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drbubb

Where are you on the Path to Financial Independence?

The Path to Financial Independence  

133 members have voted

  1. 1. What stage have you reached?

    • I haven't started yet: what is all the fuss?
      0
    • I am spending more than I make, and need to change that
      6
    • I'm free from most consumer addictions: spend on only what I need
      20
    • THe only debt I have is mortgage debt
      25
    • I have no debt at all (except financing my investments)
      30
    • I am debt free, and have a job I like
      44
    • I am debt free, and no longer need to work
      9
  2. 2. How long before you expect to reach Financial Independence?

    • Never. I expect to die in debt, still working
      7
    • I will be financially independent when I retire
      39
    • I should be F.I. in about 10 years
      31
    • I should be F.I. in 5-10 years
      26
    • I plan to be F.I. in 2-5 years
      15
    • I can see F.I. within two years
      3
    • I have already reached Financial Independence
      13


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There are many uncertainties, having to do with family, work, future property purchases or sales. But take your best guess on where you are, and when you expect to be Financially Independent ("F.I.")

 

Over time, let's turn GEI into a High-FI community

 

= =

 

HERE IS WHAT true freedom (from debt) feels like:

 

"Is There Life After Debt?

Yes. Different. New Again.

 

My wife and I just celebrated our third anniversary of Debt-FREEDOM. My debt freedom date ended 20 years of indebtedness, counting my college school loan days. Virtually all of my adult life was spent owing money to various banks, car dealers, mortgage companies, credit card issuers, department stores. The last time I can remember not owing money was when I was a freshman in college. When my life journey was just starting. When the future was unfettered by the past.

 

As humans, it seems we can get used to anything, even when it's detrimental, irrational, illogical, and sucks the life out of tomorrow. We cheerfully signup for a lifetime of fear for the immediate gratification of today, and in doing so we impoverish our future. Someone much wiser than me once said,"We are what we repeatedly do."

 

Life after debt is different. It's a lot like life before debt...if you can remember that far back. Except it's different. Life after prison, I imagine, is a lot like life before prison, except it's different. The experience leaves you changed. You are happy for the change of scenery, yet the knowledge of the loss of so many years of productive life - for what is money if not the embodiment of time - weighs heavy on your soul. You seek forgiveness from your creator for your poor stewardship of his gifts.

 

But it's also New Again. It's like before. It's like before you knew about credit, debt, loans, interest, bankruptcy -- except it's different. You DO know about these things. And what's more, you know you have defeated them. And you know that the future is once again unfettered by the past."

 

@: http://www.thefrugallife.com/debtfree.html

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Having paid off my mortgage recently, I'm now debt free and work in a worthwhile public sector job that I really enjoy. Re home ownership, I genuinely respect those with the balls to STR, but I know it's not for me.

 

Strangely, although I've never been rash with my cash, I seem to be thriftier now that I have more disposable income. I think I've reached a stage where I already have most of my fairly limited list of essentials, and can now see clearly through the consumerist hype. For the most part, I do not ultimately desire what's on the conveyor belt of shiny toys that we're tempted with every day. I'm not immune, but can usually persuade myself that I can live without x,y or z. I think that if you can train yourself not to need these things, and focus on other goals which have little financial impact, the journey to self sufficiency, (in more than just a financial sense), becomes much more achievable, even on a modest salary.

 

Financial independence? Realistically, probably when I retire. Having said that, I'm better off now than I thought I'd be 10 years ago, so maybe with the excellent advice here, and a reduced desire for the 'shiny things', it may be sooner. Selling up and leaving the country, it could be sooner still. Even if I was fully financially independent, I think I'd probably still be working in a similar area to what I do now, at least while I'm capable of doing it.

 

TLM

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I'll get there in the end. My weaknesses as far as consumer goods go are out of print gold cd's and hand made speaker wire/interconnects so I'll allow myself those...

They call me tight arse at work for whinging about the price of everything I see, but having lived through deflation in Japan I know what can happen. This country just has no concept of it yet..

