Thursday, 10 October 2019

Financial Independence Retire Early (FIRE)

Image result for schwab stocks sharesI've had a few questions asking how it's possible to retire early having lost $225,000 in 2014 at the age of 40. While that's true, this post examines how I bounced back.

The first thing to note is that I started with nowt. My parents (both passed) were far from affluent. I'm not complaining - I had a great childhood. Just stating a fact. I left school at 16. Joined the Royal Navy. Was trained as an Electronic Engineer and served on HMS Coventry (Balkans conflict 1994) and HMS Victorious (a submarine designed to rain nuclear horror on innocent civilians).

During that time I paid myself through a BSc(Hons) in Electronic Engineering with the Open University. I left the RN and worked in IT before funding myself through an MSc at Newcastle. I left the UK in 2006 with £100,000 sitting in a standard savings account. This money mostly came from buying a house in 1997, paying off the mortgage by 2003, and selling it for £100,000 in 2006.
Between 2006 - 2011 I lived a life of unadulterated hedonism. This period can mostly be summed up by simply calling it Booze, Birds and Travel. Man, I kicked the arse out of life back then. Somewhere amongst all that I managed to begin a teaching career and even complete a PGCE (teaching qualification).
During those mad times I'd drink piss with Barry Payne in Phuket - a self-proclaimed financial advisor. Not that I checked his credentials mind you. Well, with my mind on other things he convinced me to give my entire life savings to an Aussie thief. Thus, ultimately reducing my net worth to $0. Epic.
So what's a lad to do? In 2014 I just so happened to be teaching maths part-time in a CM school for something to do. It's kinda funny because just as I lost everything, a full-time job manifested itself. A-level Maths and Physics in the International section of the same school. I think I was the only applicant ...... I taught like-the-wind for 18 months. Saved like f8ck and got on with enjoying life.

Next was China. I earned a gargantuan salary and managed to save a whopping 90% of it. I lived rent free, drank zero piss, cooked my own meals and cycled everywhere. It was a shit job in a shit place but, looking back, the sacrifice was worth it.
After that it was back to Thailand where the savings rate dropped to a pathetic 70%. Running a CBR500 will do that to you. I should mention that for the whole of 2019 I've lived a monk-esque existence having eschewed alcohol and pleasures of the flesh (mostly). Paradoxically, given my history, I've never been so content. Happiness comes from within folks. A side effect of this clean living is enormous savings.
So, busting-me-balls in International Schools and living a frugal (yet contented) life netted a cool $80,000. Now, luckily for me (as I was expecting nowt back), the liquidators of Barry Payne's scam managed to find some money that hadn't been stolen and returned around $60,000. Or around a third. Don't get me wrong - it's still a massive shit-sandwich but a 66% loss is better than a 100% loss.
So armed with $140,000 ..... whaddya-gonna-doo?
Well, the first (and easiest) decision was no more Barry Paynes. No paying someone for work I can do myself. Listening to that guy was probably the most foolish thing I've ever done. No one will care about your money more than you.

So, it was time to get edumacated. I spent hours pouring over stocks, bonds, ETFs, CEFs, brokerages, assets, liabilities and tax implications. Riveting stuff. Some good resources I'd recommend:
There's an overwhelming amount of information out there - your job is to sift through it. I've ended up going down a "Monthly-Dividend-ETF" route. I've just made that up. I don't know if it's a thing.

I'm too lazy to pick individual stocks so I buy these ETF wrappers. The downside is you have to pay an expense ratio (as opposed to individual stocks) but the upside is automatic diversification (where I made a HUGE error previously).
I ended up opening and exploring three brokerages:
Image result for schwab stocks shares1. Saxo, 2. Interactive Brokers, 3. Schwab.

They're all expat friendly. Schwab is my favourite.

Once you've got your brokerage set up you need to choose some ETFs. Here's mine in order of asset allocation and risk - I put more coin into 'safer' assets.
HYLB is a diversified corporate bond. The safest of my instruments - with a low Expense Ratio. Next up is Invesco's SPHD - a mix of carefully selected equities. DIV is my riskiest ETF yet most generous dividend payer. These three ETFs pay monthly dividends - there's no feeling like watching passive income roll in monthly. I wish I'd known all this in my 20s - I'd probably have been a millionaire by now.

Being a UK citizen resident in Thailand, Uncle Sam will likely extort 15% of your dividend income. They call this tax. Someone has to keep those single mothers in section 8 housing.
Image result for bitkubThomas Jefferson said "With great risk comes great reward". And that's where Bitcoin comes in. I first bought some in 2013. Little did I know it would become the legend it is today. I love it. The tech, the price action, the youtube videos, the charts - it's all good. However, it's incredibly volatile. I'm well up on my BTC investments but was down for the whole of 2018. Tread carefully. Currently using Bitkub to trade crypto.

Am I in a better position than 2014?

Undoubtedly. I've managed to recoup 90% of what I lost in 2014 (in £ terms). I can live on less than before. I have full control of my assets. Yes, I'm at risk if the US economy shits the bed but, in that scenario, I'll likely have bigger things to worry about than a portfolio. I'm not paying a "financial advisor" any commissions. I know exactly what my money is doing. Could quantum computers wipe out bitcoin? Possibly. However, we have to establish a risk tolerance, form a plan and stick to it. He who dares Rodney.

But, how can you retire on $500/month?

By living a simple life. I have no need for gratuitous possessions. Selling that gas guzzling motorbike was like removing a burden. No more tyres, petrol, oil and chains to buy. I love riding a bicycle. I appreciate simple scran. I like sleeping in modest accommodation. To be honest, I think I'd be happy anywhere. To reiterate: Happiness comes from within folks!

We're all born with a finite number of hours to enjoy. That number is lower than we think. If not having to sell my time so cheaply means cutting a few luxuries then so be it. I'd rather be cycling through palm trees and learning languages than working in a cubicle.

Additionally, this invested money only really needs to last 14 years because at 60 I'll have work pensions kick in $570/month. At 67 the UK state pension should add another $900/month provided I contribute another 7 years of national insurance (and the UK hasn't gone bankrupt). So, I could draw down the capital to a greater degree than $500/month and still be OK. For example, using I could draw $700/month for 14 years and have a 0% chance of running out of money.

So what does all this shit mean?

I don't know. I didn't arrive at this point instantaneously. It was more like a journey. A journey of earning, frugal living, saving and investing. There's been two years of researching, tweaking assets and general edumacation. Is my strategy the best? Hell no. There's more than one way to skin a cat but this method suits me. I like reinvesting the $500/month passive income - that's income I earn while sleeping. I like the Bitcoin roller coaster - might make me rich one day.

Since I've divulged the yields and total monthly income net of tax .... I'll leave it as a mathematical exercise for the reader to calculate my current net worth.

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  1. Appreciate the mention. Kudos again on getting back to the mountaintop!

  2. Curious to read how you go in Cambodia. I think a temptation might be the booze, it's just so cheap overthere. Food on the other hand is a bit more expensive than Thailand. And yes foreigners are routinely double charged right in front of their noses. Good luck.

  3. Excellent read, mate. You inspire me! Gotta get my arse of the couch and start doing some digging. Otherwise I'm never leaving China! lol. Alex in Nanning.

  4. You inspire me to start taking prozac...
    My saying is "Live like you will be dead tomorrow; because one day you will be right"
    See ya when ya get back to Thailand ya big sook...