Kipling's Journal

Where are you and where are you going?
Kipling
Posts: 68
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Kipling's Journal

Post by Kipling »

1 April 2019

This is to follow up on my 'Introduce Yourself' post.

I have made many mistakes (health, relationships, money) over the years but I hope I have learned from them. This first journal post deals with the outline current state of the money.

Although when I was growing up there weren't role models for being financially responsible in my family, a decent proportion of the money-we-didn't-have was spent on my expensive education, so my failure to deal with money more strategically is my own fault, at least from when I left home. I was poor at dealing with money throughout my 20s, almost always spending more than I had, and my net worth was probably negative until I was 30. I went quite suddenly from earning not-very-much-at-all until I was 31 [which presents set-of-problems A] to earning really-quite-a-lot at 32 [which presents different-set-of-problems B]. When eventually starting to get a handle my financial existence thereafter, I was very risk averse, from having had no money, and focussed on the most basic debt-repayment techniques, repaying debts sequentially from highest rate to lowest before starting to invest in earnest [basically, get rid of loan! get rid of student loan! get rid of overdraft! get rid of mortgage! save up to refurbish flat! stuff money into pension! in that order]. This has cost me in terms of tax efficiency over time, but it is time to stop ruminating on the mistakes of the past, and instead to acknowledge that I have indeed been fairly financially responsible for the past dozen years or so; and that the current situation has me set up for a distinctly comfortable early retirement by about 55. The real question is whether I go and do something else, or nothing, earlier. For that I need to build up reserves of accessible cash, which is the area where I am still lacking.

Assets and liabilities

Assets

Property - £390,000 (net sale value)
Saleable collections - £13,000 (net sale value)

Pension 1 - £15,000 (SIPP accessible at 57)
Pension 2 - £459,000 (SIPP accessible at 57)
Pension 3 - £84,000 (Net Present Value of small final salary pension payable at 60, on assumption I live to be 80)
Pension 4 - £71,000 (NPV of state pension payable at 68, ditto)

ISAs - £18,000
NS&I - £30,000 ('premium bonds')
Cash at bank - £5,000
Loan out- £12,000

Gross - £1,097,000

Liabilities

Credit card - £3,000 (paid off in full each month, just easing early-part-of-year cash flow)
Committed purchases - £2,000

Net - £1,092,000

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Bankai
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Re: Kipling's Journal

Post by Bankai »

Your financial situation is very strong. What are your plans for after the retirement? Are you planning to stay in London or move to lower CoL area?

Kipling
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Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

Not sure yet. London is preposterously expensive for housing. And also for certain non-ere things like owning vehicles, going out to eat in restaurants, the opera and so on. If they are not your thing, everything else is pretty much the same price as anywhere in England. And there are lots of free events. But I'd quite like a cottage in the country, and a cat, and a lot more bookshelf space. So that's probably what's going to happen.

Jin+Guice
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Joined: Sat Jun 30, 2018 8:15 am

Re: Kipling's Journal

Post by Jin+Guice »

Damn breaux, showing up to the race at this finish line. Congratulations, good luck figuring out what to do with your riches!

Kipling
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Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

If I am towards the finish line in the journey, rest assured that it is only because JLF and the posters on this forum have, unbeknownst to them, been guiding and pacing me for the last nine years. And, for that I am most grateful.

Earlybath
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Joined: Thu Sep 22, 2016 8:43 am

Re: Kipling's Journal

Post by Earlybath »

Hello Kipling, I'm glad to see you've started a journal.

Having spent a fair bit of time ruminating on past 'inefficiencies' myself e.g. paying off mortgages, not taking out pensions, futzing about with asset allocations and so on, I concluded that although people spend an awful lot of time blogging about it, it doesn't really matter. Just not fucking up seems to get you 90% there and that's good enough. I haven't given it much subsequent thought.

