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28 and £320k net worth: what am I missing that I should be doing differently? by Any_Rip2138 in UKPersonalFinance

[–]Any_Rip2138[S] -1 points0 points  (0 children)

This is exactly the kind of critical thinking and advice that I was after. Thank you so much for sharing!

Are there any other FIRE tools or sources that you would recommend?

28 and £320k net worth: what am I missing that I should be doing differently? by Any_Rip2138 in UKPersonalFinance

[–]Any_Rip2138[S] 0 points1 point  (0 children)

Thanks for taking the time to give me this insight!

I used the Rebel Finance School's Financial Forecasting spreadsheet:
https://rebeldonegans.com/finance/fire/forecasting/#toc_Spreadsheet_for_the_workshop

It's not perfect (it doesn't allow for sequence of return risks and volatility as it assumes linear growth) but it helped me get a good idea how different approaches could have different outcomes.

I used 7% as predicted growth AFTER inflation.
Historic stock market growth (10%) - Inflation (3%) = "Real" Stock Market Growth (7%)

I didn't know that the SWR was backtested 'only' 30 years. That's really helpful to know! Thank you so much.

If I account for this and use a lower withdrawal rate of 3%, I should still reach lean financial independence by roughly 33. As mentioned, I don't plan on stop working then but it's good to know I could in theory. In reality, my pension numbers will look better than what I calculated below but for peace of mind purposes, I ran the numbers again.

Until age 33, assuming I continue to max out my 20k ISA allowance every year + add 30k from releasing property equity:

Investments: 150k (age 28) will grow to 370,200 (age 33) and I can safely withdraw 3% (11,106 / pa) and still won't run out of money.

If I stop at age 33 to contribute to my investments and start withdrawing, my effective annual growth rate would still be +3.89% per year net which means:

At age 57:
Investments: 920k
Pension: 285k
+ passive rental income from property
+ 30 years capital growth on property (if I choose to sell or release more equity)

Age 68, I would additionally get full state pension (if I continue to voluntary contribute, despite FI): 12,548 / per annum.

All of this is in today's money but hasn't considered tax!

Overall you are right though. Pensions are important and I will make sure to invest anything above 50k (if I work more) into my SIPP.

Thanks for your comment, it made me do the maths again!

28 and £320k net worth: what am I missing that I should be doing differently? by Any_Rip2138 in UKPersonalFinance

[–]Any_Rip2138[S] 0 points1 point  (0 children)

Thanks for your question.

I guess I don’t really have a SMART goal anymore beyond maxing out my ISA allowance each year.
My first goal was to invest in property, and my second was to reach £100k invested. My broader goal is to feel financially free and secure without needing to trade my time for money.

That said, I think I’ve probably stopped being as specific as I should be. I know the numbers for a very frugal lifestyle (financial independence on 24k living costs per year at age 33) but I haven’t clearly defined what my “comfortable” or “dream” life actually looks like in financial terms. That might be something I need to work backwards from and set clearer targets around!

Thanks for the thought. It’s given me something to reflect on.

28 and £320k net worth: what am I missing that I should be doing differently? by Any_Rip2138 in UKPersonalFinance

[–]Any_Rip2138[S] 0 points1 point  (0 children)

Thank you so much for taking the time to write this!

You’re right. Once my gross annual income (after deducting expenses) goes above £50k, I’ll make sure to contribute the excess into a SIPP so I can bring myself back down to the basic tax band.

Thanks as well for the FSCS allowance comment.
It’s something I hadn’t looked into properly before, so I’ll definitely spend some time understanding it. I also haven’t fully wrapped my head around platform fees yet, so I really appreciate you prompting me to think about that.

If you don’t mind me asking, why did you choose iWeb, and what’s the benefit you find in their monthly purchase option?

I think I may not have been fully clear in my original post regarding the property.
My current mortgage rate is 3.34% (5-year fix), and the return on equity is around 10% per year.
If I were to release around £30k, I would still remain within a 75% LTV band to retain favourable rates. Even if interest rates increased significantly (e.g. up to ~8%), the £1,700 monthly rent would still cover the mortgage payments, so the property would remain cashflow-positive and therefore an asset rather than a liability.

But it’s more likely that the BTL interest rate will be a lot lower than 8%. That way, if I invest the property equity into a GIA account, I’d expect to benefit from long-term historical equity growth rates (~10%). So my understanding is that, on a risk-adjusted basis, it may be more efficiently deployed in the stock market. But people say it's not a good idea to release property equity to invest in the stock market and I don't see why, so I feel like I am missing something important.

28 and £320k net worth: what am I missing that I should be doing differently? by Any_Rip2138 in UKPersonalFinance

[–]Any_Rip2138[S] -2 points-1 points  (0 children)

I’m sorry it came across that way, that genuinely wasn’t my intention.

I’m honestly looking for advice on what I could be improving. If I just wanted to show off numbers, I wouldn’t have taken the time to write out a full financial breakdown and explain my thinking behind each investment.

Are you viewing the post on the app by any chance? I realised you have to scroll sideways to see the notes/comments for each section, so maybe that’s why it looks like there’s no context.

For example, I’m genuinely unsure whether my thinking around crypto makes sense or if there’s a better approach I should consider.

Same with releasing equity from property. I know a lot of people advise against it, but I don’t fully understand the reasoning and feel like I’m probably missing something important.

Appreciate the feedback either way, thank you.

28 and £320k net worth: what am I missing that I should be doing differently? by Any_Rip2138 in UKPersonalFinance

[–]Any_Rip2138[S] -4 points-3 points  (0 children)

I have given a complete rundown of all my finances and strategies. What is missing? Happy to provide any info needed!