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Strangely, although I've never been rash with my cash, I seem to be thriftier now that I have more disposable income. I think I've reached a stage where I already have most of my fairly limited list of essentials, and can now see clearly through the consumerist hype. For the most part, I do not ultimately desire what's on the conveyor belt of shiny toys that we're tempted with every day. I'm not immune, but can usually persuade myself that I can live without x,y or z. I think that if you can train yourself not to need these things, and focus on other goals which have little financial impact, the journey to self sufficiency, (in more than just a financial sense), becomes much more achievable, even on a modest salary.

 

TLM

 

 

Agree with that. I too have never felt the need to spend money, or especially to spend money I don't have - debt. Debt is a simple concept to understand. You are spending your future earnings, or rather potential future earnings today. For most, those earnings, or level of earnings, are not guaranteed. An understanding of economic and financial history will tell you why.

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Agree with that. I too have never felt the need to spend money, or especially to spend money I don't have - debt. Debt is a simple concept to understand. You are spending your future earnings, or rather potential future earnings today. For most, those earnings, or level of earnings, are not guaranteed. An understanding of economic and financial history will tell you why.

 

 

Absolutely No.6! especially true for me as Im self employed and future earnings are far from guaranteed. Makes me respect debt and all that it entails.

 

Though I'm debt free now having STR I guess I will need a mortgage again one day (though not any time soon).

 

Health and happiness for you and your family come way way above the need for shiney new things!

 

Would be great to be FI, but Im not agressive enough with my investments or perhaps I'm just comfortable with the current level of risk for now ;-)

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Having spent most of my working life in some kind of debt, this forum is of particular interest to me. I spent too many years as a manager in industry where the stress levels were unbearable at times and the wages mediocre. The thought of being FI would be a dream come true for me

 

I am very much a novice here and apologies that I dont feel that I can contribute too much to this forum, but very grateful for some of the excellent postings.

 

So my quest for FI involves puting this years ISA allowance into ML gold & general when I feel that I can time the bottom of the retracement (as a newbie, any nods of agreement here would me much appreciated...ta :huh: )

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Harvipark,

 

You are taking the early steps in a journey. I hope GEI can help.

You may find some inspiration in one of the broadcasts: on Independent World.

 

Or on Financial Sense, which has been mentioned frequently here

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Having spent most of my working life in some kind of debt, this forum is of particular interest to me. I spent too many years as a manager in industry where the stress levels were unbearable at times and the wages mediocre. The thought of being FI would be a dream come true for me

 

I am very much a novice here and apologies that I dont feel that I can contribute too much to this forum, but very grateful for some of the excellent postings.

 

So my quest for FI involves puting this years ISA allowance into ML gold & general when I feel that I can time the bottom of the retracement (as a newbie, any nods of agreement here would me much appreciated...ta :huh: )

 

Hi harvipark, and welcome. Not being a financial whiz here either, I felt a bit daunted initially posting too, but there's various forums where there's some good discussions, eg the 'Utopian ideas' section where any opinion is valid. As for the rest, people are generally willing to answer sensible questions if you've put some effort into doing some research. I don't understand a lot of what is discussed here, but if you can take the time to follow it up, it does start to make sense.

 

With investment, I think the important thing is to go with what you're comfortable with. Assess your attitude to risk and decide the best way of protecting your capital. Also, where possible, go with what you know. Maybe your years in industry have given you an insight into whether you think that your particular area or associated areas are potentially a good investment or not (if so, feel free to share!). There's an adage that you 'buy on the rumour and sell on the fact'. The problem for the layman is catching the rumour before everyone jumps on the bandwagon, so you may be able to catch the wave if it's an area you're experienced in. There's also the adage 'don't catch a falling knife', so I'm always wary of the risks of trying to second guess the bottom of a market.

 

As a newb, I personally I think everything is a bit volatile at the moment. This can provide rich pickings for the experienced trader, but I'm sitting on the sidelines, almost wholly in cash to see which direction we're likely to be heading. FWIW, I may buy some physical gold if the price dips over the summer, and it may be worth buying back into mining stocks which have taken a hammering recently. I think pharmaceuticals are also a good long term bet. I sold banks recently, and am in two minds whether to buy back in. I'm reluctant, as I suspect that bad debt write offs may be vastly greater than has been estimated over the next few years, especially with impending IR hikes on the horizon. Anyway, just my 2p worth. Happy posting.

