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It’s time to review 2022 and bid farewell.
It has been my annual practice to review and reflect on the year that has gone, before making goals for the New Year. This is a relatively new practice for me – it’s only been since 2019 when I reviewed my year of 2018.
I stumbled upon the concept of FIRE (Financial Independence Retire Early) in May 2018 at the ripe old age of nearly 47. And decided to embark on the journey even though I was way older than the traditional FIREes who had retired well and truly by 47!
What I couldn’t have foreseen then was that not only would I sort out my finances and accelerate my path to retirement but that I would also free up time. And time is so precious!
It didn’t happen overnight of course but year by year, I carved out more time for myself. Because as my money was being taken care of, my mind and energy were free to focus on other aspects of my life. And now I have time to reflect.
I went into 2022 with one word – Consistency.
Because I wanted to be consistent in all areas of my life and stop the start and restart cycle. But I found that I was consistent in some areas and consistently inconsistent in others!
In the end, I would describe my 2022 as a year of rediscovery.
It was also the year I caught Covid – you can catch up on that in my Mid Year 2022 Goals Review and Update
So without further ado, how did I go in terms of accomplishing my goals?
Goal 1 - Invest $30k in shares portfolio
This shares portfolio outside of my superannuation (retirement account) forms part of my ‘bridge-the-gap’ fund.
I need it to support me for the five years from age 55 to 60 ie the years when I can’t access my superannuation.
I was concerned that I may not be able to meet this goal because I started working 4 days a week from mid February (more on the non financial benefits later). Initially, I used long service leave to fund the day off but that eventually ran out in August.
Fortunately I picked up some short term evening shifts in September and October which supplemented my reduced income. I invested most of this extra income which helped me meet my goal in early December. Just in time, phew!
Goal 2 - Make a will
I’m super proud to announce that not only did I make a will, but that I did the whole estate planning caboodle. That is, I now have instructions for what to do should I be so incapacitated, but not dead, that I can’t look after my own affairs. In some ways, this not being dead is scarier than being dead.
I wrote about my experience in this post – What happens when you die tomorrow? How to make a valid will
I can’t tell you how at peace I am now that it’s done. But I confess that it took me months before I read through the documents my lawyer sent me and thinking about who I’d like to be my executors and trustees etc.
It forced me to evaluate my relationships – who do I trust to look after my affairs when I’m dead or when I’m incapacitated? Who do I want to take care of? Which charities would I support?
Confronting one’s death is supremely uncomfortable!
I know it’s not a set once and forget forever deal and that I must review it annually or at least when my circumstances change. But the hard work is done & that peace of mind is real.
Goal 3 - Replenish my emergency fund
This was a fail.
I had raided my emergency fund in 2021 to pay for what I classified as home maintenance – the replacement of major appliances such as the oven, microwave, washing machine, painting of doors / window frames etc. In 2022, I raided it to pay for estate planning.
It’s hard not to see it as a slush fund but that discussion is for another post!
I was worried about the reduced income while working 4 days a week. In order to feel more secure, I decided to save an extra month of living expenses in my Bills account/sinking fund so I’d always be one month ahead.
And so I ‘sacrificed’ replenishing my emergency fund for a few weeks. There was only so much money to go around! And I didn’t want to sacrifice investing in my shares portfolio.
My goal is to have 6 months’ of living expenses in my emergency fund. As at the end of December, I had 5 months of living expenses, so it’s not that far off.
Goal 4 - Make health and wellbeing a priority
This was neither a win nor a fail … I’ll explain.
Working 4 days a week drastically improved my mental wellbeing. Having a day off consistently in the middle of the week was truly the best thing I did in 2022. In the first few months, I spent the day off just lying on my couch, reading and napping. Yes, I struggled initially with being guilty because I wasn’t more productive. And then I didn’t care – I clearly needed the rest.
It gave me the mental space to work on projects I wanted to work on, such as this blog. I was able to join Masterminds and courses and worked on my mindset.
At the end of the year, I jumped on an opportunity and secured a side gig that was within my industry and would utilise skills I’d built up in the last 30 years. It’s the first job I’ve applied for in the last 30 years! So I was proud to be able to secure it. I know I wouldn’t have applied if I hadn’t been rested and open to opportunities.
My physical health, though is another story.
I’ve been suffering from TMJ (temporomandibular joint) pain – pain n my jaw since July. It got so bad that I couldn’t open my mouth wide enough to eat a Lindt ball. Now, that is DISTRESSING!
