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<\/a><\/div>\nThe fourth quarter of 2018 contained the pivotal moment of my FIRE journey so far \u2013 FIRE day<\/a>.\u00a0 Financially it represented the transition from rapid wealth accumulation to hopefully well managed wealth decumulation or drawdown.\u00a0 As I write this though more importantly it also represented the start of what seems to be called the decompression phase of retirement and I\u2019ll freely admit I\u2019m finding this really difficult.\u00a0 Prior to FIRE I had 60 \u2013 70 hours a week either commuting or in the workplace where I would be seeing new data that would require action every 15 to 30 minutes.\u00a0 I would then be paid reasonably well for this effort on a monthly basis with some being spent to live well while the majority was saved.<\/p>\n Now we get to do what we want when we want and there is no need for urgency but also if we want to eat I now need to withdraw from my wealth that will only be renewed passively.\u00a0 I can\u2019t speed it up without taking more investment risk.\u00a0 So what emotions have I been experiencing?\u00a0 Initially, mainly a lot of stress caused by giving a good work handover and pushing too hard on our relocation plans to Cyprus<\/a>.\u00a0 That has now subsided with us now having been here for about 6 weeks.\u00a0 After the stress left I experienced euphoria!\u00a0 I\u2019d done it, I can now do whatever I want and am free to be where I want when I want.\u00a0 That also has now subsided.<\/p>\n So what am I experiencing right now?\u00a0 That\u2019s have we done the right thing and should we persist.\u00a0 There is certainly some fear in there as well.\u00a0 Fear of running out of wealth, fear of not having enough wealth to meet our quality of life ambitions for the next 40 or so years, fear of my skills quickly becoming stale and not being able to re-enter my career when that occurs…\u00a0 At one point I even thought about asking my employer if they\u2019d take me back and I have also looked briefly at what jobs are out there.\u00a0 Thankfully, I\u2019ve bitten my tongue and moved on for now.<\/p>\n So what am I doing about it?\u00a0 Firstly, I\u2019m getting outside and exercising as much as possible.\u00a0 Initially, I\u2019m just covering a lot of miles on foot to explore what\u2019s around me.\u00a0 The result of that so far is that I\u2019ve lost 7kg.\u00a0 I also think the increased exercise and loss of stress is resulting in my sleeping like a baby currently which can\u2019t be a bad thing.\u00a0 I\u2019ve also started to write things down \u2013 a lot of things both psychologically and financially.\u00a0 If it remains cathartic it may even end up in a 2nd Edition of my book<\/a> in the coming months.\u00a0 I\u2019ve also started to try and meet new people but that\u2019s going slow.\u00a0 The informal cycling club here has either closed down or is only operational in the warmer months and some other clubs I\u2019ve investigated have an average age of attendance at least 15 to 20 years my senior.\u00a0 I guess that\u2019s one of the challenges of an early retirement.<\/p>\n \nClick to enlarge, Beauty everywhere, Paphos, Cyprus<\/i><\/p>\n \nSo what\u2019s next?\u00a0 We\u2019ve always said we want to give this FIRE to the Med a fair chance.\u00a0 We\u2019ve jumped in with both feet and have always said 6 to 12 months to allow time for the homesickness to subside and decompression to play out.\u00a0 In the coming months we also have some travel planned to see far flung friends and family in person which may also put a different take on things.<\/p>\n That the psychological piece.\u00a0 Let\u2019s now looking onto the financial front where wealth closed year on year down \u00a319,000 even after savings in 2018 of \u00a328,000.\u00a0 Let\u2019s look at the details.<\/p>\n This section in my quarterly updates used to be called Save Hard which I defined as Gross Earnings (ie before taxes, a crucial difference) plus Employer Pension Contributions minus Spending minus Taxes.\u00a0 Given I no longer have Gross Earnings (only passive income from dividends and interest) or Employer Pension Contributions I\u2019m going to switch this to a focus on spending sensibly only.<\/p>\n 2018 spending totalled \u00a331,971 with \u00a312,911 of it occurring in the final quarter of 2018.\u00a0 This was not unexpected as it included my higher cost of living in the South East of England for most of the year but on top of that it also included establishing ourselves here in Cyprus.\u00a0 That included big ticket items like international removal costs, sorting out our Cyprus private medical insurance for the next year which necessitated expensive visits to private UK GP\u2019s (you would die before getting an NHS GP appointment in the part of the UK I was living) as well as car hire for a period.<\/p>\n The chart below shows where the money went.\u00a0 Those removal and car hire costs can be seen under Miscellaneous and the Medical Insurance costs can be seen under Personal Care\/Medical.<\/p>\n Looking forward to 2019 I see no reason why spending won\u2019t now reduce to the \u00a324,000 per annum planned.