Tuesday, 23 February 2016

2016 Financial Targets

Right now, I'm essentially at the start of my journey on the road to Financial Independence. That's not to say that I'm starting completely from zero - I have no debt other than the mortgage on my house, I have already been saving into a personal pension and I have some savings - but until now I have not been consciously working toward a specific FIRE target date (July 2025). My "FI Before 50 Roadmap" feels like quite a big challenge from where I'm sitting at the moment, I'm not sure how I'm going to achieve it, but as Martin Luther King Jr said,

“Take the first step in faith.
You don't have to see the whole staircase,
just take the first step.”
So that's exactly what I'm doing with my goal setting and writing this blog. I'm setting myself some targets that I'm not sure how I'm going to hit them yet, but at least I now have the knowledge of what I need to achieve if I'm to succeed in my goal.

My Roadmap suggests that I need to save a total of £2,734 each month until June 2025. This splits out across my Personal Pension as £1,180 and my Freedom Kitty as £1,554.

Personal Pension
Since I'm a Freelancer, I choose to operate through a Limited Company. I receive monthly contributions into my personal pension from the company's business account, these are currently set to £3,000 per month. I'm very fortunate that over the last 4 years, the contracts entered into by the company have created a nice pot of money accumulated in the business account, this means that a high contribution to my personal pension is possible.

Freedom Kitty
I find savings for my Freedom Kitty are more difficult to achieve. Any savings need to be funded from my personal income and not from the company's business account.

My personal income is predominantly made up of a monthly salary and quarterly dividends from the company. After tax my annual income is approximately £38,795. From this, all of my expenses are paid (such as mortgage, utilities, council tax, groceries, entertaining, petrol), I make a monthly £150 contribution to a stocks and shares ISA and I save anything else left over in the current account (which has a 3% interest rate on my balance up to £20,000*).

These leftover savings get ear-marked for different things, effectively splitting the money into different pots such as "Big Bills" (car, home & pet insurance; car servicing, MOT & tax), "Birthdays", "Christmas", "New Car" and "Holidays". I keep track of what I've allocated to each pot by use of a monthly spreadsheet which I've formulated over several years.

Although I think that my regular monthly expenses are relatively streamlined, the quantity of additional things I'm saving for in the current account means that the amount of money I have left to save into the Freedom Kitty (which is going into my ISA) is not as high as I would like it to be. This year I think that I need to undertake a review of all money which I'm saving in my current account to see if any changes can be made. I'm also due to be moving house this year which means my finances are somewhat uncertain until I know what my mortgage and bill payments will be after moving.

2016 Financial Targets
For the above reasons I'm setting some adjusted monthly financial targets for the remainder of 2016. If you've checked out my Roadmap you will notice that this year's targets are not aligned with the targets specified in it - I'll have to make adjustments accordingly in future years as I get a better picture of where my finances are at and what I'm capable of!

£3,232 average income per month from salary and dividends from my freelance company
£100 average income per month from sources other than my freelance company

Equals TOTAL Income Target: £3,332 per month

Track (and report on this blog) all expenses and calculate average expense per month to be used as a benchmark to compare against next year

Freedom Kitty - £1,000 per month
Personal Pension - £2,000 per month

Equals TOTAL Savings Target: £3,000 per month (£266 more per month than the Roadmap states is needed, but split differently across the 2 savings pots)

Even paying £1,000 per month into the Freedom Kitty is going to be a big challenge for me - this will mean I need to find an extra £850 per month (I'm currently paying just £150 per month into my ISA).

I think this post pretty much concludes my target and goal setting for 2016.
Sorting these Financial Targets means that I've completed another task toward Goal number 2 (Create a 2016 financial plan/budget) which is a nice feeling! I'm now looking forward to being able to start reporting on my progress against goals and targets from next month!

* My current account is the Santander 1|2|3 Account

It's nearly the end of February now, do you have any targets in place and how do you find you're tracking against them?

Friday, 19 February 2016

How I plan to become Financially Independent in 10 years

In my last post, where I shared my 2016 goals, I set myself a task to create a "FI before 50 Roadmap" containing the steps I need to take to become financially independent before reaching the age of 50 (giving myself just over 9 years to achieve FIRE). This is because my ultimate goal is to:
"Gain the freedom to choose what I use my time for, removing the necessity of doing work that does not inspire me simply because it pays the bills"

In today's post I lay out the roadmap I have created. As with all good plans, I'm sure that changes may be necessary along the way, so I'll revisit the roadmap to make adjustments if I feel that something is not working to get me to my ultimate goal.


I would like to begin with defining what I mean by Financial Independence. Here's a quote from wikipedia which describes it more eloquently than I would be able to:
"Financial independence  is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses."

