This is the eighth year chasing FIRE, my financial freedom retire early journey. It turns out that the number eight is pretty significant according to Wikipedia. In Pythagorean numerology, the number 8 represents victory, prosperity and overcoming. It is considered a lucky number in Japan. In Chinese culture, eight gives an idea of growing prosperous, because the letter (八) broadens gradually.
This is very fitting because after the odd 7th year that I had, this one has turned out to be very different. As I move into the second half of my FIRE plan it feels like I am picking up speed. The wealth continues to grow and the assumptions continue to be reasonable and I get more clarity. I get the feeling that this plan is going to work after all!
FIRE Plan Review
My plan to financial freedom is my road map to early retirement. I started in 2015 and have done a FIRE plan review every year.
I have been at it for 8 years now. In the beginning my only objective was to pay off debt. I achieved that in 2019 so the reviews were short and sweet. Since then I have done full reviews every year 2020 , 2021 and last year 2022.
Check this post to see how I created my personal financial plan. Here you will find exactly how I setup the plan and all the calculations etc.
The process of reviewing my plan consists of the following
- Review the actual plan to see if it still makes sense
- Review annual expenses to see how we did
- Review the FI target
- Update the financial plan spreadsheet and progress graphs
- Review investment performance and portfolio plan and allocations
How was 2023?
Unpredictable and volatile is the norm these days. The Russia invasion continues and the middle east is also now a war area with Israel and Hamas. Interest rates are at an all time high with some saying this is the top and we should see cuts in future. But who knows.
Closer to home we have the high interest rates too. Together with a very weak Rand thanks to the strong dollar and a completely useless government. Eskom power cuts reached diabolical levels. Even though COVID is long gone and life is back to normal, we are all still dealing with a COVID hangover.
Stick to your plan and ignore what you can’t control
Every year there are problems and it will never stop. So don’t let it control you and have your own plan. There is more than enough that each of us can control and do to secure our future. That is what you need to focus on.
Personally it was a good year with good health, that is the most important. It was difficult though because we lost a member of our family as my mother in law passed away. She lived with us so it was quite a shock to our household. It’s an end of an era now as both my parents and my wife’s parents are no longer with us.
Business-wise work was a challenge in these tough times. But I still appreciate the opportunity to contribute and earn a salary that feeds my FIRE plan.
My wifes accounting practice is moving along and her network continues to grow. This is a long-term strategy that will provide income in the future. So if you have a small business needing advice and a seriously experienced accountant then please contact me.
Highlights in 2023
- Successfully monetised my new YouTube channel
- Enjoyed several holidays
- 229 days of exercise and 6685km on my bike
- Competed in 4 bike races
- Exceeded financial freedom investment targets
- Received dividend from side hustle
Managing expenses is a crucial part of the chasing FIRE plan review. The less you spend the more you can save and the quicker you can reach freedom.
2023 was a good year for expenses. My goal is to keep expenses flat and at worst case below inflation. We had a 1% increase on our expenses which is excellent considering the extremely high inflation. But a contributing factor was that for part of the year we had one less member in the household.
We did still experience significant inflation in food and health related categories bud made some changes to minimise the impact.
The graph below gives the detail of the last few years.
Overall there is no major change in the proportion of our spending. As long as we are tracking on target with our investment targets then we are ok.
Many of these categories are also discretionary like restaurants & travel, recreation, and a large part of exceptions. Arguably we could cut these and invest that money to achieve FIRE sooner. But we are trying to balance life now with future security. This is a good example to show that chasing FIRE does not mean that you have to suffer. You just need to spend wisely on the things that matter most and not waste while maintaining a healthy savings rate.
FI Target Review
As part of my chasing FIRE plan review, I have been looking at the assumptions of my plan. Three of these assumptions have changed.
First one is that my mother-in-law will continue to live with us for an unknown period. However she unfortunately passed away this year. So this unknown has now become known. These expenses can now be diverted to investment and no longer need to be accounted for in a retirement scenario.
Second assumption is that my wife will retire with me. Reality is she will continue to work for longer as she is younger than me and wants to remain working. So I have adjusted my plan accordingly to allow for additional income after FIRE date. This has the same effect of reducing expenses post FIRE date.
Third assumption is our expected expenses at retirement. This has a massive impact. I realised or more accurately had to accept, that my predicted retirement expenses were too low and a bit unrealistic. So I have reviewed them and only eliminated costs that I know for sure will fall away. I also added some extra expenses that may come. Like any good assumption, I rather consider worst case scenario than hope for best best-case scenario.
Updated spreadsheets and progress graphs
This graph shows me how I am doing according to my revised plan from 2018. The grey bars are my plan while the orange bars are my actual. According to my plan for 2023 I should have reached about 49% of my target. My actual result shows that I am at about 60% of the target. For 4 years now I have maintained a healthy lead over my plan.
The other measure I use is to calculate that if I retired today how much would I have of my Retirement amount. That calculation says that I have 50% of my required retirement amount as of today. This is lower than the figure that I had a year ago but it now includes the adjusted assumptions mentioned above.
I also keep track of my portfolio allocation which shows the different type of investments that I have. There is an ongoing shift in the proportions. Foreign equities are now my second biggest asset class. Crypto has also shrunk a bit as I lost some of it in the FTX exchange collapse.
Review Portfolio Allocations and Investment performance
I manage the above portfolio allocations with a simple spreadsheet that I used when I created my own portfolio.
I had previously stated that some of this portfolio allocation I can’t influence like my provident and pension portions. But this is not entirely true.
I am able to choose and change the funds that my provident and pension are invested in. This is what I did at the end of 2023. I have moved half of my provident and pension into a low cost passive managed fund. I did this to reduce costs but also the international asset allocation is higher in this fund. Consequently, I have now managed to balance my portfolio better as I was always underweight on my 40% international equity target.
This change has now helped me to achieve my 80% equity target with a 50/50 local/international split.
Markets in 2023 were a mixed bag. The JSE was dismal with 1.8% growth while international markets rebounded from the shocking 2022 with S&P500 +24%.
My investment performance shown below is an annualised return since I started. Compared to last year the international stocks have recovered but local equities are dismal. This is due to some local stocks that I bought that have all gone backward. The bulk is in ETFs that were ok but these poor-performing individual stocks are not helping my confidence in picking stocks.
My long term investment growth assumption is 10% per year. In the table above you can see that only about half of the investments achieved that target and overall it was not achieved.
This is only my 5th year in this market so it is still a relatively short term. I expect this to improve over the next 5-10 years.
The more conservative pension and provident investments showed stable returns. In the good years in some of my previous reviews I was complaining about how poor the Provident and Pension performance was. But it is probably better that not all my investments are up and down like a yoyo.
The Quiet Confidence
After doing this review and sharing this with my family I felt a very calming quiet confidence. It is only a little feeling but it is something that I have felt before.
The last time was in 2019 when I finally became debt free. That was a feeling of freedom and knowing that suddenly there were more options for the future. This time was similar, a feeling of more freedom, more options and a growing ability to be less dependent on others and especially a job.
I have started to think what it will be like in four years time when I hit that target. Can I get there sooner? Is it going to be enough? There are still questions but after completing 8 years of chasing FIRE successfully the chance of completing the next 4 years successfully is increasing every year. Exciting times!