Reaching Coast FI and Keeping Our Feet On the Peddle
This week I ran our numbers through the Coast FI Calculator on www.walletburst.com and found to my surprise that we had already reached Coast FI.
For anyone who is not familiar with the concept, a Coast FI Calculator will show you how close you are to the point of not needing to add any more to your retirement savings in order to reach a certain final amount. This means that you could “take your foot off the pedal” and just earn enough to cover living costs. Without the pressure of earning enough to save extra, you can work shorter hours, or take a job that is more enjoyable but pays less.
This is an attractive goal to us because I’m so conscious that it’s around this time – when the kids are so young (2 and 4) and aren’t in full-time education – when we would most benefit from some extra flexibility, rather than waiting until we are fully financially independent and the children are busy at school.
Based on wanting to have a net worth (excluding our residential property) at 60 of at least £750,000, it showed that if we stopped saving now then our current investments would, by themselves, grow to our final pot size.
It was great to reach this milestone and feel that having more options was in our grasp. However, we are not planning on coasting quite yet, for the following reasons:
Our net worth make up
While in theory our net worth is over the Coast FI number (which is about £340,000 for a 40-year-old wanting to retire at 60 on £750,000), a significant proportion of this is equity in our rental property. I know that the growth and yield on this is not as high as what we would hope to get from investments. I could fiddle around with growth rates in the calculator, but it would just be an estimate anyway, and there are other reasons we are not coasting yet.
Uncertainty over whether the final pot would be enough
The calculations are based on us retiring at 60, which is still 20 years away. Although an annual pension of £30,000 split between us would probably be plenty, especially with the house paid off, we can’t guarantee it. For example, this is the amount for both of us. If we were not living together any more, we might need more than this each and may not have paid off both of our properties. Also, the kids would just be starting their adult lives and we might want to help them with getting set up.
Current childcare situation
At the moment – when not in lockdown – our children spend the mornings at nursery and are with a childminder in the afternoon (at our house). As my daughter is starting school soon, I think she benefits from the social aspect of nursery, and they both absolutely love their childminder. While I would like to spend more time with them, I don’t want to disrupt this now.
Also, during lockdown we do already spend a lot more time together as we don’t have a commute and work from home. Just by taking lunches and breaks together, and playing together before and after work, we are already spending a lot more time together.
Focussing on building network and skills to work freelance
My most important goal at the moment is that when my kids are both at school in two years’ time I can work more flexibly. This means that I can drop them off to school, pick them up and be around to play or help with schoolwork when they are at home. I’d also love to have more time to keep on top of the house, and the time and space to follow my own interests, whether that’s learning new things or developing my own creative projects.
Part of this strategy is to build up the network, skills and experience to be able to market myself as a freelancer in my current field. If I can charge a premium for the type of work I am doing now in my industry, I will not need to work as many hours.
One area I’m interested in upskilling in is developing eLearning in my field. It is something I’ve done before in my day job, but I’d like to master a software to do this quickly and professionally, and work on some content ideas that I can adapt for different companies’ situations.
If I were to stay in my current role now and just reduce my hours I am quite sure I’d end up working extra hours to get the same amount of work done. I’m also working on some interesting major projects which I really want to complete successfully as I know they will boost my CV.
So, what am I doing instead of coasting?
Firstly, to have some more time with the kids, without decreasing our pay, my partner and I are both taking two half days off a month for the next 6 months until our daughter starts primary school.
We are also trying to double our savings rate compared to this time last year to boost the amount that we have invested in index funds in proportion to our rental property equity. We currently have about £30,000 in my Stocks and Shares ISA and our stretch goal is to make full use of both of our annual ISA allowances, so save £40,000 this year. If we can do the same the following year, by the time our daughter starts school we should have over £100,000 invested.
The ways we are hoping to do this are by:
- Both continue to work from home (saving £300 a month on transport)
- Start putting our mortgage overpayments into investments instead (£250 a month)
- Continue doing our own cleaning (£180)
- I’m hoping for a salary increase of at least 2% to be confirmed soon (about £80 a month)
- We’ve remortgaged our rental property mortgage (saving £120 a month)
- Saving one morning of nursery a week (about £100 a month)
We will also take other actions to make up the remaining £1000 – but it’s more difficult to predict how this will break down. This is a stretch goal, but one I’m excited about:
- Decreasing our food budget by making best use of our extra freezer
- Decluttering our home and selling unwanted items – I know by taking better care of our house and being more content we are also less likely to spend on expensive “home improvements”
- Work on projects that might eventually bring in extra incomes, but which also give us opportunities to build new skills
When we do eventually rely on our investments to have more work flexibility, we will still aim to keep investing on the months that we can, but have the freedom of knowing that if there are months that we can’t, we just need to cover our immediate living costs.
For more information about Coast FI, check out The Fioneers. They have a more sophisticated calculator which they will send if you subscribe to their mailing list. It allows you to run different scenarios and also track other milestones on the way to full financial independence.
I would love to hear from anybody else who has hit Coast FI and their thoughts on whether they are changing their lifestyle as a result.