In order that I can stop working at age 49 (just over 9 years from my starting point in Feb 2016), my strategy will be to save and invest money over the next 9 years 3 months into a mix of:
  • My Freedom Kitty - comprising personal saving and investment accounts (Stocks & Shares ISAs, high interest savings accounts etc)
  • My Personal Pension

Just before my 50th birthday I will be able to consider myself Financially Independent. This is because I will be able to use my Freedom Kitty to support me for the 7 years until I reach age 57 when I'm permitted to start drawing my Personal Pension. In doing this I will effectively be depleting the Freedom Kitty (it won't be large enough to support an income from the return on investments), but this approach will satisfy my ultimate goal of early retirement and is more achievable than trying to build the Freedom Kitty up sufficiently to generate enough income to allow it not to be diminished when I start withdrawing.

By age 57 my Personal Pension will be large enough that it can cover my annual expenses from the return on investments, so I can enter into Income Drawdown without depleting the underlying funds.

FI Before 50 Roadmap
In order to achieve my goal of retiring before 50 I need the following financial targets to be met:

Freedom Kitty must reach £209,590 by Jun 2025 (age 49)

  • I anticipate achieving this by saving £1,554 per month

Personal Pension must reach 
£364,965 by Jul 2032 (age 57)

  • I anticipate achieving this by saving £1,180 per month

This results in a total monthly saving goal of £2,734

This plan assumes that any mortgage commitments are paid off by my age of retirement (57). 

The most difficult part of this plan will be achieving the saving rate of £1,554 per month into the Freedom Kitty. I am only just starting on my journey to FIRE in some respects, I have not yet learned how to achieve a high savings percentage so this will be my biggest challenge.

The pension savings target is definitely achievable for me, I am saving more than this per month at present (£3,000 per month). This is possible because I have been freelancing with my own business for 4 years and have built up a pot of funds in my company account which I am using to max out my pension contributions. However the ability to pay this much into my pension depends on the frequency of contract assignments I work on and the rate I am able to charge for this work.

Do you have a strategy and roadmap to get you to a FIRE goal? Do you have a similar situation to mine, where you already have significant funds in a pension pot which you'd like to factor into your FIRE calculation? I'd love to hear of your FIRE plan!

Tuesday, 16 February 2016

Organised Redhead's 2016 Goals

It was back in the summer of '96 that I first discovered the power of setting and working toward achievement of goals. That was the year when I was fortunate to live in Atlanta, Georgia, USA on an hotel internship which formed part of my university degree. The luxury hotel company I worked for had introduced the concept of employee empowerment, which necessitated the education of staff into a different mindset. Part of the training which filtered down to the on-the-ground employees originated from Stephen Covey's hugely successful book "The 7 Habits of Highly Effective People" (first published in 1989) from which training programmes were being introduced into companies around the USA. 

Many of my friends at the hotel (particularly those in the more managerial positions which I aspired to) were reading this book and talking about it. So I decided to join in and see what all the fuss was about. This was the first self-development type book I had ever read, and I lapped it up. 

Covey suggested that for "long term organising" it's useful to create a personal Mission Statement which can then be used to drive out goals that would help you to achieve your ultimate purpose. During the process of setting goals, it's useful to identify key roles which you find yourself performing regularly in your life - for example Mother, Wife, Daughter, Office Manager, Home Builder, Charity Supporter. Once the key roles are determined, it's easier to define goals within each of them.

I duly wrote myself a Personal Mission Statement, worked out my roles, set myself goals and then started to reap the benefits of being more focussed, driven and ultimately getting what I wanted. 

By the end of my year in Atlanta, I'd made many wonderful friends, had an extremely successful internship at the hotel (receiving one of a handful of 'with distinction' awards toward my degree for my placement year), travelled to New York, Ohio, Florida & Canada and on top of all that I'd bought myself a beautiful diamond & sapphire ring with matching diamond & sapphire earrings. 

Out of all these amazing things, the one most positive effect I experienced was that my personal confidence levels were significantly increased. It felt like the world was my oyster and I was hooked!

Since then, I have found that setting and working toward the accomplishment of goals has given me a direction and sense of purpose in my life. I'm positive that if it were not for learning from Stephen Covey and having goals, that I certainly would not have achieved half of what has been possible for me so far. 

Personal Mission Statement

My reason for writing a personal mission statement is to try to encapsulate what I fundamentally want out of my life. Once I have this in writing, I find it's much easier to come up with meaningful goals.

I've recently written a new mission statement as I found that the one I wrote back in 1996 no longer captured the essence of what I now want. It's probably a good idea to take some time to revisit this each year to check it's still working for me.

"To experience happiness, contentment and bliss by having the freedom to choose what I use my time for. 

I choose to spend my time:
 On a continuous journey of self development; 
Sharing great times with family, friends & acquaintances (old and new); 
Helping others with their own search for freedom & happiness"

My Roles

I find that the roles I identify for myself change over time. At the moment the ones I'm using are:

  • Home Builder
  • Money Manager
  • Entrepreneurial Endeavours
  • Relationship Builder
  • Traveller
  • Philanthropist
  • Self Improvement

My 2016 Goals

So without further ado, here are my goals for 2016. The "complete by" date for all goals is December 31st 2016 unless otherwise stated.