The biggest contribution towards this pain is the clenching and grinding of teeth in my sleep. Many years ago, my dentist made me a mouthguard but I haven’t worn it for the longest time. Hence, the pain now, sigh! But I found it again and had it adjusted. I started wearing it inconsistently but it’s more often than in the past. Hopefully, this will help to reduce the pain and my osteopath visits.
About a month before my holiday, my cholesterol was the highest it had ever been. My doctor gave me a few months to get it down or I’d have to start on medications. It’s happened before, a few years ago. So, AFTER my holiday, I worked hard to lower it. I succeeded but really need to maintain it now. I can’t continue to have this yo yo, up & down levels.
At the start of the year when the weather was warm, it was easy to fit in a morning walk before work. But after I returned from my holiday in sunny London in August, I found it difficult to get back into my routine in wet and cold Melbourne.
As a result, my sleep and physical exercise fell by the wayside.
The good news is that I have maintained my weight. I’m happy that I haven’t put on any extra weight in 2022. But like the cholesterol, it has fluctuated a lot during the year. Trying to lose weight in menopause is a real struggle!
My sleep is still not very good, despite reading Michael Mosley’s Fast Asleep – How to get a really good night’s rest. The information made a lot of sense but my biggest struggle is to get to bed on time every night and to reduce my blue light exposure. I like reading on my ipad in bed.
In summary, my mental wellbeing improved in 2022 while my physical health was a tad neglected. Hence the score of neither a win nor fail!
Goal 5 - Prepare for the non financial aspects of retirement
With 5 years to retirement, I decided it was time to work on the non financial aspects of retirement. I don’t want to wake up on a Monday morning after my last day of work the previous Friday, not knowing what to do. I know I’ll probably sleep in for the first six months, but then what?
I can confirm that I love reading. In fact, I read 74 books in 2022, most of which were fiction. I hadn’t set a goal – just read whenever I wanted. And it was often!
The majority of the books were borrowed from public libraries via the Libby app. It saved me from going nuts in a London attic while I had Covid. I did buy a few non fiction books as they were not available from my libraries.
The last time I travelled overseas was in 2019. So, after my trip to the UK in July, I can confirm that I love travelling – specifically exploring new places and eating the local cuisine (from the humble shortbread to fine dining). When the plane took off, I thought about how much I’d miss it – that feeling of freedom as I looked out at the clouds and anticipation of the fun ahead.
Thanks to Covid, I missed out on meeting up with Sam (Late Starter to FI Series #2) in UK. I managed to meet up with Weenie, a fellow late starter who shares her journey at Quietly Saving in Manchester. I’d never been to Manchester and hadn’t met Weenie before either. We exchanged photos and arranged to have dinner. But hilariously, we met at a random street corner waiting for the traffic light to change, earlier in the day. I was shocked when I heard someone behind me say “Excuse me, are you …?” It was such a comical moment! Literally, she was the only person I ‘knew’ in Manchester!
I had so much fun talking to Weenie over dinner. It was like we’d been friends forever. We had a lot in common and it was reassuring to know that someone else in a similar situation was progressing well to FIRE.
Before my holiday, I also met up in real life with Frogdancer Jones (Late Starter to FI Series #14) and Adulting World (Late Starter to FI Series #4). Once again, we all had a lot in common and it was such a joy to share our stories, progress and plans for the future.
So I can confirm that I love meeting up with like minded late starters pursuing FIRE. I can definitely do more of these meet ups when I retire.
I’ve loved re establishing my relationship with my little niece. The time spent creating new memories and building on old memories with her is so precious and worthwhile.
I used to love attending musicals & plays in my younger days, especially while on holidays. Yes, I can confirm that I still love them. In 2022, I ventured out to Hamilton in Melbourne; Life of Pi, Six and 101 Dalmatians in London. I also attended the Lume for the Van Gogh immersive sensory experience in Melbourne.
Of course, I can confirm that I still love eating – hello, cholesterol & weight struggles! I love researching where to eat, what to eat and then finally eating it – during my holidays as I’m bit more boring when I’m home.
I discovered I quite like hiking when I hiked a few trails in the Isle of Skye by myself. I can certainly see myself doing more hiking when I retire.
This was a bit more wishy washy as a goal – but I’m going to claim a win as I’ve rediscovered and confirmed activities that I love and who I like connecting with.
What's my progress to FIRE?
