C'est incroyable...another year has flown past and I still can't speak French! That was one of my aims for this year, but whether I succeeded with my 2020 early retirement targets is for a different post. Today is about the money.
I've now completed four full years of early retirement, none of which looked the same:
2017: Lived in Dubai for the year (our son was still at home for most of this year)
2018: Lived in Dubai for 6 months, travelled for 4 months, lived in France for 2 months
2019: Lived in France for 9 months, travelled for 3 months
2020: Lived in France for 9 months, UK for 3 months, and there's that Covid thing too
My plan for this post was to compare how my spending has changed, or maybe stayed the same, over these four years. But the different countries, different currencies and exchange rates makes things confusing. In my old finance role, I might have had to figure this sort of thing out but, as I no longer have a boss, I don't have to. I love that in my new life, the choice of what to do is mine, so I'm simply going to ignore different currencies and exchange rates, I'm sure the numbers will still be close enough.
For starters, below is a summary of what we've (Sally and I) spent in each of the last four years (I've included the normal monthly cost analysis at the end of the post in case anyone wants to look at it):
The first thing I notice is that every year is more than my original £45,000 estimate, on average 20% more - that's quite a lot. But I also know that we wouldn't have expected to spend such large amounts on travelling, and I'm pretty sure these high levels won't continue for ever. If we ever had to reduce our costs, I'm sure we could by a significant amount.
I also notice that we're bucking this year's trend. While many have spent less because of Coronavirus restrictions, we've managed to keep on spending. We did spend less on travel, less going out and at coffee shops, but replaced those savings with a big lump of new spending to furnish a second home as we test splitting our time between France and the UK. I don't think a spoiler alert is required to reveal that operating two homes is more expensive than one!
Why grocery spend is so high continues to be a mystery. We seem to always spend more than most FIRE bloggers, but to an even greater degree in 2020. Perhaps 2018 and 2019 are a little understated, when I suspect some grocery costs got wrapped up in the travel category during our longer trips, but not that much. My instinct is that Sally spends more at the grocery store than I do and she's done most of the shopping since September which is when the costs have gone crazy. However, I'm not brave enough to suggest an audit on her😬 - if you hear what sounds like a loud explosion, that's Sally reacting to this comment!
I can't really complain about Sally's grocery spend when I'm buying expensive sports equipment. This year it was my ski touring gear which I've used precisely once before lockdowns put an end to that. Our other big sporting spend was lift passes for this winter's ski season which we have not yet used at all. The lifts are currently shut because of you know what, and I'm not sure keeping my fingers crossed will be enough to change that.
I'm happy with our charitable donations. It's something I scarcely thought about when I worked but, now I have more time to think, it has started to feature. Last year we set a target of 4% of our spend to be to charity and this year we've made it 5%. I'm sure some will say we should do more, and perhaps they'd be right, but I feel we're moving in the right direction.
While costs are one side of the equation, income is the other side. We have two main investments, residential rental properties (approximately 60% of our investment portfolio) and low costs ETFs (approximately 40% of our portfolio). Here we have good news. The first good news (for both us and our tenants) is that we've had no Covid related payment issues on our properties. The second piece of good news is that our rental income completely covers our costs - we don't have to draw any income from our ETFs, which is a good place to be. Probably it's overly cautious, and it tells me that I could have retired earlier if I'd wanted to, but I'm conscious that our money may have to last another 50+ years, so caution isn't a bad thing.
The less good news on investments is that we still have a lump of cash that's not invested. So when I said 40% of our investments are in low cost ETFs, what I really meant is that half has been sitting in cash since June. I had this idea that with Coronavirus hitting the economy, stocks would continue to fall and I could re-buy at a lower price. Not for the first time, I've got my investment assumptions wrong - stock prices continue to go up each month and I scratch my head in disbelief and do nothing. I still instinctively feel that prices are too high, but when do I bite the bullet and invest? I know the theory is to do it today, but doing so in practice seems difficult.
That's my 2020 early retirement money story. It can be sliced and diced a hundred different ways, but the headline for me is that so long as our income is more than our costs, things are pretty good.
So there's just one thing left, which is for me to wish you a happy and healthy 2021 - Bonne Année.