Financial Independence – Lessons Learnt Over the Past Year

two blue chairs on the beach
You might be able to sit here every day if you achieve financial independence

It has been over a year since I discovered the financial independence/retire early movement. I have listened to so many podcasts and read hundreds of blog posts in that time. It has helped me to become familiar with many of the principles of FI/RE and for those of you new to this concept I want to introduce you to the basic tenets. This is also an opportunity for me to look back at what I have learnt over the past year and how far I have come in my FI/RE journey.

The four percent rule

Financial independence is achieved when you have saved 25x your annual spending. For example, if you could live on £10,000 a year you only need £250,000 saved. If you prefer a less frugal ‘retirement’, say on £30,000 a year, then you will need £750,000. This is based on the premise that when you stop working for money you will be able to withdraw 4% of your savings every year to live on. Despite the regular withdrawals, at a rate of only 4%, if invested wisely, your nest egg should last until you die.

Although financial independence is amazing, I arrived late to the party, so my chances of being able to save 25x my spending are about zero. Nevertheless, the principles of FI/RE have enabled me to begin to spend my money more thoughtfully and helped me learn what is important in my life.

a takeaway coffee
Not buying one of these every day can add up

Small savings can add up

This is the easy part and something that everyone can do. Unless you’re completely new to the FI/RE movement, then you will already be familiar with the usual list of things to cut out of your life e.g. cable/satellite television, gym membership, daily lattes/lunches expensive mobile phones, bottled water.

I have stopped buying so many coffees and lunches, but also cancelled some magazine subscriptions. I have also not bought any clothes in a year, having realised that I have plenty to keep me going for a while yet.

The three big wins are making savings on housing, transportation and food

These are the three areas where we all spend the majority of our money. Over the past year I have mostly been tackling our food budget. We used to do our weekly shop in Waitrose, which is one of the most expensive supermarkets in the UK. I have to admit that the quality of some of their food is better than what I now get in Tesco, but currently the savings are worth it.

woman buying bread in a market
I have worked hard on making this stress-free

Food

As well as changing where we shop I have also devoted time to meal planning and now do that once a month, along with ordering a monthly food delivery. This is one of the areas where I realised that time is more precious than money. At the beginning of 2019 I was going to two separate supermarkets each week to maximize our savings, but after a long day at work I was exhausted and found this a challenge. I was also disappointed in the quality of the fruit and veg from Lidl and we ended up wasting food as it just went straight into the compost.

Now I choose to shop only at Tesco, which is via our delivery and then weekly top ups, mainly of perishables. The delivery also means that I am not lugging heavy bags of shopping in and out of the car e.g. beer, tins, bottles of cleaning products. I feel that I have completely taken the stress out of shopping. The delivery does come with a charge of approximately £1.50, but for me it is so worth it.

white house with blue shutters
Our house is really too big for just a couple, but we don’t want to sell it

Housing

Housing is a much more difficult area as prior to discovering financial independence we spent £435,000 on a house, albeit the mortgage was only £130,000. It now stands at £73,810.70.

I don’t want to sell the house and so the only other option is to maximise our asset. This could be through AirBnB or renting out a room. The first would be my preference, but I have realise that this may be difficult when we are hosting trainee guide dogs. We love having the dogs and wouldn’t want to give this up, but I’m not sure how the organisation would feel about this. Theoretically the strangers staying in your house could steal the dog, who is worth a lot of money due to all the training hours that has been put into him/her. This eventuality seems unlikely, but it would make me anxious. I am not sure how we are going to address this and probably need to have a chat with someone from the agency.

We are then left with the option of renting out a room on a long-term basis.  At the moment I am not sure about that. Mr Simple has talked about trying to find full-time employment, which may mean staying away from home Monday to Friday. If that does happen I may consider having lodger, ideally one who is just here through the week and returns home at the weekend.

red car in a field
We need one of these, but manage with old ones

Transportation

Ideally a financially independent life is a car-free one, but if you live in a rural area as I do this is not realistic. As I’ve mentioned before I get an allowance from my employer towards the upkeep of my car as it is essential for my job. If you do need a car, then buying second hand is the way to go, which my car was when I bought it. At nine years old it is getting on a bit and costing me more money in upkeep, but it is less than buying a new car, so I am trying to keep it going.

