2018 is 50% done and I’m going to perform a half-year review of how it went versus the financial independence goals I 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 1.34 (GBP is being hammered currently thanks to Brexit!)
Two months ago, I added 2 metrics into the progress summary:
- WB40 ratio = Total Income / £60,000 (this is my WealthyBy40 financial goal which is to generate £60,00 of monthly income by 40)
- Saving rate = Total savings / Total income
Currently, my total savings are comprised off:
- Mortgage capital repayment (which increases my equity in the property and adds to my net worth)
- Personal emergency account
- Family emergency contribution
- Self Invested Personal Pension (SIPP)
- SIPP tax rebate
- Brokerage account
- Dividend and interested income not paid out
This month I am adding 2 more ratios courtesy of Joe from RetireBy40:
- Financial Independence 1 Ratio (FI1) = Total Passive Income / Total Expenses
- 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 5 ratios in total are enough. No more death by KPIs, I promise!
1. Pay rise – SORT OF
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 realising 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.
Thanks to a change in my tax code as a result of the government increasing my personal tax-free allowance by £350 to £11,850 per year, my net pay has increased slightly to just over £3,400. It’s getting a step closer to my £3,500 per month goal however for entirely the wrong reason.
The key lesson here is that you need to be creating your own income stream and thus be able to live on your own terms.
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
June has been an amazing month for dividend as I received £647 from 6 different stocks.
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.
The unfortunate thing is that I did buy a “dividend trap” stock this year, which is a stock with an alluringly high yield but and a weak underlying financial position, making the yield unsustainable. Going to look at how to get out of this one.
4. Develop another source of income – COMPLETED
In Q1 this year, I developed a side hustle as a freelance management consultant on Upwork which netted me $3,307 in total. I love Upwork. I think it’s flexible, easy to start and convenient. The projects on there can be interesting as well. You can read about my experience here.
The downside of this was that I simply did not have sufficient time to take on additional projects. Realistically I only had around 6 hours during the weekday and 10 hours at weekends and that’s simply insufficient for bidding, interviewing as well as consulting. Furthermore, with the coming of WB40 Junior, I want to devote time to him rather than sitting in front of my laptop bidding for projects. This is why I am leaving Upwork because
I simply want to stop trading my time for money.
In the March progress report, I wrote that I want my future side hustles to be more of a passive income nature. I am pleased to announce that I will be publishing my first novel this year.
I’ve always loved writing and the idea of sharing my story with millions of readers across the globe simply is too thrilling an idea to be passed. You can learn more about my writing experience here.
As a result, I have retired this goal and replaced it with publishing my novel in #11.
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. In fact, I contributed £1,000 to SIPP in June because the fund from MoneyBox has matured and I withdrew them into SIPP to achieve a cheaper fee structure.
Furthermore, since May, I have started saving an additional £150 per month into my brokerage account in order to boost the saving rate further.
7. Have a baby – COMPLETED
WB40 Junior was born on at the start of June.
8. Blog twice a week on WB40 – NO
I managed to publish 5 blog posts in June. I know this is sub-par and my lowest month so far. However given that I just had a new-born and I am also focusing on the publication of my novel, I think it’s pretty damn good.
A way more exciting piece of news about my blog:
I cannot express how happy I felt that day as after what felt like a 6-month solo-mission, I had finally been accepted into the realm of civilisation. It definitely gave me the confidence boost to continue developing WealthyBy40 into the best FI blog.
9. Have a tropical holiday with my family – NO
No progress made, again! I think I might as well scrap this goal as the coming of WB40 Junior isn’t going to make it any easier.
10. Do 2 office-station runs per week – NO
No progress made. I can’t even use the weather excuse now because we have just hit 30 C (86 F) today. 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 – START
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. I will dedicate a special post to this topic properly but so far, I have completed the first review by myself and sent it off to my editor for a second read.
I have also found several beta-readers amongst friends and families but if you are interested, give me a shout.
A great month. Excellent progress in hitting the dividend goal, exceeding the SIPP goal and completing the first review of my novel. Need to work harder to ensure traction on WealthyBy40 is maintained.
How are your 2018 goals progressing? Please comment away.