Speaking of London, FI blogs and not screwing up reminded me of Mister Squirrel, did you come across his blog C. 2014? His (pretty good) blog disappeared overnight and he's been largely memory holed, but here's one of his last blogs that stuck in my mind.

https://web.archive.org/web/20150213141 ... ependence/

Kipling
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Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

@earlybath - thank you; you are quite right about not ruminating and just moving on. But I will at some point in this journal go back over the errors I have made, partly because I am finding writing here for an anonymous public enormously cathartic and partly for the edification of the wider public, since I have observed that most of the mistakes I made are (even among the very bright people with whom I spend most of my time) remarkably common.

I would go as far as to say that, in the financial sphere as in many others, it's okay to fuck up, even repeatedly, so long as either you can drag yourself out of the mire or someone is kind enough to help you get up out of it. I have fucked up repeatedly, in many different ways. and in most cases either I have helped myself or someone else has helped me.

There are relatively few long-term London FI blogs of real value. The UK based blog out of which I got the most back in the day was Simple Living in Suffolk. Older than most here, but he was brilliant at the small-house-no-car-voluntary-simplicity-to-get-out-of-hell thing. Lately though he seems to have been reading the news too much, rather than enjoying life, and has gone down a dark BREXIT-related rabbit hole.

Kipling
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Location: London

Re: Kipling's Journal

Post by Kipling »

But; anyway; tonight, to explain something else. I am a lawyer, a litigator, and I love winning clean and fair.

Today, I represented a client in a mediation where I got it absolutely right. Pre-mediation correspondence, preparation, staffing, groups sessions, breakouts, everything. Uniquely in my experience, we got 100% of what we were asking. Not 'we would settle for'. Not 'we would be happy with'. But, everything, plus interest, in a mediation- which is almost by definition supposed to involve compromise. Seven unbroken hours where I wasn't just doing my job, but where I was in a state of pure flow, more conducting an orchestra than arguing with a room full of legal geeks.

So, now, I am on a massive high, sipping some EXTREMELY good wine, listening to a recording of John Ogden playing a Chopin Polonaise, and feeling pretty-fucking-good about life. May you all have days like this.

Kipling
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Location: London

Re: Kipling's Journal

Post by Kipling »

I have been tracking optional expenses (i.e. excluding council tax, mortgage payments and the like) on a daily basis since the beginning of 2008. I have been tracking all expenses since 2013 (I paid off my mortgage in 2012).

2008 £30,645
2009 £42,465
2010 £37,702
2011 £27,347
2012 £33,764

2013 £45,979 - lowest month's expenditure was £1,891 (October)
2014 £37,044 - lowest month's expenditure was £1,092 (February)
2015 £39,954 - lowest month's expenditure was £1,810 (February)
2016 £101,286 - lowest month's expenditure was £2,005 (February) - I refurbed my flat in this year and excluding that expenditure was about £38k
2017 £53,677 - lowest month's expenditure was £2,625 (September)
2018 £50,637 - lowest month's expenditure was £2,813 (December)

February I tend to live fairly carefully because most of my recurring annual expenses land in January so January is cashflow negative and so to avoid dipping into savings it's usually just the (still luxurious) 'necessities' that I buy in February.

There has in recent years been a lot of lifestyle inflation. I need to rein that in because otherwise the target number grows to a point that has me working for another decade or so. What I had not done before 2019 was set an actual budget; having set up the basics (small housing close to work, no car, no kids) I was observing, rather than acting. So, budget for 2019 is £46k, 90% of last year. I'll reflect on my thinking in relation to each of these categories in more detail here at some point in the future. And, I will carefully assess each category at year end to determine whether in next year's budget (which will be lower) it should have a greater or a lesser priority.

• Wine 8.5k - about 75% of this is 'en primeur' buying that will be drunk in 4-12 years (much of my current drinking I purchased years ago)
• Holidays 8k - more than I would like to spend, but a compromise with my girlfriend for whom holidays are the primary way to destress
• Food 6k - a fairly extravagant diet involving lots of fresh vegetables and fruit, fresh fish and high quality meat
• Flat 4.5k - most of this is service charge and council tax
• Clothes 3.5k - maintenance of a professional wardrobe is expensive
• Club, societies, collections 3k
• Tubes, trains, taxis 3k - unavoidable unless I give up going to see my parents out of town every month. Plus, my girlfriend lives across town.
• Personal care 3k - includes a personal trainer for about 35 sessions a year
• Meals and drinks out 3k - in London there is a virtually unlimited amount of money one can spend on this category
• New computer etc. 2k - current laptop is on its last legs
• Misc. 1.5k

I absolutely acknowledge that this is an extravagant existence, and that I could be saving 90% of my income rather than 60%. But, a journal is to document the journey.