 

Cheers,

TLM

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Hi DrB/TLM

 

DrB, Thanks for the links. I was aware of Financial Sense through here and HPC. There are some good articles on there which I am sure will be useful. As for "Independent World", the link does not seem to work where I am

 

Hi harvipark, and welcome. Not being a financial whiz here either, I felt a bit daunted initially posting too, but there's various forums where there's some good discussions, eg the 'Utopian ideas' section where any opinion is valid. As for the rest, people are generally willing to answer sensible questions if you've put some effort into doing some research. I don't understand a lot of what is discussed here, but if you can take the time to follow it up, it does start to make sense.
Hi TLM

 

Its good to know I am not the only one learning the ropes and thanks for the words of encouragement. I am sure that many of the lurkers here, (and myself) feel like the "spotty kid at the back of the class" afraid to raise his hand and ask the "dumb question" :)

 

Also, where possible, go with what you know. Maybe your years in industry have given you an insight into whether you think that your particular area or associated areas are potentially a good investment or not (if so, feel free to share!). There's an adage that you 'buy on the rumour and sell on the fact'. The problem for the layman is catching the rumour before everyone jumps on the bandwagon, so you may be able to catch the wave if it's an area you're experienced in. There's also the adage 'don't catch a falling knife', so I'm always wary of the risks of trying to second guess the bottom of a market.

 

This is something invaluable that I have learned from HPC/GEI. Staying ahead of the crowd and not reacting to broad market sentiment (HPI being a good example). I have spent the last few years trading stocks with around 3k in a shares ISA basically learning the ropes. I lost about half of this amount in a bull market! :huh: .... and so having made the basic investing mistakes, I feel am ready to risk larger amounts. I became interested in investing after seeing my pension funds decline after the dot.com boom. Through lack of understanding, I felt powerless to prevent the losses I was sustaining. Therefore, I decided I would learn how to manage my own investments as I didnt trust any of the financial advisors that were recommended to me.

 

As for my background, I worked in the food industry for most of my adult life. I saw declining wages, poor company profit mainly due to the large supermarkets squeezing margins and much of the work outsourced. It is not an industry that I would be prepared to put my money

 

As a newb, I personally I think everything is a bit volatile at the moment. This can provide rich pickings for the experienced trader, but I'm sitting on the sidelines, almost wholly in cash to see which direction we're likely to be heading.
I have the same feeling about things at the moment. Moved my investments into cash just after the market turned recently (I really must pay more attention to DrB in future!!!) :) Not sure how far the stock market will fall so just waiting to see how things pan out for now

 

FWIW, I may buy some physical gold if the price dips over the summer, and it may be worth buying back into mining stocks which have taken a hammering recently. I think pharmaceuticals are also a good long term bet. I sold banks recently, and am in two minds whether to buy back in. I'm reluctant, as I suspect that bad debt write offs may be vastly greater than has been estimated over the next few years, especially with impending IR hikes on the horizon.

 

As I said, I am looking to buy into a gold fund when the time is right (with the adage "catch a falling knife" firmly in the back of my mind!) Totally agree with you on banks. Personal debt levels and the general state of the UK economy look very risky at the moment. I am sure that we are heading for a recession, but the thing that noone knows is how bad it will be? The 1929 crash is frequently mentioned on here and HPC and I ask myself if that could really happen again in this day and age? It something I dont want to think about too hard :)

 

Cheers

 

 

Harvi

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Hi DrB/TLM

 

DrB, Thanks for the links. I was aware of Financial Sense through here and HPC. There are some good articles on there which I am sure will be useful. As for "Independent World", the link does not seem to work where I am

Hi TLM

 

Its good to know I am not the only one learning the ropes and thanks for the words of encouragement. I am sure that many of the lurkers here, (and myself) feel like the "spotty kid at the back of the class" afraid to raise his hand and ask the "dumb question" :)

 

Yes you have me to do that ,I was desribed at school as the ( class clown ) Thought it was good at the time i suppose

Looking back i wish i had tried harder ,much harder in fact!

