FIRE v London

Annual FI audit

2020-01-072020-01-08 FIRE v London6 Comments

It’s that time of the year when we take stock. Here at FIREvLondon, that means it’s time to do an ‘audit’ of our Finances, and our financial Independence.

Let’s take a look at some of the key questions an audit should consider.

Q1: What state is the balance sheet in?

I review the portfolio performance monthly, and it’s progress against ‘budget’ (i.e. target allocation). As this post highlights, December saw a very strong performance with net assets up almost 23%. An exceptionally strong performance, by historical or future standards, reflecting the 30% gain in the US stockmarket in 2019.

Liabilities remain very much under control too. The margin loan that provides my account with leverage amounts to just over 10% of the value of the assets.

Off balance sheet, the recent move to sell a key residential property and reinvest the money will provide further strengthening of the balance sheet.

Q2: How does the income statement look?

A year ago I borrowed a framework by {indeedably} in which he breaks down his assets and income. He has an unusual way of looking at his state of financial dependence, as shown by his (updated) image below:

Using this framework, 2019 saw me, like 2018, make a clear ‘profit’, or surplus, between total inflows and total outflows. However, from a Financial Independence perspective, i.e. stripping out earned income (and taxes on them), I saw a slight deficit – with outflows exceeding inflows. The chief reason for this was a very high level of expenditure on ‘wants’.

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December returns and 2019 review

2020-01-062020-01-06 FIRE v London4 Comments

The UK election already seems some time ago. Really, it was just last month, and mid month too. And it provided welcome clarity – I will say that for it – after several years of frustration. For all the hyperventilating Brexit nonsense, citing ‘enemies of the people’, ‘a treasonous Speaker’, parliament undermining democracy etc, the root cause of much of the last few years’ nonsense was the lack of a majority in Parliament. Parliamentary sovereignty is supreme, and is delegated to the government/executive by a clear majority. All else is noise.

And much as I am no fan of the Tories and the Tory Brexit, the improvement in mood / confidence / sense of clouds lifting after the election result was palpable. The dimwit forex markets lifted the pound above $1.35, before dumping it back where it started once they came to their senses. By the end of the month though sterling had climbed 1-2% against the USD/EUR.

GBP/USD and GBP/EUR since 1 Nov 2019 to 3 Jan 2020

Elsewhere, we saw the new EU commission take over, the USA/China trade war rumble on, and some nasty early season bush fires take root in Australia.

And amidst all this noise, equity markets rose. The UK market grew the fastest, bouyed by the election result presumably; both European and USA markets also saw good gains, admittedly mostly cancelled out by their currencies falling against the pound. Only Australia was the outlier, with a drop in its ‘share market’ somewhat mitigated by the rise in the AUD.

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I’ve sold my house, and I’m down over £500k

2019-12-292019-12-30 FIRE v London8 Comments

My Dream Home saga nears its conclusions. Longsuffering followers will recall that, in the last instalment in Q4 2016, I had abandoned my effort to sell my Former Dream Home into the Brexit referendum aftermath, in favour of renting the property out to some (North) Americans. I reasoned, three years ago, that I could well expect to sell the property for 1.20X (where X was the supposed fair market value) in 2020, by which point Brexit would be well and truly behind us…..

What happened next?

Well, the (North) Americans proved to be fine tenants. They looked after the place and kept on renewing. My rent increased by 2% each year. I used a managing agent, so the deductions were swingeing, and I had the occasional cost to bear too. But overall the landlord experience proved to be relatively painless.

Until Q2 this year, when the fine tenants gave notice. He had received a job offer back in the mother country and was off to take it.

Losing these tenants left me in something of a quandary. Brexit was due to be done in June 2019 (remember that?), except that pretty clearly it wasn’t. Property prices (and rents) hadn’t budged materially since late 2016. Yet somehow I felt a different mood – a “well I can’t put my life on hold forever” sentiment that tempted me to attempt a sale for the second time.

Moreover, with the void period starting in June, the timing felt good to ‘test the waters’ for selling the house, but reverting to let it in time for the busy ‘back to school’ season in September. So I decided to give it a go, and put my Former Dream Home on the market to sell. I listed it at a somewhat lower price than last time – essentially the price that I had accepted an offer on in 2016.

When is a sale a sale?

Cutting a long story somewhat short, the market felt completely different this summer than in the summer of 2016. I had far more interest in the house. I even had an offer, that I was prepared to accept! Not once, but in fact three times….

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