Welcome to our latest Semi-Retirement update, where we share the ups and downs of our Coast FI journey from Flamingo FI to full Financial Independence and beyond.
You can find an overview here if you are new to the blog and unfamiliar with our plan.
I’ll share a quick life update followed by our latest FI progress, net worth and some notes on our investment style, inflation and growth assumptions.
Life Update
Lately, I’ve been thinking a lot about how much having kids changes your life. Sure, when you first get handed your newborn baby, everything changes in an instant. But the real big changes happen slowly and gradually over time – priorities, plans, lifestyle choices.
Looking back just five short years ago, our lives and attitudes were so different.
We asked questions like “Should we relocate to Spain once we hit FI?” and “Should we buy a catamaran and sail around the world for a year?”.
Now the questions we ask are, “Which primary school should we send the kids to (and when)?”, “What’s the best local walking track for little legs?” and “Should we renew our annual zoo pass or have a break?”.
It’s safe to say we are very much in the thick of family life with young kids.
We spent the three months since the last quarterly update just living life – bike rides, park and beach picnics, bushwalks, playdates, swimming lessons, family visits, Lego projects, birthday parties… I’m sure fellow parents know the drill. No big trips or events for a change – and it’s been great. Sometimes it’s just nice to keep things simple for a while.
We spent so many years travelling, partying and exploring in our 20s and early 30s before we had kids that this family-oriented lifestyle still feels like such a novelty, although we are 4.5 years in now.
As you can see I’m much more of a Mummy Flamingo than Money Flamingo in daily life these days. 😉
A quick work update: In the last couple of quarterly updates, I mentioned that things have been “interesting” at my part-time job, with many changes happening in the company. This has actually opened up some new and unexpected options for me. I might share more information in a future post, but for now, I’ll just say that things didn’t play out as expected, but that might actually be a good thing.
That’s our life update for the quarter. Let’s move on to the money part (that you probably came here for).
FIRE and Net Worth Update
It has been a strong quarter for the FIRE portfolio, and at the end of June, it sat at 21x annual expenses (up from 20.5x). This means we are now 84% of the way to Financial Independence.
I have been getting a lot of questions about our asset allocation/investment style, growth assumptions and inflation recently, so I wanted to share a few notes on these topics.
Reminder: Instead of using dollar amounts, we display our net worth and portfolio value in years of living expenses. Real wealth is about time, not money, so I find this way of looking at things much more helpful.
Investment style
I don’t share the details of our asset allocation and investments anymore to be on the safe side (thanks again, ASIC…). However, I will say that our FIRE portfolio consists of several different asset classes. We are coasting to FI, meaning that we are not adding any funds to our portfolio anymore, as it will grow to our target number through compound interest over time.
This doesn’t mean we don’t manage the portfolio itself. In fact, we are probably slightly more active than most investors in the FIRE community. While the portfolio has a boring/standard core, we tend to adjust allocations once or twice a year in line with larger macroeconomic developments (which I’m very interested in).
Inflation
One danger with the concept of having a set “number” is that people forget to adjust for inflation. If your FI number is, say, $2 Million, and it takes you 15 years to get there, that $2 Million will buy you a whole lot less than when you first started out. This is why we increase our FI number for inflation on a quarterly basis. So when I say we are 84% of the way to FI, this is based on current CPI figures and not some arbitrary number we came up with years ago.
Growth Assumptions
I often get asked what the dotted line in our FI progression chart means. It shows our path/timeline to FI based on an expected annual return (inflation-adjusted) of 7%. I’m not implying that we think we will achieve a 7% return every year. However, I’m very comfortable with this assumption as an average over time. We’ve set things up in a way that means we will be ok even if we only achieve 3% returns over time (which is unlikely but gives us some peace of mind).
When we first reached Flamingo FI in 2020 we assumed it would take around ten years for compound interest to get us to full FI – by 2030. But now looks like we might get there by 2026 based on the 7% growth assumption. Pretty cool!