One possibility for us is having one car. Mr Simple wasn’t enthusiastic when I mentioned this recently, but as he is home most of the time and his car sits on the drive way, I do question whether it is really necessary. He says that he needs it when he goes away to work as travelling on public transport would limit where he is able to stay overnight. I think that it’s something we need to consider. I may look at how feasible it is for me to arrange my appointments on the days that he is usually here and to be at home when he is away so that he could take my car.

hands typing on a computer
Sell clothes on Ebay or start a blog

If you can, increase your income through side hustles

There is only so much you can do to reduce your spending unless you want to live like a monk and eat rice and beans every day. Those aggressively pursuing financial independence look to earn extra money in their spare time. You could get a second job, do surveys on line or start a blog. There are lots of ideas here on the Humble Penny website. So far I haven’t made any progress in this area.

logo for Vanguard investment platform
This is where to put your money

Put all your savings in index funds with Vanguard

All that money you save from cutting back and earn from side hustles needs to be put straight into an index fund with Vanguard. The company set up by John Bogle in 1975 seems to be the favourite of the financial independence movement, as a result of its low fees. There’s no picking individual stocks, just own a part of the total stock market, invest regularly and wait. It will go up and down, but over time will gradually increase in value until you’ve got that nest egg from which you can draw your 4%.

My money’s in a Target Retirement Fund. This is part stocks, part bonds the balance of which changes as you get nearer to the year that you have selected for your retirement. Vanguard does it all for you, so the fee it slightly higher than their other funds, but it’s still very reasonable compared to an actively managed fund.

So there we are folks, the basics of the financial independence/retire early movement and my progress so far. How’s your journey going? I would love to know. Are you just starting out or are you already retired?

Why You Really Need a Budget

calculator
If you want to stop being poor you really need to start budgeting

I get fed up of reading blog posts where people say they don’t budget or they don’t need a budget. It makes me mad! You may be one of those people that finds the thought of having a budget rather boring, but it’s essential. If anyone tells you that you don’t need a budget they are lying. Not having a budget means that your bills don’t get paid on time. It also means you may have to get into debt just to be able to pay for the basics in life.

In the world of Financial Independence/Retire Early there is a focus on making it sound fun and exciting. In reality, it can be hard work. Stephen Covey said that effective people are prepared to do things that other, less effective people, aren’t. Believe me, if you want to be effective in the field of early retirement and financial independence you’ve got to put in the work. This means having a budget. To some of you will seem like common sense, but I am always amazed at how many people don’t actually have a grip on their money.

So what does a budget look like?  

How to set up a basic budget

If you want to have any chance of getting control of your finances then you need to start looking at what you are spending your money on. If you don’t know how much is in your account and you are blindly handing over your credit/debit card to buy something that you don’t really need then you are in trouble.

You could start by keeping track of your expenses over the next few months, but really you need to look at a whole year. I’d recommend pulling out your old bank statements and having a look at where your money went.

Light bulb laying on grass
If you want to keep the lights on you need to start budgeting

Predictable Expenses – monthly

Let’s start with the easy part. Look at the regular bills that you are paying each month. For me these are gas, electricity, mortgage, council tax, water, phone and broadband and TV licence. I recommend setting up a separate account to pay these out of. You can automatically transfer a set amount to that account the day after payday. With that done you won’t be at risk of having the gas cut off.

Predictable Expenses – annually

Secondly, there are some bills that you only pay once a year. For me these are:

  • Car service
  • Car tax
  • MOT
  • Vehicle recovery
  • Car insurance
  • House insurance
  • Travel insurance

I also add money for medical expenses such as opticians, dentist, my physio appointments. Finally I add money towards my holiday fund. For some of the annual bills there is the option to pay them monthly by direct debit, but often this increases the annual total.

Make a list of all your one-off annual expenses, plus anything else that you want to save towards each month. Add up how much you spend on these in a year and then divide by 12. If you are going to have a second account for your monthly expenses you can then add this amount to your post-payday transfer every month. That way, when the yearly bill comes around you’ve already got the money saved. It also prevents those expensive months, as you spread the cost over the year.