Jin+Guice
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Re: Kipling's Journal

Post by Jin+Guice »

Kipling wrote:
Thu Apr 11, 2019 4:14 pm
So, now, I am on a massive high, sipping some EXTREMELY good wine, listening to a recording of John Ogden playing a Chopin Polonaise, and feeling pretty-fucking-good about life. May you all have days like this.
Fuck an A man, congrats. @Seppia mentioned in a thread about the books and blog of Wall Street Playboys that there's not enough kicking ass and taking names around here. It's good to see a like minded person still enjoying their job.



I'm sure you know this, but compared to a lot of people here you are spending a fuck-ton. However, your savings rate is also admirable. You must also have a very high income if you are able to save so much. Is reducing expenses something you'd like to do, or are you satisfied with your current situation?

Kipling
Posts: 68
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Location: London

Re: Kipling's Journal

Post by Kipling »

@J&G Thank you for the encomium. Alas, not very much of my working life involves such high levels of enjoyment. Pondering on it over the past couple of days I think that such enjoyment as is derived from my working life has four main elements, here in order of meaningfulness: (i=) Doing work that makes a difference for clients with whom I evolve a good relationship. (i=) Working with trainees and young lawyers to help them develop; equipping them, and then giving them the freedom, to fly; and watching them do so. (iii) Access to an in-person community of extraordinarily bright people with whom I can kick intellectual stuff around. (iv) Kicking the opposition's ass. I need to consider how to change my working life so that the proportion of it spent doing things I consider meaningful is increased.

I am indeed spending- and earning- significantly more than most people who participate in this forum. I should explain that earning these sorts of numbers is a relatively recent thing. My income 18-31 averaged well below the minimum wage- I was in either full or part time education for seven of those years, struggling to find a career job for three, and head-down doing the poorly-paid hard initial graft for the next three. So I know how to live on not-very-much-money; and am choosing not to live on not-very-much-money. A JAFI would be about £6,500 at current exchange rates but allowing for London's higher basic costs than Chicago, an London JAFI (a JAFIL?) equates in spending power to about £7,500, so I am living something like a 6-JAFIL lifestyle while my basic net drawings amount to about 15 JAFILs.

My spending is optimised for health, time-efficiency, and enjoyment rather than cost. The reasons for reducing spending are more to do with the intellectual satisfaction of optimising my life than to enable me to get to FI faster. But, I cannot compromise on either of the first two elements for which my spending is currently optimised, the health because I had the wheels come off when I stopped paying attention to myself a few years back, and the time-efficiency because I typically work 50-60 hours a week...

It is genuinely helpful to be asked these questions. You assume you know why you are doing something but, when someone asks the question, in articulating the response you re-examine and test your assumptions as to your reasons. I have been thinking about this while going round the supermarket (buying expensive but healthy food...).

Nomad
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Location: UK

Re: Kipling's Journal

Post by Nomad »

This is an interesting first post. I think you are starting where a lot of people aim to finish.
That is not in of itself a bad thing but even considering the costs of London, that is a tidy amount.
You seem to get considerable enjoyment from your work and the capital so you may not be as keen as some would be to quit the rat-race.

Personally, I would be tempted to move somewhere cheaper, liquidate the considerable house investment and take a job with far fewer hours.

Assuming that isn't your immediate plan and you are going to continue working 50-60 hours a week. What kind of net worth are you aiming for to support your Fat-FIRE lifestyle?

Kipling
Posts: 68
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

@nomad - thank you. Saving money when you have a top marginal tax rate of 60+% is indeed sometimes a dispiriting process. I am proud of what I have achieved.

