All the money in the world

I’m reflecting on 24 hours in my life, last Sunday.

Mrs FvL was away for the weekend, no kids are around, and I’m home alone. While I’d organised a couple of things on the Sunday, I had nothing planned on the Saturday night.

On the Saturday evening, having had a decent lunch in central London with an old friend, I decided, on a whim, to go to the cinema by myself to see a movie – an inane movie Mrs FvL would have no interest in anyway. I have a choice of four cinemas within walking distance, including two of the upmarket Everyman chain, so I took my pick of location, time and movie and booked a ticket. My favourite is a particular local Everyman, who don’t do popcorn and do do far nicer sweet and savoury goodies plus a range of wines – served to your comfy sofa/seat with waiter service. What’s not to like? It comes with a £20 ticket price, naturellement, but as with many things I chalk that one up as the price of quality.

The following Sunday morning I had two errands scheduled. One was to do with some minor remedial work that my Dream Home needs. Minor work this may be, but it is in a conservation area and is of quite a technical nature which is controlled by the local council. If I don’t abide by the council’s protections, the maximum penalty is a jail term. So I’m abiding. This too is the price of quality. Thankfully I’ve managed to arrange two builder/ planning experts to meet me on a Sunday morning to discuss.

Next up, I take my builder on a five minute drive across the local park, to the Previous House. Traffic is light and, as usual, I can park <10m from the house even though I no longer have residents’ parking. I’ve decided this is the day to repair/replace the Previous House’s garden fence, which is quite a specialist job due to the stipulations of Mrs FvL. It’s becoming a nice sunny day, and the Previous House abutts the local green space, so it’s a nice place to hang out. Soon after we arrive my tenant emerges from the Previous House; she is a lovely character and offers us tea/coffees/etc. All smiles.

My builder and I assess the work and agree what raw materials we will need for the fence. I leave him to start the heavy lifting and I head off to the nearest B&Q/similar. I have a choice of three B&Qs within 15 minutes’ drive and opt for one about 10 minutes’ drive away. I find what I need, which barely fits in the car, and have it back at the Previous House – along with some refreshments for my builder – forty minutes later.

In my absence, my builder has had a discusssion with the neighbour whose house borders one of my fences. Soon enough, the neighbour reappears, offers us both a drink, and we have a bit of a chat about the work I’m doing as well as some other work on the road he and I have been discussing. He asks me to make sure that the fence looks better from his side than my side; this is North London after all. He disappears.

I leave my builder to crack on and I return to the Dream Home for some lunch. The neighbourhood has woken up and is grinning in the sunlight on my brief drive through. I bump into some of the neighbours of the Dream Home who have lived there for longer than I’ve been alive. They have been in poor health so I haven’t seen much of them and we have a bit of a catch up.

After my own lunch I return to the Previous House, and find my builder has made good progress. Another neighbour waves a greeting and we exchange a few words.

My builder then asks for some garden wire, which we don’t have to hand. So I go a few doors along where I disturb one of my favourite former neighbours who is getting ready for a long haul holiday he starts this evening. He takes the trouble to scour his garage for some garden wire and gives me something roughly suitable, which I scurry off with.

The bordering neighbour reappears. He points out that the fence by this point looks a lot better on my side and, erm, much less good on his side. He’s right. We spend half an hour tarting up the fence on his side. The neighbour, very much mollified by now, offers us another drink.

As we are starting to pack up, a ‘distant’ neighbour appears who I hardly see. We get into quite a deep-and-meaningful conversation. Time passes. Eventually she moves on.

Finally we wrap up on the fence building project. I drop my builder at the nearby station (<5 mins drive) and then head home (<5 mins further).

I finish the day by strolling back across the park to the pub, where I enjoy a couple of drinks with the locals, who I know quite well by now.

It’s been a good day to be alive, and it’s one of those days to appreciate how lucky I am.

I have, literally, world class facilities all around me within walking distance or a few minutes travel. I have access to professional services pretty much 24/7. I live firmly within arguably the greatest metropolis on Earth. I didn’t grow up in London, and we didn’t have the sort of facilities and convenience I simply take for granted these days.