Savings

If you haven’t yet got a grip on your spending, then finding some money to put away each month may not be at the top of your list. I would hope that as you’ve gone through all of your main expenses you will have discovered where you could make some savings. Hopefully you’ll have been amazed at how much you’ve wasted on things that in retrospect you could have done without. Once you’ve worked out how much you can afford to save it’s just a matter of transferring that amount to a savings account or preferably an ISA each month.

woman doing pilates
A Pilates class – one of my weekly expenses

The remainder

What you have left is yours to spend as you see fit. I have six categories for this money. They are food, petrol, toiletries, Pilates, social and miscellaneous. As I am someone who likes budgeting I allocate a certain amount to each category, but it’s entirely up to you how you spend this. As long as you don’t go overdrawn by the end of the month then you’re doing okay.

So there we are, a simple guide to start to get a grip of your expenses. It may seem like a lot of work to start with, but once it’s in place you won’t have to worry anymore when you get to the end of the month as to whether you’ve got enough money to pay the bills.

Do you have particular problems with your budget that you are trying to tackle? Let me know in the comments section or if you’d rather keep it private send me an email via the contact form and I’ll see if I can help you.

How to Save Time and Money Everyday

In this modern and hectic world everyone seems to be so busy, but there are easy ways to save time, along with making some financial savings as well. This is particularly important if like me you are interested in the financial independence/retire early movement. Making small savings every day can help you to increase your savings and having more time might just help you find a few hours each week to work on a side hustle. Therefore, here are some ideas how you can save time and money every single day.

Do less washing – you won’t be smelly – I promise!

Laundry

Wash items less

Washing clothes is time-consuming, costs money and is bad for the environment. The first way to save time and money on laundry is to hang up your clothes after wearing them once, instead of washing them. Now I don’t mean underwear, just items like trousers, skirts and jumpers. I wear those several times before washing them. I also wear blouses and t-shirts twice. In between the first and second wear I put them on a hanger on the front of the wardrobe door. This stops them from getting creased, allows them to air and reminds me that I have already worn them once.

Use an airer

If you use a tumble dryer the cost of electricity can be astronomical. To dry our clothes we have a washing line outside, which in our lovely British weather is only useful so many months of the year. When it’s too cold or wet outside, in order to save money I use airers to dry our clothes. I don’t think that hanging clothes on radiators is a good idea.

For a start, I think that it restricts the heat coming into the room and I find it’s too hot for many of the clothes and they can go a little crispy. A much better idea is to just hang them on the airer and stand it next to the radiator. It may sound a bit pedantic, but made sure each item is laying flat. I used to have a flatmate that would hang her knickers on the airer whilst they were still crumpled up. This meant that they took longer to dry and again seemed to have a ‘crispy’ feel once they were dry.

Reduce the ironing pile

As well as putting clothes in the washing machine and hanging them up to dry there is also ironing. Fortunately since Mr Simple got made redundant a couple of years ago I have saved hours of my life as I no longer have to iron his work shirts very often. He spends most of his time working from home and just shoves on a t-shirt and jogging bottoms. About once a fortnight he wears a shirt and like me, he will wear it more than once, so now it’s only one shirt a month that I have to iron.

If you do a lot of ironing, in order to save money I would suggest trying to do a large pile in one go. Heating the iron up several times a week to iron a few items will cost you more money than putting it on once and keeping it at that temperature until you’ve finished the whole pile.

Colouring your hair yourself is easier than you think

Personal care

Dye your own hair

Since discovering the financial independence/retire early movement I have significantly cut the amount of services that I purchase and even before that I wasn’t a great consumer of the beauty industry. Through this I am able to save both time and money on trying to fight back the signs of ageing. When you get to the ripe old age of 50 (and for me long before that) grey hair is a fact of life. Some people choose to embrace this and are happy to go grey, but I just think that I would look so much older, so I choose to dye my hair.

This used to involve going to the hairdressers once every six weeks and paying about £60 for a colour, cut and blow dry. I’d never really considered dying it myself, but after reading about Mrs Frugalwoods cutting her own hair I thought that I would give it a go. It is a bit messy, but it saves me so much money. A pack of ‘Nice and Easy’ Dye is just £6. I then just go for a wet cut every few months, i.e. I turn up with wet hair, the hairdresser cuts it, gives it a quick blow with the hairdryer to get out the worst of the moisture and I’m off. That only costs me £20.