1. Experience the joy, satisfaction and contentment of living with my partner (TheBF) for the first time
ROLES: Home Builder, Relationship Builder
I will seek to do this by:

  • Accepting suitable offers for the sale of my house and TheBF's house, with both proceeding to sale completion
  • Finding a new house to buy with TheBF which meets all our purchase criteria
    • Agree a suitable purchase price
    • Complete the purchase
    • Move in [by December 31st 2016]

2. Gain the freedom to choose what I use my time for, removing the necessity of doing work that does not inspire me simply because it pays the bills
ROLES: Money Manager, Entrepreneurial Endeavours
I will seek to do this by:

  • Pursuing financial independence
    • Create a 2016 financial plan/budget [by February 29th 2016]
    • Create a "FI before 50 Roadmap" containing steps I need to take to become Financially Independent before the age of 50 [by March 31st 2016]
    • Follow the 2016 financial plan/budget

  • Researching alternative options for spending my time which could eventually help to replace my current mode of work
    • Create and maintain a blog site to track my goals and interact with the online community
      • Research a suitable blog site and how to use it, and set-up blog [by February 2016] {DONE}
      • Deliver at least 1 post per week on average*
  • Research new alternative sources of repeat income
    • Generate at least £1 this year from a new source** of regular income

*   From the start date of the blog (Feb 12th 2016)
** Existing sources of income include: salary, dividends, interest, cashback, eBay sales, recommendation referrals for products and services I already own/use

3. Become a better person by the end of the year, than I was at the start of it. Can be measured in terms of knowledge & skills gained, health & fitness improved, relationships circle expanded & strengthened, internal beliefs challenged & reviewed, positive habits created
ROLES: Self Improvement, Relationship Builder, Traveller
I will seek to do this by:

  • Completing a personal development challenge with my sister (100 day challenge or something similar)
  • Reading at least 6 new books
  • Losing 10lbs in weight by the end of July and maintaining the weight loss through till the end of the year through good diet and exercise
  • Going on at least 12 planned "date nights" with TheBF in 2016
  • Going on a family holiday to France where I can spend quality time with TheBF, my parents, my sister, brother-in-law and niece
  • Researching and booking a mini-cruise with family
  • Introducing a routine of regular meditation
    • By the end of the year, I will be meditating a minimum of 3 times per week

4: Use my unique personal skills and abilities to help others achieve happiness. This may include offering tips & insights, friendship, encouragement and support 
ROLES: Philanthropist, Relationship Builder, Self Improvement
I will seek to do this by:

  • Offering tips, support and conversation online through:
    • My blog
    • Social media accounts (Twitter in the first instance)
    • Getting involved in the FI and Personal Development communities by commenting on and sharing other people's blogs/sites
  • Offering tips, support and help offline through any face-to-face opportunities should they arise, such as:
    • Meet-ups
    • Coaching
    • Training
    • Speaking engagements
  • Supporting my chosen charities through a spread of donations totalling £350 this year

Do you set yourself goals or do you prefer to be more of a 'free spirit' without them? 
I'd be very interested to hear what goal setting approach you use, and how frequently you set goals...

Friday, 12 February 2016

It's nice to meet you

I'm extremely excited to be writing my very first post, on my very first blog site. It's an idea I've been toying with for some time and finally I've decided to take the plunge. I do hope that you'll forgive me for any mistakes I may make being a complete novice at this, I'm sure there'll be stumbles along the way, so I look forward to receiving feedback and tips on how I can improve - advice will always be gratefully received.

I've decided to take a three-pronged approach for my conversation topics:
1. Goals - primarily my journey to achieving Financial Independence before I'm 50
2. Organisation Tips and Tricks - shortcuts I've found to make life easier
3. Life's Simple Pleasures - in my opinion the route to happiness can often be found in appreciating the unassuming smaller things in our lives

These are 3 areas I'm really interested in delving deeper into with you. I also feel they will give me the depth of subject matter to ensure that I can provide interesting, engaging new content. I will categorise each post I write with labels so that it's easy to find just the topics you're interested in - if for example you just want to find out my organisation tips, or just follow my story for seeking financial independence.

I will be writing a minimum of one new post per week, hopefully more. Since I'm so new to this game, I'm still uncertain on how to get this site "out there" to find people who may be interested in reading, so I suspect at least for a while I may be writing more for myself than for anyone else. If you happen to stumble across me, please do say hello and let me know what you'd be interested to hear about from me. I'd also love to hear about you and your life goals, organisation tips and thoughts on life's simplest of pleasures.

I've already got quite a few ideas lined up for future posts. I'm looking forward to telling you about:

  • Goals I currently have and how I go about setting these (they change and evolve over time)
  • Where I am now and where I need to be to achieve Financial Independence (essentially getting to a point where I don't have to work anymore to survive)
  • Monthly updates on my income, expenditure and savings/investing progress
  • Introducing frugal concepts into my spending habits to cut costs

I know that this is going to be a very exciting, sometimes challenging, but nevertheless thrilling journey for me. I really do hope you join me for the ride and enjoy what I have to say!

What topics are you most interested in hearing about from me?    Is there any one of my 3 subject areas of particular interest to you?   Are you also starting your Financial Independence journey now?