 

After wasting a few years in dead end jobs, I found a good job (well paid anyway)although very hard work in the building game, Now i am trying to make up for the lost time and money! and i think GEI is the best chance i have of acheiving that goal (thanks Bubb) .I know i post a lot of dumb questions but i suppose someone has to.

 

I think GEI has the makings of an excellent forum and I for one will at least try to learn from the more experienced posters (thanks everyone) . And if anyone feels like the "spotty kid at the back of the class"

afraid to ask? .

Dont worry your not the only one making a fool of himself!

My advice is post away were all learning (just some more than others) :)

 

 

 

 

 

 

 

 

This is something invaluable that I have learned from HPC/GEI. Staying ahead of the crowd and not reacting to broad market sentiment (HPI being a good example). I have spent the last few years trading stocks with around 3k in a shares ISA basically learning the ropes. I lost about half of this amount in a bull market! :huh: .... and so having made the basic investing mistakes, I feel am ready to risk larger amounts. I became interested in investing after seeing my pension funds decline after the dot.com boom. Through lack of understanding, I felt powerless to prevent the losses I was sustaining. Therefore, I decided I would learn how to manage my own investments as I didnt trust any of the financial advisors that were recommended to me.

 

As for my background, I worked in the food industry for most of my adult life. I saw declining wages, poor company profit mainly due to the large supermarkets squeezing margins and much of the work outsourced. It is not an industry that I would be prepared to put my money

I have the same feeling about things at the moment. Moved my investments into cash just after the market turned recently (I really must pay more attention to DrB in future!!!) :) Not sure how far the stock market will fall so just waiting to see how things pan out for now

As I said, I am looking to buy into a gold fund when the time is right (with the adage "catch a falling knife" firmly in the back of my mind!) Totally agree with you on banks. Personal debt levels and the general state of the UK economy look very risky at the moment. I am sure that we are heading for a recession, but the thing that noone knows is how bad it will be? The 1929 crash is frequently mentioned on here and HPC and I ask myself if that could really happen again in this day and age? It something I dont want to think about too hard :)

 

Cheers

Harvi

 

 

Hi DrB/TLM

 

DrB, Thanks for the links. I was aware of Financial Sense through here and HPC. There are some good articles on there which I am sure will be useful. As for "Independent World", the link does not seem to work where I am

Hi TLM

 

Its good to know I am not the only one learning the ropes and thanks for the words of encouragement. I am sure that many of the lurkers here, (and myself) feel like the "spotty kid at the back of the class" afraid to raise his hand and ask the "dumb question" :)

 

Yes you have me to do that ,I was desribed at school as the ( class clown ) Thought it was good at the time i suppose

Looking back i wish i had tried harder ,much harder in fact!

 

After wasting a few years in dead end jobs, I found a good job (well paid anyway)although very hard work in the building game, Now i am trying to make up for the lost time and money! and i think GEI is the best chance i have of acheiving that goal (thanks Bubb) .I know i post a lot of dumb questions but i suppose someone has to.

 

I think GEI has the makings of an excellent forum and I for one will at least try to learn from the more experienced posters (thanks everyone) . And if anyone feels like the "spotty kid at the back of the class"

afraid to ask? .

Dont worry your not the only one making a fool of himself!

My advice is post away were all learning (just some more than others) :)

 

 

 

 

 

 

 

 

This is something invaluable that I have learned from HPC/GEI. Staying ahead of the crowd and not reacting to broad market sentiment (HPI being a good example). I have spent the last few years trading stocks with around 3k in a shares ISA basically learning the ropes. I lost about half of this amount in a bull market! :) .... and so having made the basic investing mistakes, I feel am ready to risk larger amounts. I became interested in investing after seeing my pension funds decline after the dot.com boom. Through lack of understanding, I felt powerless to prevent the losses I was sustaining. Therefore, I decided I would learn how to manage my own investments as I didnt trust any of the financial advisors that were recommended to me.