Make fewer trips to the salon

So how does this save me time? When I went to the salon to have my hair dyed I would be there for about two hours. By the time they had put the dye on, left it a bit, washed my hair, cut it, dried it and then straightened it, most of the morning would be gone. My hairdresser would often ask me what I was doing later, expecting me to say that I was going out somewhere nice to show off my new haircut. In fact most of the time as soon as I got home my hair went up in a clip and I got on with some household chores or gardening. All that drying and straightening, which I can do perfectly well myself, was a complete waste of time and money. On top of the time and money spent at the salon there was the travel time and if I took the car, the cost of petrol. It’s only a mile away, but it all adds up.

As well as my hair I am now plucking my own eyebrows instead of getting them waxed and using hair removal cream on my other facial hair. Each task only takes a few minutes, saving another trek into town and yet more money.

Cleaning

Be tidy

One of the best ways to save time on cleaning is not to make a mess in the first place. When you’ve finished with something, put it away. When you pick up the junk mail on the way in the door put it straight into the recycling bin rather than leaving it on the side to pile up. Eventually you’ll have to sort through it.

Ban ornaments

I’ve never been a great fan of ornaments, but I think that if you want to save time on cleaning it’s really important to keep your environment simple. I can never understand ‘collectors’ – shelves and shelves of figurines or fancy teapots. To my mind these are just dust collectors which you have to spend hours of your life keeping clean. So, save time and money – by not buying them and therefore not having to dust them. If you really must have something, keep it simple and buy just a couple of things that will be easy to move when you need to dust that shelf.

So there we are, just a few simple ways to make life easier, giving you more time and saving you a few pennies.

Simple and Healthy Meals for the Freezer

Bowls of rice and vegetables
Make healthy meals that you can freeze and eat later in the month when you need something quickly

I have mentioned several times that in a bid to save money, we often eat out of the freezer. For Mr Simple and I this means making healthy meals for the freezer and keeping them for those evenings when you are short on time. As a rule, we tend to eat these in the second half of the month. They are particularly useful if I am going to be home late or if Mr Simple has to cook. This often happens on a Tuesday when I have a Pilates class. It isn’t that he can’t cook, in fact he is a better cook than I am, but he is reluctant to spend too much time on meal preparation when he’s got a lot of DIY to do.

I find that there are many benefits to eating this way and it takes a lot of the stress out of meal planning and preparation. I believe that there are several benefits to eating this way.

Cheap

Many of our healthy meals for the freezer are made with inexpensive ingredients such as vegetables and beans. We mainly used tinned beans e.g. chick peas, kidneys beans, but you can use dried as well. The dried versions are cheaper, but they take more preparation. You need to soak them overnight and boil them for over an hour. Another frugal ingredient is lentils, which sometimes need soaking, but a lot less than the dried beans. I find pouring on boiling water instead of cold water when soaking speeds up the process. Red split lentils don’t need any soaking at all and are especially good at thickening stews and curries. During autumn and winter you can use root vegetables which are very cheap, such as carrots and potatoes.

Carrots – cheap, good for you and they last in the fridge for ages

Easy to make

You don’t need to possess amazing culinary skills to make many of these meals. It just takes a bit of peeling and chopping and opening a tin or a packet. Food such as curry or vegetable stew can be made in one pot. Then you can make some rice on the side. You can make it even easier and have some crusty bread with it instead. Keeping it simple means that there won’t be a lot of washing up afterwards.

Healthy

It’s easy to get in your five a day as the meals are heavy on vegetables. The beans provide that much-needed protein. To make it even healthier stick to accompaniments of brown rice, quinoa or mashed sweet potato.

Time saving

Once you’ve cooked, and eaten what you want, the rest can go in the freezer. The next time you want to eat it you just have to remember to take your dinner out of the freezer in the morning or the night before. Then you can have your evening meal ready quickly. Just heat up your defrosted food and add a grain or other carb of your choice.

