Monday, 12 September 2016

Keeping myself honest

I have a little confession to make, which makes me feel a little foolish. After grandly saying how I’ve been holding up my little corner of the FI world by saving hard I then re-visited my savings rate and my heart sank a little as I saw it was at less than 40%. I'm not proper hardcore like some out there, but I do try and hit some reasonable numbers and to my mind 40% is my benchmark for a good level - room to really screw down on costs if needed, but a lot higher than the average.

I didn’t really have a preferred measure before, but that needed to change. Looking through Zombie and FIRE Starter’s posts on it I decided to take me post tax, take home, salary and to sum half of what my employer puts into my pension, as well as my contributions to that and my other pension, ISA, mortgage over-payment and whatever’s left that goes into the long term savings pot each month. I did not count money going into emergency funds etc and I didn’t include tax relief on pension payments, which I could do, but this distorts the picture too much.

When I adopted this I realised I was down on where I thought was – so much for walking the walk…

To seek to remedy this and shine the spot-light of truth into the mirror of self-analysis I have started tracking my net worth, I know, climb down on earlier post, this is going well isn’t it! The aim of doing this is to accurately gauge, warts and all, the value of cash and investments (excluding pensions as I have no access to them currently for FI purposes and it keeps the admin down).

The important thing is that I should not be able to fool myself, it’s the same accounts summed each month, what is the change, what is the explanation. The number should be increasing, though I take into account market moves as I have invested more over the last couple of years and a good employment report here, or a presidential candidate stumbling there, can make a material difference in a short space of time. But if the markets are quiet and my totals aren’t increasing, then I’m fooling myself somewhere.

An example of how I’ve been doing this recently is that my significant other and I have done some work to our house. Hopefully improving the value, but it’s been expensive and the additional costs not included in the general budget are sapping my savings rate each month. Those costs will come to an end, but I’ve allowed myself to fudge my own accounting which flatters the true state of play and if that carries on into the future it will have a larger impact. The focus for the next few months is to get back on track, increase savings and investments and use the above to keep me honest, because no one else is going to and all it does is delay when I can walk off into the sunset, a bona fide, FIRE’y hero!

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