 

As for my background, I worked in the food industry for most of my adult life. I saw declining wages, poor company profit mainly due to the large supermarkets squeezing margins and much of the work outsourced. It is not an industry that I would be prepared to put my money

I have the same feeling about things at the moment. Moved my investments into cash just after the market turned recently (I really must pay more attention to DrB in future!!!) :) Not sure how far the stock market will fall so just waiting to see how things pan out for now

As I said, I am looking to buy into a gold fund when the time is right (with the adage "catch a falling knife" firmly in the back of my mind!) Totally agree with you on banks. Personal debt levels and the general state of the UK economy look very risky at the moment. I am sure that we are heading for a recession, but the thing that noone knows is how bad it will be? The 1929 crash is frequently mentioned on here and HPC and I ask myself if that could really happen again in this day and age? It something I dont want to think about too hard :)

 

Cheers

Harvi

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Great comments, everyone. I enjoyed reading them

 

"I am debt free, and have a job I like"

 

Hmm...

I think I left a category out: those who are debtfree and do not yet own their homes.

Obviously, there is a big difference between Debtfree-with-home, and Debtfree-without-home.

Now, as a STR person, I am DFWH, rather than DFWOH, but I can afford to buy a home, and still be debtfree, so perhaps that is the same category are DFWH.

 

If you are willing, it would be interesting to learn if people here are WH or WOH- perhaps I will start a new pool about that in a few weeks, when this section is better developed.

 

I get the feeling from reading HPC, that there are many who are DFWOH who are just waiting for the right moment to buy, and then they will pounce, and become homeowners with debt. They will exchange the stress (for some) that comes being off the ladder, for the stress of having a mortgage to pay. Personally, I think that the debtfree life is better, even if WOH.

 

How do other posters feel about that?

 

I like the idea of moving beyond the wannabe-FTB prejudices that seem rife on HPC.

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Hi Halebop

 

 

Yes you have me to do that ,I was desribed at school as the ( class clown ) Thought it was good at the time i suppose

Looking back i wish i had tried harder ,much harder in fact!

:) Cant say that I was a complete angel at school either! Happy times though. I was lucky in many ways as the company i used to work for sponsored me to go to college day release. However I completely lost faith in the benefits I should have gained from further education. I read a thread recently on HPC where one guy had ditched his degree training and became a truck driver. Thats exactly what i did and am much happier and wealthier for it

 

After wasting a few years in dead end jobs, I found a good job (well paid anyway)although very hard work in the building game, Now i am trying to make up for the lost time and money! and i think GEI is the best chance i have of acheiving that goal (thanks Bubb) .I know i post a lot of dumb questions but i suppose someone has to.

 

In my experience, the only ones making a decent living these days are the brickies, sparkies, plumbers, etc. i.e. the self employed tradesmen/contractors. I am a self employed driver and earning more than double what I was before working for a company. I honestly do not think I will work for another company again of it is within my control. The poor wages and stress is just not worth it.

 

I think GEI has the makings of an excellent forum and I for one will at least try to learn from the more experienced posters (thanks everyone) . And if anyone feels like the "spotty kid at the back of the class"

afraid to ask? .

Dont worry your not the only one making a fool of himself!

My advice is post away were all learning (just some more than others)

 

Thanks for the reply and best of luck on reaching your first million! B)

 

 

Harvi

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Hi Halebop

:) Cant say that I was a complete angel at school either! Happy times though. I was lucky in many ways as the company i used to work for sponsored me to go to college day release. However I completely lost faith in the benefits I should have gained from further education. I read a thread recently on HPC where one guy had ditched his degree training and became a truck driver. Thats exactly what i did and am much happier and wealthier for it

Hi harvi

I left school and wanted to be a spark or a plumber ,When i went for the CITB apptitude test .They said i could be a plasterer or a labourer (thick eh?)

Anyway to cut a long story short i ended up being a carpenter

 

 

In my experience, the only ones making a decent living these days are the brickies, sparkies, plumbers, etc. i.e. the self employed tradesmen/contractors. I am a self employed driver and earning more than double what I was before working for a company. I honestly do not think I will work for another company again of it is within my control. The poor wages and stress is just not worth it.

Thanks for the reply and best of luck on reaching your first million! B)

Harvi

 

Your not wrong there !!!! Brickies are earning up to 1500 quid a week

I worked with a plumber before christmass 2000 a week

sparks about 1000,This is on building sites by the way. and in the north .I can earn a day what my freinds earn a week . But the work seems to be drying up

The building trade has had its day again IMO ,its downhill from here!