Make courgette and feta cakes – they freeze really well and are delicious

Below are some examples of the healthy meals for the freezer that we eat regularly, along with where to go for examples of recipes. Hopefully they will give you some ideas if you want to save time and money on what you eat.

Veggie chilli

This is a staple in our household. Usually it is made by Mr Simple. He would say that I am too tame with the chilli and he likes it a bit hotter than I do. We have several of Hugh Fearnley-Whittingstall’s books and the recipe comes from one of those. . Instead of the usual kidney beans he uses pinto beans, but I am sure you can use whatever you have in stock.

Black bean curry

I currently have the ‘Curry Guy Veg’ out of the library and he has a recipe for black-eyed bean curry. I used black beans instead. He doesn’t appear to have a website, but here is a similar recipe for you to try.

Courgette and feta cakes

These are something slightly different as they are a bit fiddly to make, but delicious and they freeze really well. It is a Delia Smith recipe and they are a good way to use up a glut of courgettes.

Veggie burgers

I find that most, if not all, vegetarian burger recipes freeze well. This month I found we had four different types in the freezer so got them all out and Mr Simple and I had them with polenta chips and a salad.

So there we go, I hope you feel inspired to start filling your freezer with healthy and delicious meals which will save you time and money. After a long day driving to work and back, sometimes in the dark, it is good to come home to something warm and comforting which you haven’t had to spend a lot of time cooking.

How do you use your freezer? I’d love to me know about any meals you regularly make for the freezer.

Ten Habits to Make You Rich

Coins dropping on to a table
Build habits which will give you more of this

Over the life time of this blog I have been making my way through Tom Corley’s thirty habits in his book, Rich Habits Poor Habits. So far I have looked at ten of them, so I thought that it would be a good point to take a breath, remind myself of what they were and have a look at how I’m getting on with trying out some of his ideas. If you’ve missed any of the posts I’ll link back to each one for you below so you can check out the full details. I will also let you know other resources that I’ve come across recently which may help you if you want to work on a certain area.

Just to let you know this post contains affiliate links. That means that if you click on one of the links and purchase the item I will get some money. Please see here for more information about my use of affiliate links.

So here we go…

Number One – I will adopt good daily habits and follow these good daily habits every day

I’ve been doing some reading about habits recently as I am re-reading James Clear’s book ‘Atomic Habits’ and making some notes. I was going to write a post about it, but Latestarterfire beat me to it, so I would just suggest that you read her post. You can also listen to James Clear talk about his book on the Afford Anything podcast.

During another, more recent episode of Afford Anything, Paula Pant’s interviewee, Kristen Berman, claimed that habits are overrated and you should foster one time decisions that force behaviour change e.g. if you want to save, set up a direct debit to your savings account from your current account on pay day or if you want to walk more, get a dog as it will force you to go out twice a day no matter what the weather. (By the way, if you are thinking of getting a dog, then I would strongly recommend reading Chrissy’s post on her recent decision to give a home to a four-legged friend). Although Kristen almost dismissed habits, much of her advice about cultivating behaviour change was similar to that of James Clear so it is worth a listen to both of the episodes.

Number Two – I will define my dreams and then create goals around each dream. I will focus on my dream-goals every day

This is such an important area. Many of us plan for our weekends and our holidays, but we don’t plan for our lives, we don’t think about where we want to end up. We just follow the same route as everyone else, school, maybe university, job, long term relationship, children, grandchildren, retirement, death.

A lot of that may be very enjoyable (except for the death part, obviously), but there are other possibilities, other realities, you just have to be brave enough to be different. For me this is a constant work in progress as I am still working out what my dreams and goals are. How about you? Is your life going to way to you want it to? Are you just doing what is expected of you by others rather than making a conscientious choice? If you want some help setting goals then listen to this podcast by Natalie Bacon.

Number Three – I will devote at least thirty minutes each day to increasing my knowledge and improving my skills. I will invest in myself every day

I have certainly improved my knowledge over the past few months through reading and listening to podcasts, but my skills are probably much the same. In a bid to invest in myself and this blog I have recently purchased the Genius Blogger’s Toolkit, an amazing package of courses, which should help me to develop ‘A Simple Life’ over the next six months. So watch this space!

