The Odd FIRE Plan Review 2022

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Its that time of the year to reflect and take stock in my FIRE plan review. Seven is an odd number. No I really mean it, Seven is an odd number. Its odd because it is in the middle of nowhere. Somewhere between 5 and 10. Thats why it is called the seven year itch in marriages when couples start to lose interest.

It also happens to be how many years I have been on this FIRE (financial freedom retire early) journey of mine. And it feels like all of the above for me. The initial excitement of starting and progressing has worn off. I feel like I am in the middle of nowhere. Also if I am honest then some realities and disinterest have set in. But there is a silver lining at the end.

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.

Even though I have been at it for 7 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. Then I did full reviews in 2020 and in 2021. So this year I will follow that similar format.

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

  1. Review the actual plan to see if it still makes sense
  2. Review annual expenses to see how we did
  3. Review the FI target
  4. Update the financial plan spreadsheet and progress graphs
  5. Review investment performance and portfolio plan and allocations

How was 2022?

We were all hoping for that fresh new year to shake off the COVID blues and get back to more normality. Well we all know how that went don’t we. It all seemed to start off fine until a certain Russian decided to Puttin his troops where he wasn’t welcomed and the next thing there was a war. Then came the energy crisis. That fueled the inflation and that gave the central banks license to raise fuel the interest rates. The UK officially implemented musical chairs as their new political system. And that was the end of that as far as markets were concerned. Tech stocks crashed, the crypto exchanges went belly up and the recession word started doing the rounds.

It was a very bad year for the markets, especially the US market. In Europe and UK they hit record inflation rates. While back at home Cyril decided that cash was king and stored his money in his sofa. We were all left in the dark as ESKOM confirmed their expertise in switching off rather than switching on.

Control What You Can, Ignore the Rest

Like it or not these factors all affect the market and our investments and earning potential. But we can do nothing about them. Thats why I joke about them because it is like watching a movie. You can’t change the plot. What you can do though is take control of everything that is in your control. So I don’t let all these things worry me. I just use them to make sure that I am doing what I can to secure my future.

My world was actually very good but that doesn’t mean it wasn’t challenging.

Personally and health wise it was a good year and we had some amazing family time and holidays.

Business wise at work I am dealing with a potential acquisition of the company I work for which is unpredictable and uncertain. But because I have this financial plan in play and an emergency fund in place it is less of a worry than it could have been.

My wife is still doing her own accounting business and it is slowly growing. But we are still lower in earnings than when she was employed. But this is a longterm strategy so we continued to work at it to make it successful to 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 2022

  • Successfully started a new YouTube channel
  • Revisited Mozambique again
  • Went on a long overdue covid delayed overseas holiday
  • 222 days on my bike 5700km average of 50min exercise per day
  • Exceeded financial freedom investment targets
  • Received dividend from side hustle

Expenses Review

Managing expenses is a cruicial part of the FIRE plan review. The less you spend the more you can save and the quicker you can reach freedom.

2022 was not a good year for expenses. My goal is to keep expenses flat. Yes I know there is inflation but I aim to neutralise inflation by continually looking for savings. I had done this successfully previously but this year I did not manage.

It was particularly difficult with the increases in fuel and food prices. Also as my son gets older the schooling and activities cost more and we won’t cut on those. We also traveled more because we love it so much and we were unable to previously due to covid.

Housing also cost a bit more with utilities going up. Other services crept up the most and this is a combination of all the smaller items but many of them were inflation driven

The graph below gives the detail of the last few years.

Overall we are still managing well on the larger categories like food and education. The biggest concern is the other services and the overall expenses creep so I will focus on this again this year. We have identified some areas like takeouts, general purchases and bank fees where we can quickly cut back. Reality is that we are fortunate in that we can cutback if we have to in many of these categories.

FI Target Review

As part of my FIRE plan review I have been looking at some changes to my financial plan. The existing plan assumes that both myself and my wife retire in 2028 and rely 100% on invested funds. But reality is my wife will still be working in her business so we will still have some income.

This means that my target retirement date could be reached sooner. But with the uncertainty around my future employment it means that I could be forced to stop working sooner. I haven’t changed anything yet but I have run some worst case scenarios just to make sure that I am not missing something. So for now we just continue to save as much as is possible until I have more certainty about future changes.

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 2022 I should have reached about 41% of my target. My actual result shows that I am at about 49% of the target. It is interesting to see that despite a bad investment market I am still ahead of my plan. But you can see that I have lost some of the gains that I made in 2021.

The other measure that 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 55% of my required retirement amount as of today. This is the same figure as I had a year ago. So that shows the lack of growth in my investments that hasn’t kept up with inflation for 2022.

I also keep track of my portfolio allocation which shows the different type of investments that I have. No major changes there just a bit of shift in the proportions. Compared to last year the foreign equities decreased slightly while local equities increased. My provident fund increased a bit as it is a more conservative investment and more protected in these volatile times. Overall cash decreased as I used some of that for my holiday trips. Last year the Crypto (grey block) was growing but this year you can see how small it is after the major crypto crashes.

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. Some of this portfolio allocation I can’t influence at the moment like my provident and pension portions.

As I continue to buy equities this portion of the portfolio increases. My target is 80% equities split 50/50 between local and foreign and I am sitting at about 77% at the moment. This portfolio helps to guide me to what investments I need to make during the year.

Investment performance in 2022 was not great. This was not because I made bad investments but rather because the whole market was down. The JSE was -1% down for the year while the S&P 500 was down -20% for the year.

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.

But considering how bad the market was it was only my foreign equities that showed a negative growth. This is only my 4th year in this market so it is still a relatively short term. I expect this to improve over the next 5-10 years.

Once again in these volatile times 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 this year I saw the stability and benefit of these more conservative investments.

The Silver Lining

So overall I think 2022 was really average and pretty much in the middle of nowhere as I suggested to start with. But looking at the glass half full I am now passing halfway and entering into the second half of my financial freedom journey. By all accounts this is where the magic happens and I’m hoping that it speeds up.

Also you cannot expect every year to be fantastic. Considering how bad 2022 was from an investment point of view the overall result is not that bad. If this is how bad bad looks then I can live with that because good looks a whole lot better than this.

However most important is that the plan is still on track. Doing the FIRE plan review every year helps me to know that. In 2023 I will maintain that investment momentum and spend more time focused on managing expenses better. Most important of all is to start saving again for that next holiday.

Let me know if you have any questions and how your financial journey is going.