Lessons from a £1m divorce

FIRE v London3 Comments

The media has reported a divorce with fees of around £1m.  This is for a family with around £6m net worth.  This story sums up a lot of crazy London living to me. Notably:

  • The family has earnings of around £1.5m a year. Let’s call this £800k net of tax. This is very very high – it would put them in the top 5000 or so earners in the UK.
  • At this income level most FIRE eaters would say they would hit financial independence in months, not years. Yet the net worth has been reported at about £6.2m. Into which £1m legal fees carves quite a dent. A net worth of 4x gross income is surprisingly low for such a high earner, reflecting how their cost of living was enormous (and/or how terrible his investment decisions must have been!).
  • The family apparently spent £800k per year. And now the beauty queen wife will receive maintenance of £320k per year. For herself. Gulp. This is luxury living even by their own admission.
  • And by its own admission this family did not save any money.

These guys are those Jones that friends of mine ‘needing income of £500k to live in London‘ are striving to keep up with.

And a lot of the attitudes that drive the sentiment that £500k is a bare minimum were on display in the courtroom as reported by the media:

  • “There’s a limit to how far the wife can reasonably be expected to move from the centre of London”. The husband had proposed Battersea, which is walking distance from the Chelsea/Knightsbridge area they have been living in.  Nope, outrageously too far, was the reaction.
  • Eye-watering sums on bringing the kids up “appropriately”.
  • Eye-watering sums on annual holidays – the wife wanted £75k per year just for this.
  • Extravagance is the new normal.  Can anybody become a beauty queen, if they spend the £60k annually on hairdressers and beauty treatments asked for by the wife, I wonder?

The premise of this blog is that true financial independence entails being able to live where you want to live – central London included – and spend what you are used to spending.  I suppose in theory that means I need to respect the decisions of this couple on what they need to spend.  But they’re about £20m and some good tax planning away from where they need to be on the Save Hard / Invest Wisely front…. good luck to them.

Publishing my Investment Policy Statement

FIRE v London2 Comments

One of the triggers for me creating this blog was an excellent post by LivingAFI about Investment Policy Statements.

For some years now, I have had various unwritten investment approaches that has been slowly evolving in my mind as I have learnt more about investing. But the idea of setting these approaches down in writing as one Investment Policy Statement appeals to me.  The next thing I thought is that I would like some input and help with it.  At which point I realised that the best source of input and help is the FI community that I have been avidly reading for ages.  So, dear readers, please help me critique my IPS – it’s here.

I’m going to set out my thinking behind each section of the IPS in a succession of blog posts.

Minimum salary required in London: £500k?

FIRE v London38 Comments

I have not one, not two, but at least three good friends (couples) who would broadly agree with the statement that you (/one / they) need £500k of salary to live in London.  Can this be right?  You need at least 20x the official statistical median wage – really?

First a couple of caveats.  The friends I’m thinking of are all ‘fully fledged families’ – dual income mum+dad, with 2-4 kids.  By dint of being dual income, they need paid-for childcare.  They all live in premium parts of London – all in zone 1. They are not blind to the very affluent and privileged lives that they live, but nor are they totally removed from the real world; they aren’t oligarchs.   They also aren’t wildly excessive compared to a bunch of other friends; I know a lot of Londoners who would be a similar camp to these guys.

Secondly these friends all live very comfortable lives.  Regular ski trips, Michelin-starred restaurants, frequent use of taxis, babysitters used at least once a week – these are all a given.  But they all have budgets, manage their finances pretty carefully, and bitch about the cost of living.

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