When I look at our family’s financial progress over 2021 I see some solid steps forward with a slowing down towards the end. I track our net worth on a chart with pen and paper, and every wiggle in the curve tells a story about the little choices we have made.
Over the course of the year we were able to double our Stocks and Shares ISA and my current pension pot, as well as open an investment ISA for my partner, now at £5k. All in all our net worth grew by about £50k, excluding the value of our house. With the house, the increase is about £75k.
The reason we could do this is that we lived relatively frugally, putting the money we were saving from me working from home and from reduced childcare costs into investments. I’ve been more disciplined about looking for better insurance deals when we come to the end of the term, and we’ve also been more vigilant about food waste which has helped keep our grocery spending in check.
By the end of the tax year I will have maxed out my ISA contribution for the first time, now at around £60k. I’m also starting to move over funds from my cash ISA (our current emergency fund) by creating a new emergency fund in Premium Bonds and then transferring the equivalent money from cash to S&S ISA.
I also increased my workplace pension contribution to 10% (while my work also increased theirs from 5% to 10% as I have now worked there for 3 years). When I got my bonus, that went straight into my pension too, meaning I could avoid paying tax on it (for now!).
As of the end of the year we are just over 50% of our way to our FIRE number of £900k and have paid off almost 30% of the house (three years after buying it).
However, looking at the last few months our progress has plateaued and our net worth has stopped increasing. This is due to a combination of me going down to 4 days a week in August and splurges like a family holiday, getting some painting done on the house and starting counselling.
Of course, as I’m tracking these numbers, it bothers me to see our progress slowing down, but I realise it’s because we are prioritising our quality of life now, enjoying our time together and making the most of the house we are so lucky to have. I also remind myself that we should be in a better position financially next year, as our childcare costs will drop again.
Bigger money moves
I should also, I hope, get a pay rise next year which is better than the usual 2% increase “in line with inflation”, because I recently made a case for recalibrating my pay to reflect market rates, and I’ll hear about that in January.
I am proud of myself for doing that – tackling one of the “big numbers” and demonstrating my worth rather than avoiding an awkward conversation and putting all my energy into things that won’t really turn the needle on our finances.
The “boring bit in the middle”
It’s a couple of years since I started thinking about financial independence and we are now “more than halfway through” so I definitely feel that we are in the “boring bit in the middle”. This is the part where we’ve educated ourselves enough to develop a strategy and have put some saving and investing systems in place, but aren’t really seeing the effects of compounding yet.
To be clear, we haven’t made all of our progress in a couple of years as a huge part of our net worth is the equity we have in our rental property, which is our first property from ten years ago.
Choices that we make to improve our quality of life now can be enough to slow or reverse progress, leaving us to wait until life’s circumstances give us a little boost up or chip away at our gains.
What I’m realising is that the “boring bit in the middle” is also the best years of our life, so it is so important not to focus all of our energy on what the numbers are saying. Luckily my partner balances me out. A certain level of financial stability is important to him, but after that everything else is prioritised.
My biggest learnings
I’ve learnt a few things about myself and our journey this year that I’m looking forward to taking into 2022:
- Monthly tracking is better for me than daily tracking – I used Money Hub this year and enjoyed how it clarified my monthly income and expenditure, as well as the view it gave of my overall pension and investment portfolio. It definitely helped me to adjust my saving and spending when I went down to four days a week and when we diverted some of my partner’s money from our bills to his new ISA. However, when my net worth started to plateau and when the market dropped recently having such a regular view started to stress me out. It also meant that I forgot to look at our progress on a monthly basis, something that I used to find satisfying. My free 6 month subscription to Money Hub (see here for my review) has ended now and I’ve decided not to renew it so that I can go back to my monthly tracking and let my finances bob along on autopilot for a bit.
- Going part time is worth it – I would even say, it’s what it’s all about. Realising we had already hit Coast FI gave me the confidence to make the leap. While it’s slowing down our progress to FI, it’s also giving me some of the balance that the journey to FI is all about. I’ve been feeling a lot of regret about working full time while my children are so young so having this extra time with them has meant a lot. We all get on better as a family and I am less impacted by stress at work.
- Investing in relationships and mental health pays dividends – I think one of the reasons that I focus more on money in tough times is because it’s easier to think about and control than other parts of my life. It’s a coping mechanism, but like all coping mechanisms, it doesn’t fix issues. As tired parents to young children, I am realising that we need help, convenience, things that will relieve pressure, so I’m better at letting go and seeing some extra spending as an investment in itself. I’ve been a lot more aware of the basics that need to be in place for me to even think about functioning well: decent sleep; time to relax; a bit of movement; nourishing food and drink and time to connect with my partner.
- You don’t need to work more hours to increase your income – I always knew this – it’s not rocket science – but I have struggled with the confidence to ask for more. I realised that it doesn’t take that much confidence, just some thought into how you can talk about what you think you are worth and justify it. It’s normal for people to ask for pay rises, even if it’s outside of your particular comfort zone, and many other people won’t think twice about it. Once I asked, I felt a lot more peace about work and more willingness to do the harder parts of my job, which is surely what our employers want after all.
- You need to give up things to make the most of what you have – This rings true to me on a material level as I can see how much more I appreciate our house and our most cherished possessions when we get rid of things we aren’t using. But I’ve also started to realise how important and powerful this can be when applied to time. I’ve become better at stopping activities that
What does 2022 hold?
I’d like to continue to make progress to our FI goal next year, but I’m ok with slow progress.
In fact, I’m going to consciously slow things down to prioritise some home improvements, repaying a family loan and putting aside more money to pay tax. I also want to make sure we are putting aside enough money for gifts and experiences.
To do this I will stop our mortgage overpayments of £110 a month and our regular ISA investing until I these things are covered. I’ll then start investing again. If I could max out one of our ISAs, with a stretch goal of both, I’d be delighted, but this would involve investing as much of any increase in income as possible. After this year I have a clearer idea of the kind of balance I want to strike and the areas in my life that I’m prepared to spend extra on, even if that impacts how quickly we can build wealth.
I’d also like to focus much more on establishing healthy habits like more exercise, time for mindfulness and following a more nourishing diet. This isn’t something that needs to cost any more, it’s just about making better choices.
I will also be trying to find a way of working more autonomously so that I can set my own hours and be available to the kids when they aren’t at school.
I’ve realised this year that we won’t be financially free any time soon, but we are already reaping the benefits of financial stability such as being able to cut down my hours. These years are precious and it’s not worth it to us to make sacrifices that impact on our wellbeing. That said, I also realise that there’s a lot more that we can do to lead happier, healthier lives, without it costing us any more. My priority in 2022 is developing a more balanced approach to money and to make the most of everything else.