\u00a0 There have certainly been some puts and takes on where the spend will go but directionally I don\u2019t think I\u2019m far off.\u00a0 January 2019 spending is shaping up to plan with a view of what that might look like also shown in the chart.<\/p>\n \nClick to enlarge, RIT Spending<\/i><\/p>\n \nSpending Sensibly score: Conceded Pass<\/b>.\u00a0 An explosion of costs at the end of 2018 but not unexpectedly so.<\/p>\n 2019 (06 January 2018 to 05 January 2019) investment return closed at -3.7%.<\/p>\n Investment wise the portfolio is now positioned for FIRE drawdown<\/a>.\u00a0 Cash and cash like holdings (NS&I Index Linked Savings Certificates predominantly) for a non-mortgaged home purchase and to give me a few years of cash buffer as I enter FIRE sit at \u00a3342,000 today.\u00a0 I\u2019ve also positioned my portfolio to hopefully enable us to live just off the dividends. 2018 total dividends were \u00a328,704 which if we succeed in living well off \u00a324,000 per annum will mean I\u2019m spending 84% of dividends.<\/a>\u00a0 Right on plan.<\/p>\n \nClick to enlarge, RIT Annual Dividends<\/i><\/p>\n \nFor completeness this is what my asset allocation looks like today.<\/p>\n \nClick to enlarge, Current RIT Asset Allocations<\/i><\/p>\n \nI continue to invest as tax efficiently as possible with my tax efficient holdings from a UK perspective now consisting of:<\/p>\n If we stay in Cyprus then this isn\u2019t going to be very helpful as the NS&I ILSC\u2019s and ISA\u2019s are not recognised as tax efficient vehicles.\u00a0 Positively though as we are of non-Cyprus domicile all of our interest and dividends should now attract zero tax for the next 17 years.<\/p>\n Tax efficiency score: Pass<\/b>.\u00a0 At the end of 2017 this was 66.3% and at the end of 2018 is now 66.8% from a UK perspective.\u00a0 If we stay in Cyprus long term that will shift to 100% tax efficiency which is a pass in anyone\u2019s books.<\/p>\n Investment expenses also continue to be treated like the enemy.\u00a0 2017 finished with expenses at 0.23% and today they are slightly lower at 0.22% helped by a partial pension transfer<\/a>\u00a0earlier in the year and by not making previous investing mistakes like buying expensive active funds<\/a>\u00a0that I can\u2019t currently sell.\u00a0 If we become certain we won\u2019t be returning to the UK within 5 years of leaving I will clean that up reducing expenses further.\u00a0 There is no capital gains tax on the sale here in Cyprus but UK HMRC has far reaching talons thus the 5 years.<\/p>\n Minimise expenses score: Pass<\/b>.\u00a0 A reduction by taking some conscious actions throughout the first half of the year.\u00a0 0.01% doesn\u2019t sound like much but given my current wealth that\u2019s \u00a3135 a year staying in my pocket.\u00a0 I\u2019ll take that.<\/p>\n In the scheme of a lifetime of investing this year is insignificant.\u00a0 I\u2019m all about time in the market and not timing the market so let\u2019s zoom out and look at my performance since I started down this DIY road.\u00a0 My long run nominal is 6.0% which is a real (using RPI) return of 3.2%.\u00a0 The chart below tells the story.\u00a0 Note that the chart assumes a starting sum of \u00a310,000 which was not my portfolio balance at that time but is instead simply a nominal chosen sum to demonstrate performance.<\/p>\n \nClick to enlarge, RIT Portfolio Performance vs Benchmark vs Inflation<\/i><\/p>\n \nLong term investment return score: Fail<\/b>.\u00a0 My whole investment strategy since 2007 has been about generating a long term real return of 4%.\u00a0 A real 3.2% is well below that but importantly we are now long into a bull market and the returns just aren\u2019t there.\u00a0 While better than my benchmarks real 1.8% it\u2019s still nothing to crow about.\u00a0 I believe I have a portfolio that historically would have survived the worst bear markets from a drawdown sequence of returns perspective historically but it still doesn\u2019t feel real good.\u00a0 The question is what action can I take but sit tight for now…<\/p>\n Wealth today sits at \u00a31,307,000 down a little from the peak \u00a31,367,000 in August 2018.\u00a0 My complete journey is shown in the chart below which is now segmented to show my new decumulation phase.\u00a0 From where I sit today in the throes of decompression I am so glad I did my One More Year(s).\u00a0 That extra buffer feels really good right now as I wrestle with have we done the right thing.<\/p>\n \nClick to enlarge, RIT Progress Towards Retirement and In Retirement<\/i><\/p>\n Piecing everything together and we end up with the drawdown tracker below.\u00a0 The spending explosion of quarter 4 2018 can be clearly seen but positively even that only equates to an annual drawdown of 2.5% of current wealth<\/a>.\u00a0 On the negative side of the equation there is a long road ahead to get that spending back below 85% of dividends but the maths tells me it will work so a bit of trust is now needed…<\/p>\n<\/a><\/div>\n\nSPEND SENSIBLY <\/span><\/h2>\n
<\/a><\/div>\n\nINVEST WISELY<\/h2>\n
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<\/a><\/div>\n\nRETIRE EARLY<\/h2>\n
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