July Progress Review Of My 2018 Financial Independence Goals

Hi folks, happy August!

2018 is almost 60% done and I’m going to perform a review of how it went versus the various personal goals that I had set myself at the start of the year. It always amazes me how quickly time flies by and therefore we need to seize the day and make things happen.

Here’s the progress summary chart:

NB: to my American readers, to convert £ into $, simply multiply by 1.30 (GBP is being hammered further thanks to Brexit!).

Two months ago, I added 2 metrics into the progress summary:

  1. WB40 ratio = Total Income / £60,000 (this is my WealthyBy40 financial goal which is to generate £60,00 of monthly income by 40)
  2. Saving rate = Total savings / Total income


Back in May, I added 2 more ratios courtesy of Joe from RetireBy40:

  1. Financial Independence 1 Ratio (FI1) = Total Passive Income / Total Expenses
  2. Financial Independence 2 Ratio (FI2) = Total Non-Employment Income / Total Expenses

I will write a proper post about these 2 FI ratios in due course. However, the logic behind them is fairly obvious:

  • FI1 looks at what happens when I quit all forms of work and rely purely on my passive income to sustain our lifestyle.
  • FI2 indicates the consequence of quitting regular employment and rely on passive + other forms of active income (e.g. freelancing).

The ideal situation is for FI1 to be >100%.

I think 4 ratios in total are enough. No more death by KPIs, I promise!

Key highlights from this month

Lower savings rate

My savings rate is much lower than before (44% versus 68% average in H1 2018). This is due to 2 reasons:

  • Greater expense -> I am now assigning £1,500 per month towards childcare and this is a significant expenditure. I am diverting savings towards our emergency funds towards this and will remain so for the foreseeable future.
  • Higher income + timing difference -> I received a significant bonus payment from my salary (W2 income) this month and I am putting 2/3 of it into my pension, which isn’t due until August. This meant a higher income combined with lower savings contributed to the decreased savings rate. This should be rectified in the August update.


Rising deposit interest income

I had been super stupid in the past where I pooled most of my savings together into the savings account offered by my main bank. The rate offered was abysmal (0.1%) and the capital risk was enormous (I’m only insured up to £85,000 under UK’s deposit insurance scheme, the FSCS).

Since the start of the year, I had been opening various instant-access high yield savings account with various other banks that are insured under the FSCS scheme and spreading my savings there. I am not getting at least 1.3% return on most of my capital and all of my capital are covered by the FSCS.

FI ratios > 100% in June

This is is a proud achievement. A combination of beautiful weather and my parents being here during June and July (we spent much more time in the garden rather than going out) meant the discretionary spending was low in June. This propelled me towards reaching FI during that month.

Now let’s review the goals.

1. Pay rise – YES

I had my pay review in March and the outcome was somewhat different from what I expected. You can read about the story here but in essence, I got a much smaller-than-expected base pay rise but a much larger performance-related bonus. An added benefit of not completely realizing my goal here is that I get to write about it throughout the year as/when my bonus gets paid, instead of just a dull line crossing it off my list.

So after my quarterly review at the end of June, I was awarded my promised bonus, which boosted my salary significantly. This was actually the first proper performance-related bonus I had received during my 6-year career so far. Yet it felt both satisfying and troubling.

  • I had worked extremely hard and had generated significant value for my company, which in turn felt extremely rewarding to be recognized.
  • If this is what it takes to generate an additional £1,500 per month, then no wonder why relying on salaries is not the best route to wealth accumulation.

The key lesson remains that you need to be creating your own income streams and thus be able to live on your own terms.

Unsurprisingly, I will be saving 2/3 of that bonus into my pension. Not only will I receive a 40% tax rebate, I will also avoid the lifestyle inflation associated with rising income, thus keeping me on a path towards FIRE.

2. Rent increase – COMPLETED

Done and dusted in January. Reached the £2,500 per month target. Want to know more? Find out here.

3. Increase dividend income by £100 per month – YES

July scored the highest dividend month so far this year as I received over £1,300 after-tax. The majority of which, surprisingly came from a high-yield “dividend trap” stock that I bought a few months back.

I will do a detailed review of that incident in a separate post but meanwhile, all I can say is that I will take all the dividend it juices out!

Dividends are my favourite form of passive income because they are truly passive. Currently, I am reinvesting them into buying more stocks rather than using them to sustain my lifestyle. However, it’s nice knowingly that if for whatever reasons, my employment income ceases then I can use it to pay for the grocery bill every month.

4. Develop another source of income – COMPLETED

Done and dusted in March this year. Want to find out more? Simply view my June update, which details why I am retiring this goal and what I’m replacing it with.

5. Save £20,000 into ISA – COMPLETED

Done and dusted. April 6th is my favourite day of the year.

6. Save £800 into SIPP per month – YES

For those of you unfamiliar with SIPP (Self Invested Personal Pension), it’s a self-saving retirement investment account in the U.K., similar to Roth IRA in the US. I will do a review of it shortly but the key benefit is that all incomes and capitals gains are tax exempt until withdrawal and each contribution will attract an automatic 20% tax credit in the form of account balance top up and depend on your tax situation, a further 20-25% tax refund at the end of each tax year that can be used with discretion.

I made my first £800 contribution in February and I am still on track. As stated, I will be contributing an additional £1,000 on top of that from my bonus in August.

Furthermore, since May, I have started saving an additional £150 per month into my brokerage account in order to boost the saving rate further.

Long may it continue!

7. Have a baby – COMPLETED

WB40 Junior was born on at the start of June.

8. Produce 1 high-quality blog post per week – START

I managed to publish 4 blog posts in July (OK, I’m including the monthly progress review as well) and I received 496 views on my site in July. This was quite a big drop compared to June but I was not surprised as I was featured on Rockstar Finance in June, which led to a massive surge in viewership.

Going forward, writing better blog posts and expanding the viewership of the site will be a key focus for me and I intend to immerse myself in this domain.

9. Have a tropical holiday with my family – YES

I’m actually surprised myself on how quickly we are going to achieve this goal. We researched and booked a holiday to go to a beach resort in the Balkans in the space of a week. We are going to leave WB40 Junior at home in order to enjoy some quality couple time in 6 weeks. Hurray!

I’m actually surprised at how quickly the plan has come together but it simply shows that if there’s a will, there’s a way.

10. Do 2 office-station runs per week – NO

No progress made. I can’t even use the weather excuse now because we have been consistently hitting 30 C (86 F). Damn! Well, I could use the “it’s too hot” excuse. Maybe I will do that.

The saving grace is that my cycle-to-work plan is going fantastically and I’m averaging 25 km every work day.

11. Publish my novel in 2018 – ON TRACK

This is a new goal. As you might have already gathered, I’m writing a novel currently. In fact, I have already finished the first draft. My aim is to get it published in 2018.

This month, I have completed a second review of the manuscript with the editor. Mrs. WB40 has also combed through it and given the green light. I have converted the script into e-book formats and set up my author page on Amazon Kindle Direct Publishing. I’m going to hold fire on this for a few weeks because:

  • I’d still like to reach out to traditional publishers to see if there’s any interest.
  • I’d like to build a half-proper marketing plan rather than adopting the “release it and they will come” approach.

I have also found several beta-readers amongst friends and families but if you are interested, give me a shout.

Wrap up

July was probably the best month this year. I am well on track to achieve most of the goals I had set myself the start of the year. If I compared myself between July last year and now, the difference in mentality and outlook in life is enormous. A metamorphosis has clearly taken place.

How are your 2018 goals progressing? Please comment away.