This is what stops me from buying again at the moment ,After STR last year my plan is to buy a house outright(no mortgage) and after saving up this last two years ,And with my profit from my last house .I could buy it back mortgage free .But i will wait you never know i could possibly be buying a lot bigger house mortgage free with the same money in a few years. :)

 

P.S sounds like your happy in your job! I f@@cking hate mine .but life is such

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I am completely debt free, and have always been except for the 4.5 year period ('01-'05) in which I "owned" a house. I have since STR'd but in addition to that money I have been saving up - not completely frugally but fairly sensibly - such that the STR money is less than half of my total savings.

In other words I am not defined by being a STR, I am more a saver than anything else.

 

I am not FI. I have about 2 years gross income saved up. If I moved flat to share with somebody I could probably cut down my costs quite a lot and survive a fair while.... but I'm not at a point where low risk growth of my savings could cover my costs and inflation indefinitely.*

 

I think in my present state I could achieve FI in 10 years, BUT in that time I would like to get married and have a family, so my present state isn't really applicable. Times change.

 

 

 

* That's actually an interesting calculation to make: what % return would I need to make every year to pay for a certain living standard and not see the capital eroded by inflation? I think it's about 20% at the moment. From the other thread:

 

The basic formula is you need to live off approximately 4% of your capital, assuming your capital returns 4%+(real)inflation per annum, after taxes, you could live indefinitly on your savings. The 4% figure works well because that is the long term minimum return, after inflation, of equities.

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If you look hard, you can find ways of investing your money to earn more than 4%.

 

And I think that if we have a market meltdown this year, then returns of 5% or 6% may be available in many markets. The trick will be to keep your capital intact through this year's meltdown, if it comes

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If you look hard, you can find ways of investing your money to earn more than 4%.

 

And I think that if we have a market meltdown this year, then returns of 5% or 6% may be available in many markets. The trick will be to keep your capital intact through this year's meltdown, if it comes

 

Oh certainly. I managed 50% last year (ok, 49%) but that was high risk and partly based on what a bunch of internet strangers told me (ok, suggested) to do. :)

I think the 4% is just based on worst-case long-term minimums.

 

If all years were like last year I think I could retire now. Any idiot could make money.

But that's bubble talk.

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If you look hard, you can find ways of investing your money to earn more than 4%.

 

And I think that if we have a market meltdown this year, then returns of 5% or 6% may be available in many markets. The trick will be to keep your capital intact through this year's meltdown, if it comes

 

Yes, but how?

 

Perhaps we could discuss it here:

 

http://www.greenenergyinvestors.com/index.php?showtopic=409

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Debtfree-without-home.

 

Describes me quite well - no house, but not yet financially independant :)

 

Still within the first few years of saving for an income, and learning the ropes of investing.

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"I managed 50% last year (ok, 49%)"

 

that is quite a few years at 4% pa. The trick is not to lose it when you make big returns.

That requires alot of dilligence.

 

For example, yesterday I was ditching Calls like mad in the first half hour of trading. When I saw the falls over the weekend in various markets I realised that the Wall Street rally last eweek was probably pure puffery thanks to pre-holiday good feelings.

 

Thanks to that quick action, I was down only 0.8%, instead of the 3-4% that I might have been otherwise. (note: my portfolio is more volatile than the market indices.) And now I am loaded with cash and free to catch the next wave. Had I just left it alone, I would have riden the move down.

 

This type of quick action is not something most would want to worry about. It is an example of one of the "headaches" that full time traders have to live with.

 

I sometimes like to say that when you choose a career, you are really choosing the headaches that you want to live with. Thank goodness, this rough of mine, comes with some rather nice smooth

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I get the feeling from reading HPC, that there are many who are DFWOH who are just waiting for the right moment to buy, and then they will pounce, and become homeowners with debt. They will exchange the stress (for some) that comes being off the ladder, for the stress of having a mortgage to pay. Personally, I think that the debtfree life is better, even if WOH.

 

How do other posters feel about that?