I have a 2 prong approach to achieving financial independence. As a late starter, my FIRE number is a bit more nuanced than the youngsters. Because I am closer to the age when I can access my superannuation compared to someone retiring at 30, superannuation forms a big part of my strategy.
I declared I reached Coast FI in April 2021 when my superannuation balance was at a point that it could reach my ‘number’ even if I didn’t invest another cent into it. The basis of that assumption was that it could reasonably double in 10 years at an average growth rate of 7.2%. I will be 60 at the end of that 10 year period which is when I can access my superannuation.
For context, my superannuation is invested in index funds – a mix of Australian and international shares. Besides my employer’s compulsory 10.5% contribution, I also salary sacrifice (ie contribute pre tax) $100 per week.
The balance was lower by $30k as at Dec 31, 2022.
Am I still at Coast FI? Yep. Because that growth rate of 7.2% is an average across the 10 years and there will invariably be good years and bad years. 2021 was just a stellar year!
2. Bridge the gap fund
I plan to retire early(ish) at 55 – that is 5 years before I can access my superannuation at 60. Therefore I need a bridge-the-gap fund 🙂
So my bridge-the-gap fund consists of cash and a shares portfolio.
Plan A was to sell down my shares portfolio to fund the five years before I can access superannuation. And having 2 to 3 years’ of living expenses in cash just in case the market isn’t very kind at the time I retire. In other words, to protect against sequence of returns risk.
However, as I started tracking my dividends, I discovered that maybe there was a chance that the dividends could support some of my living expenses and I wouldn’t have to sell the underlying shares.
So Plan B is investing in the shares portfolio until dividends can pay for half of my living expenses and having enough cash to pay for the other half. Surprisingly, the numbers I need for both Plan A and B are very similar. The picture will be clearer at the end of 2023.
As you can see from the chart above, I haven’t saved enough cash just yet. I’m still focusing on building my shares portfolio.
3. Dividend progress
So how is Plan B going, in terms of dividends?
As you can see from the chart above, my dividends have increased by 64% in 2022. This is despite the value of my shares portfolio being $5k less as at Dec 31, 2022 compared to 2021. And this is after investing $30k into it as per Goal 1.
The vast majority of my dividends is from the ETF that tracks the top 300 companies on the ASX. (Sorry, can’t tell you exactly because of ASIC’s restrictions)
Dividends in 2022 can pay for 35% of my projected retirement living expenses. So, fingers crossed, I’ll reach the 50% target soon. And then I’ll start saving cash in earnest. In the meantime, dividends will continue to be reinvested until I retire.
4. 2022 Expenses
An annual review is never complete without an expenses review,
The good news is that I spent 6.5% less in 2022 vs 2021.
And that is despite travelling overseas and indulging in expensive dining experiences.
So my top 5 spending categories in 2022 were:
1. Travel at 21.6%
My overseas holiday in July was funded by my Travel sinking fund – money I’d set aside consistently every week from my pay. This is my true guilt free spending account. Everything that I spent during my holiday was categorised under Travel, be it food or transport or anything else.
Also, in December, I paid for return airfares to London via Singapore for next July.
2. Financials at 16.6%
This is mainly professional fees and insurances associated with work plus estate planning lawyer fees.
3. & 4. Food and Health & Wellbeing equal tie at 13.5%
My biggest food month was in December because I had overseas visitors staying with me plus there was Christmas lunch . I enjoy food and show love via cooking so food will always be a top spending category.
Due to TMJ pain, I’ve been visiting the osteopath more often. And also a massage therapist for sore shoulders during the first half of 2022.
5. Personal at 7%
Besides personal hygiene items and haircuts, I dump everything in this category that I don’t know what to classify under. So this year it included my Apple macbook! It was one of my favourite purchases this year so no regrets 🙂
I did spend more than what I’ve been budgeting for future retirement expenses (17% extra!) so it’ll be interesting to see if expenses for 2023 can be pared back a bit. This extra 17% accounted for the Apple macbook, return air fares to London for July 2023 and estate planning lawyer fees.
All in all, 2022 has been a very full year for me.
Financially, it doesn’t look so good in that superannuation balances and my shares portfolio both fell in value. But my dividends improved and can cover 35% of my projected retirement living expenses. There is good news among all the bad news!
What I’m most happy about is the non financial aspects – finally having an estate plan in place, prioritising my mental health, working 4 days a week and rediscovering what I love doing and who I love spending time with.
Thank you, 2022 – it’s time to say farewell as I look forward to 2023