Author Topic: DINKY - any chance of FIRE? UK  (Read 1505 times)

IrishinScotland

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DINKY - any chance of FIRE? UK
« on: February 03, 2017, 05:14:53 AM »
I am a reader of MMM.

Our case: 32 years/ 7 years married
Double income, no kids yet.

Household income:

Gross salary 1: 62,000.00
Net salary 1:    40,592
Monthly salary 1 post deduction for pension/ shares: 3,345.93


Gross salary 2: 52,500
Net salary 2: 35,368
Monthly salary 2 post deduction for pension/ shares: 2,947.32

Monthly investments:
18% pension of salary 1. 6% salary sacrifice contribution
10% pension of salary 2. 5% salary sacrifice contribution.
Both contribute about 150 per month, 300 total into an employee share scheme. Equates to approx 400 per month investments.

Other taxes: 2 x Council tax: circa 3000

Net income post tax approx 70k/ monthly
Income 5800 a month
Spend: circa 1,200 on mortgages/ council tax. One rental property income goes against one mortgage so netting that off here.
200 in long term investment
100 on utilities
30 phones
120 cleaner (I know I know I know)
1350 credit card which includes all spending - food, clothes, nights out, travel, holidays, house insurance, car insurance  and so on.

We can save approx 3k a month.


Assets   

Property
Current Value of Home    350,000
Current value of Rental property    185,000
Current Value of Holiday Home    70,000
50% Current Value of co-owned home. Cost covered by rent.     70,000

Cash    15,000
   
Investments   
Pension balance 2    40,157
Shares 2    3,727
Investment fund 1    42,000
Investment fund 2    32,000
Pension balance 1    62,000
Shares 2

Total Assets    869,884

Liabilities   

Left to Pay on House Mortgage    128,700
Left to Pay on rental property     115,130
Left to holiday home    38,000
Left to Pay on co owned place     56,000

Total Liabilities    337,830

Net worth: 534,254

History:

As you can probably tell from the above we have focused on debt repayment and property acquisition. We have some longer term investments but I feel that we should be turning our focus to investments funds but don't know where to start.

In order to achieve FIRE we would be very comfortable downsizing and would need max of net worth 200k for property. When rental property is paid off it will give income of 800 per month.

Really just looking for inspiration and guidance on where to go next. We are in an ok financial situation and are semi-mustachian. If we pay off the mortgage and rent the holiday home often enough so it is cost neutral we then go down to needing 2000 a month annually.

Any ideas on where to go next and time to FIRE? Happy to do it in 10 years but looking to see if that is feasible.

« Last Edit: February 03, 2017, 05:18:57 AM by IrishinScotland »

dreams_and_discoveries

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Re: DINKY - any chance of FIRE? UK
« Reply #1 on: February 04, 2017, 01:56:09 AM »
Hi welcome to the forum.

What's your risk tolerance? I'd start filling up stocks and shares ISA's each year with a low cost tracker. And I'd personally not overpay the mortgages, as rates are historically low - mine is only 1.5% so investing make much more sense.

With the changes to tax on rental property, and you both being higher rate tax payers, these are going to become less profitably for you in the next few years - what are your thoughts to deal with this? Will you be thinking of selling, taking a loss, or raising the rents?

Hargrove

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Re: DINKY - any chance of FIRE? UK
« Reply #2 on: February 07, 2017, 05:09:10 PM »
Uhhh... congratulations, you did it!

Seriously, your investments throw off 7,195/yr, or 600/mo from 4%. If the rental generates 800 after it's paid off, and your investments double in ten years with no additions, you're at your target 2k. Assuming you keep working to pay things off and that results in more pension and investment money automagically (and buffers for if/when you are without a renter), you could do it in close to 5-ish years with some tweaks or dial it in easily in 10 years.

You could do it very soon if you downsized. Your current rental debt at 115k would be done in under 3 years (assuming you're making normal payments now, and add 36k/yr savings rate to those), but you mentioned being "semi-Mustachian," so, if 10 years makes you happy, you'd have an easy go of doing it in 10.

With no tweaks at all...

3 years: Pay off rental.
4 years: Pay off holiday home, a fifth of co-owned property using rental income.
5 years: Pay off co-owned property and bring mortgage well under 6 figures.
6 years: Pay off mortgage or reduce to year 7.

These assume you're making minimum payments on anything you're not focusing on which still needs a payment. If you spend three more years saving 100k+ more, not counting any raises, and your investments double, your biggest problem is figuring out how to withdraw what when.

For where to start on funds, just use index funds at Vanguard, mentioned in roughly every thread in the investing forum.
« Last Edit: February 07, 2017, 05:23:53 PM by Hargrove »

Playing with Fire UK

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Re: DINKY - any chance of FIRE? UK
« Reply #3 on: February 08, 2017, 08:44:57 AM »
Hi and welcome.

Tell me more about the holiday home please. What value does it add to your life, how frequently do you currently use it and how frequently do you rent it? If this is not cash positive I'd look into selling it and banking the cash. If it is somewhere you love and could live permanently if you didn't need to work then you could speed up you FIRE date a lot.

Are you planning kid(s) and what do you expect they will cost?

Are you firm on your plan to pay off the mortgages?

shelivesthedream

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Re: DINKY - any chance of FIRE? UK
« Reply #4 on: March 08, 2017, 02:37:14 PM »
Tell me more about the holiday home please. What value does it add to your life, how frequently do you currently use it and how frequently do you rent it? If this is not cash positive I'd look into selling it and banking the cash. If it is somewhere you love and could live permanently if you didn't need to work then you could speed up you FIRE date a lot.

+1. The words "holiday home" struck a chill into my heart. How much income do you get from renting it out at the moment? If it's cash-positive, you passionately love going there and it's not a pain to maintain, keep it. If it's just sat there... either sell it and invest the cash (70,000 at 4%/yr is 2800, enough to rent a lovely cottage every year anywhere you choose!). But if it's your future FIRE home, you need to plan for selling your current home to tip you over the edge into FIRE when the time is right.

One important thing to remember about property is that you can't count it in your net worth for FIRE unless you're making money renting it out or planning to sell it and release equity. You can't spend down the house you're living in!

But basically, you're doing a good job right now and very soon you can be doing a great job!

In terms of investment funds, you want a low-fee total stock market index/tracker in an ISA. Halifax has a good ISA platform at the moment, apparently - I'm with Hargreaves Lansdowne and keep meaning to switch but inertia and previous customer service issues with Halifax mean I keep putting it off. Once you've set up your ISA, just search "index" or "tracker" and compare the fees and pick the lowest one.

Playing with Fire UK

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Re: DINKY - any chance of FIRE? UK
« Reply #5 on: March 21, 2017, 11:18:17 AM »
The words "holiday home" struck a chill into my heart.

Yep, I know of a family where both adults work second jobs to pay for the holiday home that gets used maybe two weeks a year. And they spend most of their lives talking about how tired and miserable the second jobs make them.