 

I like the idea of moving beyond the wannabe-FTB prejudices that seem rife on HPC.

 

I am beginning to agree with this. Our main driver for buying (6 years ago) was that we didn't want to be paying rent until the end of our days. But the downside is that owning tends to lock you down into wage slavedom. I am planning a new business venture and, being a home owner, it feels a much bigger risk than if I was renting.

 

So the question is, how do you avoid the yoke of mortgage/home ownership without the problem of paying rent into retirement age?

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Possible answer:

Save your money, invest well. And buy when the cost of owning is below renting. At that time, any deposit you put in reduces your monthly rental cost, rather than merely reducing the financial cost to "barely affordable"

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Good thread.

 

I shocked myself a few months ago playing around with a simple compound return spreadsheet. Start off with £30k. Invest an additional £5k a year. Aim to average a return on investments of x % per year. How long does it take to build up a 7 figure sum? If you use an optimistic but not impossible 20% figure for "x", the answer is suprisingly not very long! I found this REALLY motivating.

 

Although averaging 20% pa is obviously not possible without being fairly clever and carefully managing risk, I don't see it as completely beyond my abilities. Unfortunately the easy way to make this sort of return (BTL) is no longer an option (although it may be 5-10 years down the line).

 

The time it would take for my investment earnings to outstrip my current salary under the scenario described is VERY encouraging! Obviously I would be unlikely to quit the day-job at that early stage, but damn it would feel good to know I could!

 

My ultimate aim is to become a full time private investor and / or own my own business, with enough capital behind me to be able to do this, live in a nice area, and support a family with little or no stress. Although I wouldn't mind the Aston Martin tucked in the garage as well, I would have to be obscenely rich before I felt I could justify it!

 

I don't generally lust after material posessions, and am shocked on a daily basis at how happy most people are to completely piss money away on useless and/or overpriced things (£50+ per month on a mobile, £3 on a coffee etc). I will admit to two areas of possible over-spending. I run two cars (one practical, one fun), but their combined cost was £2000, they are depreciation-free, and other running costs are also low (do my own servicing etc). I also spend about 10% of my take-home pay a year on holidays. Two weeks snowboarding this year! I always feel I get value for money from this spending though... without holidays to look forward to, I would really struggle to cope with the monotony of my current job!

 

No debt other than the mortgage and student loan, and no intention of ever getting any more than that! STR is currently under some consideration, but not serious (yet).

 

I would appreciate your thoughts on whether you think 20% pa is a realistic target, or pie-in-the-sky. I like to think that having age on my side will allow me to take a little more risk, hence hopefully make better average returns, than the typical fairly cautious investor.

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" would appreciate your thoughts on whether you think 20% pa is a realistic target, or pie-in-the-sky"

 

I think it is do-able. Indeed I have made this in a very good month in my aggressive account. But here's some advice:

 

+ Do not aim for such a high return to start,

+ Starting out: Invest most of your money conservatively in areas like short term bonds, where there is little risk of capital loss. Take a small part of the money and manage it yourself, to learn. Only after many months or years of successful investing, should you consider putting half or all of the money into aggressive strategies

+ Do not invest more than 20% of your self-managed money in a single stock

+ Do not invest more than 5% of your self-managed money in a single option. If you trade options, move money out fast. Am to recover your capital after a 50% or 100% move. Remember that options are like fish, they often smell after three days.

+ Treat losses as part of the game. Think of them as the tuition that you pay to learn the game. I am still learning all the time, and making new mistakes (as Frizzers can tell you after he saw a beauty earlier this week.)

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Interesting. Although... I have read that the conventional "wisdom" is to start off with a relatively high proportion of risky assets (eg. growth equities), while time is on your side (ie. able to ride out the short-term volatility) then switch more towards the safe bonds / fixed income end of the spectrum as you get older. Do you disagree with this approach?

 

At the moment, two thirds of my net worth is equity in my house - what I do with the rest is not that critical because it's such a small sum. If I was to STR, I would need to think about asset allocation a whole lot harder. The main problem being... I'd have no idea when I'd want to buy a house again, so the timescale for the investments would be a complete unknown. I suppose I'd have to go low risk with the majority of it. Not much fun though!

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