I do get some enjoyment from parts of my job. The question is the extent to which I can change it to exclude the much larger proportion of it that I get no enjoyment from. However, I cannot currently do part-time what I currently do full- time, I would have to get an entirely different job. This is because the overhead per fee-earner in a city law firm is a six-figure number (so you work for three or four months a year just to cover that, and then another three or four months to cover salary costs...). Job sharing is theoretically possible but practically extremely difficult, you have to have a sort of twin-relationship with your job-sharer and there is no-one I work with with whom I have that closesness who might possibly want to job-share (they all have houses and mortgages)... What I can see as a future possibility is moving towards treating large-scale pieces of litigation as individual projects and my simply being involved in fewer projects. For that we need to move to a location-independent set-up, so that the overhead doesn't make it unprofitable, and the tech for that is still in its infancy.

I think, conservatively, a good third of my current spending exists only because I have to work. So, I will need about 30k a year. So, NW of £1m plus housing should cover it...

Peanut
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Re: Kipling's Journal

Post by Peanut »

It’s fascinating to me that wine is your biggest expense. Do you believe it optimizes both your health and enjoyment? Honest question. If you are buying futures can’t you also sell some of them so you make your hobby pay for itself? I read an article about oenophiles doing that a few years ago. I even considered getting into it myself purely as an investment for half a minute before I remembered I had zero expertise in the field.

Glad you are on the forum. Your transparency is inspiring.

Kipling
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Location: London

Re: Kipling's Journal

Post by Kipling »

@ peanut. Good questions. I'll deal now with wine and health.

Pretty much every lawyer I know drinks a fair bit of wine, but in relative moderation. Very few people will regularly put a bottle away on a weekday evening (the wheels fall off in the professional services game if you do that) but very many (like me) will have a couple of glasses with dinner. It is both pleasurable in itself and part of the de-stressing process so web-of-goals approved. I and people like me tend to drink more (for example over dinner parties with friends) at the weekend but this is in the context of multi-course meals which can take place over four or five hours. I have blood tests for other reasons twice yearly and liver function is perfect. I should explain that what I mainly drink is European wine between 8.5% and 14%, not zinfandels and the like made on supercharged yeasts... someone showed me a zinfandel last year that was 16.8%! Headache in a glass.

But wine also has calories, 550-750 a bottle, and I am a bit overweight, 6'1" and 215lbs at beginning of the year, now down to 208. With my build I am probably at peak general fitness around 192-194 so getting back to that by end December is the aim. When I was running a great deal I would be around 190; for marathons or longer distances I would weigh in at about 184, but that was not a healthy weight for me (runners are the unhealthiest lot of fit people you can find). Anyway, one of my ways of dealing with this excess weight (in addition to more exercise again) is to have at least 90 alcohol-free days this year; so I am tracking this simple metric for the first time in 2019. Currently on 27 and it hasn't been a struggle.

Now off for a seven-hour hike, because it's a beautiful sunny day.

anesde
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Re: Kipling's Journal

Post by anesde »

Great seeing your posts as I too live in London and am always curious on fellow Londoner’s perspectives.

I’m a bit younger (30) on the initial track of a similar high income career. My costs are substantially lower (~£20k in 2018) but I feel like I live quite well. A lot of this is a more efficient housing situation (split 1 bedroom flat with fiancé) but perhaps you may find something useful from the below.

I’ll preface by acknowledging my idea of living well may be substantially different, especially with wine as while I know what I like it doesn’t necessarily translate for others.

Food - I source meat exclusively from Smithfield’s, fish from Billingsgate, and produce from Lidl. I know some may turn their noses up at this but I honestly think the quality is as good or better than the higher priced Waitrose or premium butchers. I do frequent a Brazilian and Portuguese butcher occasionally (also cheap) when I’m looking to cook something specific. I cook as often as possible and bring lunch because a) it’s cheaper and b) I genuinely like to cook and prefer my own to store bought lunches. I leave eating out for business trips and given it’s not on my personal dime I don’t skimp on eating well when I do.