And yet, I have beautiful countryside around me – between me and my local pub, for instance. I live in a community, in which I have formed strong bonds. My local neighbours provide friendships, support, security and the occasional pint. I do the same for them.

We didn’t have the same quality of community in the local village where I grew up. Which is ironic because my local ‘hood has the type of community commonly associated with villages, and not commonly associated with large cities like London.

I wouldn’t leave London for all the money in the world.

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How to become an ISA millionaire

This is the third in my annual posts about my ISA (tax-free) portfolio.  I’ve written before about how there is an outside (~10%) chance of my ISA portfolio reaching $100m, if I live for another 40+ years.  Yet, as of my last post a year ago, the total FvL ISA pot was worth ‘only’ £355k (~$500k, back then!).  So how am I feeling about multiplying my ISA 200x?

My $100m assessment was based on a scenario analysis over the next 40+ years.  Making various assumptions (no withdrawals, regulation changes, etc), if I maintain contributions at £20k x2 per year, and achieve an ‘Above Average Risk’ level of return (>9% per year average, quite a high level of volatility), then in about 10% of predicted outcomes my total pot would reach $100m.

There are a couple of simple mental tricks that help me get my head around this growth. First of all, contributing £20k x 2 per year is quite a lot of money; over 30 years this is £1.2m.  To make it easier to think about the growth of this annually-topped-up portfolio, let’s simplistically assume it isn’t annual top ups, but instead is a lump sum of £600k ($750k) in year 14.

Secondly, remember the rule of 70.  Assuming I average returns of 7% then my portfolio doubles in 70/7=10 years.  At an average return of 10% it takes about 7 years to double.  So if I start with $0.5m, and averaged 10% return, after 35 years I have doubled 5 times, and I’m at $16m.  But if I add (see previous paragraph) $750k in year 14, this $750k then doubles three times; this adds a further $6m.   The two together get me to $22m in 35 years. Now assume I last a further 14 years , which takes me to the average life expectancy for UK males of my age, and I double my combined $22m pot 2 more times.  $88m.  Not quite $100m, but not far off.

Before you say that 10% per year is unrealistic, I am citing everything here in nominal ‘money of the day’ figures.  This is before allowing for inflation.  Historic returns for a diversified portfolio can easily achieve 5% per year on top of inflation.  This works out as 7-8% per year in nominal figures. 10% is high, I will accept, but not absurdly so. If you have significant fees then you can forget it, but if you hold low-cost passive trackers this is not that unusual.

In the meantime, there I was a year ago with £355k.  At today’s exchange rate this is barely $450k.  How have I fared since then?

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My Dream Home: after the morning after 

In my last post in this occasional series about my tribulations buying my Dream Home, I left my story at 9am on Friday 24 June – The Morning After – having just received an offer for £100k less than the ‘actual’ value of my old house.  I asked for views on what I should have done next.  And I got some wonderful comments with real wisdom – a real testament to the amazing insights in the UK’s FIRE community.

The first comment came from RIT, suggesting I should have taken the money and run:

“Looks like either a very illiquid market or the price was to high to me. From where I sit I would have had their arm off and pushed for an exchange very quickly.” Retirement Investment Today

My approach wasn’t what RIT advocated, even though I think it is a very sensible perspective. I had several people giving me the same advice at the time.  In fairness to RIT, as LondonRob commented, the ‘right’ answer “partly depends on how much [I] really need the cash. It would also be good to know what the rental value could achieve.”  LondonRob said he felt a 10% discount to the asking price was too much, and so provided cash wasn’t an immediate issue he recommended turning the offer down.  This is indeed what I did.

What I hadn’t explained in my last blog is that yes I would like the cash from my old house, but no I am not desperate for it.  I have emotional ties to the property and do not want to sell it ‘under duress’.  I am pretty confident I will get a reasonable price for it at some point and can afford to wait. I also was wondering about its potential as a rental property, and felt pretty sure I could rent it out – albeit possibly at a low rental yield.  Had the rest of the market tanked between January and June I may well have been feeling more desperate for cash.  But in fact I had already made almost £1m in paper gains this year and this had boosted my resilience, so I was not in much of a mood to compromise.

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