How are you increasing your knowledge and skills? There is so much free information available these days. Whether it’s online or from real books from the library don’t let yourself stagnate. Learning shouldn’t just be something that you did at school.

A salad in a bowl
Eat plenty of this to keep you healthy

Number Four – I will devote thirty minutes to exercise every day. I will eat healthy food every day

I manage the healthy eating part of this most days, but it is the exercise portion which I am still struggling with. I have been doing a small amount of jogging a couple of times a week and when we had a trainee assistance dog recently I did do a lot more walking, but on many days I won’t even do 2000 steps. Basically, I could do much better and it is definitely an area I need to work on, probably like most of us.

Number Five – I will seek to build strong relationships with other success-minded people

I have been making an effort to keep some notes on other professionals who I meet through work; details they tell me about themselves so that I can refer to them if we are going to meet again and ask them questions, showing that I have remembered what they told me before. Okay, I haven’t remembered, I’ve written it down, but I’m only human and the more I chat to someone about their lives the more details that I retain. I am hoping this will help build relationships at work. One difficulty is that I don’t actually want more success in my job. I am content with my role and plan to do this until I retire.

As for in my personal life I struggle to find anyone who is interested in personal development or FI/RE in real life and just rely on my virtual ‘friends’. I am trying to make an effort to join in with local events e.g. there was a community cinema event last week and recently I went to see a play in the village hall.

How do you connect with likeminded people and where do you find them? Are your friends interested in personal development?

Number Six – I will live every day in a state of moderation

In many ways I am a moderate person. I am calm and not subject to extremes of emotion, but my savings rate is not moderate, it is extreme and so should yours be. How else can we achieve our financial goals otherwise? This month we are living out of the freezer in a bid to save money on food and so far it is going well. I’ll let you know how we get on in my usual monthly review.

Number Seven – I will take action on my goals every day

This is hard as my goals are personal rather than work ones and I don’t always seem to find the time or I am too tired to work on them. If I take the week as a whole I do feel as though I make progress, but finding the time to work on the blog is hard. I have been helping Mr Simple with some DIY for a couple of evenings this week and last week I had social engagements on several evenings. When I come home at 10pm I just want to go to bed rather than turn on my computer and write an article. Basically, this is a work in progress.

What are your goals? How do you manage to make progress on them? Have you tried writing a monthly review to reflect on your progress? I think this is such a good way of seeing how far you’ve come.

Someone writing in a journal
Write down every day what you are grateful for

Number Eight – I will engage in rich thinking every day

The practice of gratitude is one which I used to do, but it has fallen by the wayside. I have just started reading ‘The Miracle Morning’ by Hal Elrod and one of his six activities for the morning is ‘scribing’, which can just be writing about what you are grateful for. Whether or not I will be adopting his advice for how to structure the beginning of my day is yet to be seen, but I do feel that often we look on the bad side and are prone to moaning, so a focus on what we are grateful for can only be a good thing.

Number Nine – I will save ten per cent of my income and live off the remaining 90%

This is an area in which as you know I am ahead of Mr Corley as I save 16% as well as paying double our mortgage payment. If you don’t currently save anything though it would be a good starting point.

Number Ten – I will control my words and emotions every day

I’ve already mentioned Natalie Bacon, who is one of my favourite podcasters. She is rather an over-excited and very ‘American’ presenter (sorry to any of you from across the water who might be reading this), for whom everything is ‘awesome’, but nevertheless her advice about modifying your thought processes is amazing. I continue to meditate most days and look forward to her weekly advice which is always interesting and gives a new perspective on life. I cannot recommend her work enough as she is fascinating and her shows are usually fairly short, 20-25 minutes.

So that’s all the habits that we have looked at so far. Each one could be a book in itself. I don’t hear Rich Habits Poor Habits mentioned often, but it is such a fascinating and useful piece of work as it is not just his views on how to get rich, but written after he carried out a study of people who grew rich. If you are interested to find out more check out his book or stay tuned as I will be considering the rest of his habits over the coming months. And if you’ve made any progress in these areas or have any questions just let me know. Or, just fill in the blank: I will work on Tom Corley’s habit number ___ over the next month.