Wine - I’ll book a weekend trip to France well in advance on the Eurostar (cheap tix), AirBnB for cheap but nice accommodation, and take an empty suitcase with me. We buy a case of wine for about 20-30% less than in London and have a lovely weekend away. Train means you don’t have to worry about checking a bag or airline breaking your bottles and it doubles as a holiday.

Clothing - I’m writing this from Danang, Vietnam where we just attended a friends wedding. I sourced a good tailor in Hoi An, selected the highest quality fabrics myself and got 4 bespoke suits 12 shirts and a wool overcoat made for about £1000. Could have been cheaper but I wanted to ensure it wasn’t crap fabric or glued clothing. Time will tell if it was a good investment but I still have 2 well made suits and 4 shirts from when I did something similar in Shanghai 6 years ago.

I personally try and strike a balance between living well and being “economically efficient” (I prefer this term vs being cheap :) )

Just some examples, but the main point is much of the same quality (or very similar) can be obtained for a fraction of what it appears. Whether the “very similar” isn’t similar enough is up to you but I think you could easily shave £15k off your spending without materially affecting your quality of life. Cheers!

Kipling
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Location: London

Re: Kipling's Journal

Post by Kipling »

Moving on to wine as an investment: don't buy wine for investment purposes. Reasons why in brief: difficulty of assessing value by any empirical method; vast buy/sell spread; high ongoing costs of ownership; depreciating asset after a certain point. The long version of this explanation deserves its own thread.

Kipling
Posts: 68
Joined: Fri Mar 17, 2017 11:10 am
Location: London

Re: Kipling's Journal

Post by Kipling »

Assets and liabilities check 3/5/19

Assets

Property - £391,000
Saleable collections - £14,000

Pension 1 - £14,000
Pension 2 - £474,000
Pension 3 - £84,000
Pension 4 - £71,000

ISAs - £18,000
NS&I - £35,000
Cash at bank - £4,000
Loan out- £12,000

Gross - £1,117,000

Liabilities

Credit card - £3,000
Committed purchases - £2,000

Net - £1,112,000

I spent £5611 this month. That included some hotel costs for my summer holiday (£900) a lot of wine for future drinking (£1,000) and significant spending on collections (£1,400). Basic food and maintenance costs were about £1,500, the remainder went on three out of town trips. I socked another chunk away in premium bonds and the stock markets went up, flattering the net worth figure. May expenditure should be half April.

Frita
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Re: Kipling's Journal

Post by Frita »

Could life after being a lawyer involve wine in some way (running a shop or tasting room, buying into/starting a vineyard elsewhere, etc.)? It seems like a passion.

Kipling
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Location: London

Re: Kipling's Journal

Post by Kipling »

@ Frita, wine is indeed a passion. I have been in love with the fermented juice of the grape since I was a boy. I started to buy wine seriously (i.e. in quantity with an eye to future drinking) when still a teenager. Good wine is the perfect combination of the intellectual and the sensual, it satisfies my almost constant need to have things to analyse and classify- country, region, vineyard, grape, producer, vintage, colour, clarity, various elements of taste... and also relaxes me. This is all inter-related with the fact that I have a truly phenomenal memory for wine, to the extent that if I taste a wine I have had before I can usually remember when I had it before, where, in what context, and how it's developed since. This is probably a form of associative synaesthesia. It is certainly something that can disconcert people around me.

Working in wine it is something I have thought carefully about, but my decision is that life after lawyering is indeed going to involve wine, but as an intelligent (and fairly moderate) consumer, rather than as a business.

Running a wine shop in England is an easy way to turn a large fortune into a small one. The fixed costs are enormous, the revenue uncertain and the buying public usually undiscriminating. For this reason there are very few UK independent wine merchants left.

Other than as part of vineyard tours the UK does not really have the concept of tasting rooms (we have pubs, bars and restaurants). And, most English wine is either terrible (pretty much all reds, all but a small number of whites, most sparkling wines) or very expensive (the remaining sparkling wines). It's no fun to be pushing product you don't believe in.

Running a vineyard - well, see above for the UK. As to abroad - well, the only other language I speak well enough to have a shot at this is French, and I have visited with enough (dozens, possibly hundreds, of) growers there over the past twenty years to know that it is HARD work.

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