This month also brings the finale to our end of year budget - which is pretty dire reading when you compare it to our initial estimate of what we thought we might spend based on assumptions.
We spent £6,858.20 more than our budget estimate in 2022. However, this does mean that we have a full year of expenses tracked to help assist us with our budget for next year.
Overall, we spent £36,862.07 in 2022 with an average monthly spend of £3,071.84. So we will use this as our starting point and budget target for 2023 - stay tuned to see if we can beat it!
The 2022 year end budget is also shown in graphical format below. As you can see, I have added the average and the average + one standard deviation - just to give it a little bit more of a scientific look :D.
FI Fund
December has brought some red to the portfolio performance when compared to last month. As to be expected, with all of the uncertainty at the moment, there continues to be quite a bit of volatility in the market - but always remember - fortune favours the brave!
I continue my drip feed into 50% global equity and 50% government bonds just now. Once I feel the time is right, I will move back into 100% stocks. I did however buy a little Bitcoin and Ethereum this month!
The FI fund includes our full net worth. At the moment, it is sitting at £321,662.47 which is down £6,162.68 (or -1.9%) from last month.
Since the start of 2022, the markets have been drifting downwards but the rate at which the Mrs and I have continued investing has meant that it seems to have pretty much offset this. My records show that our net worth was £319,152.82 on the 27th of December 2021 (roughly a year ago) so there is only a small difference between then and now. Something The Wealthster and The Wealth Dad had also picked up on in one of his Tweets.
This month, I have looked at my net worth in a slightly different way - this was inspired by the Mad Fientist.
This helps me visualise the trajectory towards FIRE based on current monthly spending and investing habits. Let’s hope FIRE is achievable at some point in 2027 / 2028.
The graph has the following assumptions:
Income from investments (post-FIRE) = 4%
Monthly savings / investments = £3,000 per month
Return on investments (pre-FIRE) = 7%
If you have read my blog post updates before, you will know we normally track our FI target of £800,000. £800,000 is probably not enough based on our current spending - a £3,071.84 monthly spend results in a required pot of £921,551.75 (so a little more than the £800k number).
However, for now we will continue tracking against the £800,000 number. I think the closer we get to FIRE, the more we will need to refine this for our plan. At the moment, we live in quite a big house in the UK but our plan with FIRE would likely be to go travelling for quite a while and live in lower cost of living countries. That said, we would want some flexibility in our budget to be able to come back to the UK if it didn’t work out.
Anyway, we track the £800,000 number by splitting it into equal bars where each bar represents achieving financial freedom for each representative month of the year. Therefore, this month suggests we have reached just over 4.8 months of financial independence each year.
Overall, not a whole lot of improvement on where we were last year at this time but if we hadn’t kept up our regular investing we would have been much worse off.
Recessions and stock market crashes bring opportunity and it is likely that the recovery will bring increased returns for the years ahead. I feel much better that asset prices have deflated a bit from the “bubble” that they were in following 2020 / 2021. It feels better buying assets at more fair valuations at a time where a lot of investors that started in 2020 / 2021 are likely to be scared to invest / lose money. Normally these are the best times to accumulate.
The key to FIRE success will be to stay consistent through thick and thin.
“I am not afraid of storms, for I am learning how to sail my ship.” - Louisa May Alcott