I hope this clarifies things a little. Let’s get back to our financial update with that out of the way.
Our overall net worth position, including our FIRE portfolio and all other funds and assets, increased from 25.8x annual expenses to 26.6x.
In summary , life is good, and the graphs are all pointing in the right direction. What more could you want? 🙂
And that’s it for our Q2 2023 update – thanks for reading!
Great update and explanations – thank you! I 100% agree on what you wrote about having kids. It changes every part of your life. I’ve stopped following most childless bloggers since we had our girl. The content is just not that relatable once you have family things to consider. Love following your journey!
Thanks Caroline, I’m glad you enjoyed the update. Personally I also mainly follow content created by parents these days. Not intentionally, but I guess that’s just what happens – you relate to people in a similar situation with a similar mindset.
Hey Mrs. F.,
I’d love to hear more about your investment strategy but understand why you can’t share.
Thanks for the extra notes on inflation adjustment. This is something that’s been on my mind a lot lately.
Cheers
Chris
Thanks Chris. Yep, inflation seems to be on everyone’s mind at the moment. 🙂
Hi
Great update, and having been through the ‘kids’ years… you’ll love the ‘teenage’ years… ha ha good luck. Mine are 24 & 22 independent adults now living on the other side of Aus in Melbourne now, which has made us Re-assess our plans going forwards too.
Sorry I’ve been super quiet, just decided to take a back seat from the blogs, socials etc. negativity abounds everywhere and it was just doing my head in… I may take a peek back sometime, but like you compounding is weaving it’s magic in the background and I just felt I had nothing to add or say anymore.
Keep in touch, you know where to find me…
Mark (aka Ice Cream Fi)
Hey Mark, good to hear from you! I actually thought about you the other day and wondered where you’ve gone. 😉
I feel the same way, at some point there is very little to add to the conversation, it’s really all just math and time from a certain point.
I’m sure the teenage years will be interesting. I feel the comments go from “wait until you have kids” (which I now say to people!) to “wait until they are teenagers”. 🙂
Loved this post! Thank you for sharing.
Thanks Fiona! 🙂
Great article!
With your FI number. Do you take into account that your young children will grow up and need a car each. Will they be taught to earn a part time job to put towards a possible 1st car. Then there’s university should their career path take them that way, giving them a helping hand with house deposit, future possible weddings. I’m curious whether these things are factored given how much has changed already with bringing young ones into the world.
a little on our situation as we have been through the kids, teens, and uni years and now have two independent young men (24 & 22) living on the other side of Australia in Melbourne. I’m 57 soon, Semi Fi at 54 and have actually hit our arbitrary FI number using the 4% rule (Very underwhelming moment I may add)
I was bought up by not very well-off parents and was given no free rides growing up by my parents and I didn’t do Uni… Didnt hurt me in the slightest.. and that’s how I’ve bought up my boys. When dad passed away 10 years ago I was left around $50k Aus… I gave each boy half at that point as I had no need for it really. that’s been their base help – they’ve bought their own cars, had their own jobs while at school and onwards and have earnt their own $$$. The only help I gave the youngest through UNI was a $40k lump sum – $1k a month for 4 years towards accommodation costs in Melbourne – the rest he worked out for himself (Took a gap year and worked two jobs and went to UNi with $45k in the bank not including my lump sum… I offered the other son the same towards a house deposit – he declined but bought my 3-year-old Hilux from me instead (well I gave it to him in lieu of hard cash as we were changing cars anyway) (He just sold it for $46k go figure after 4 years owning it LOL)
I am so proud of my boys and where they are in life… mostly all on their own. Call me old school but you can molly-coddle kids way too much, some tough love does work, and I know that should my wife and I pass away tomorrow my boys have a life they can be proud of having achieved mostly on their own with good work and life ethics.
from this point on at my age at 56 i know financially they are fine and I don’t need to budget help into my numbers at all, and didn’t really along the way). they both have nice portfolios growing now one has $50k the other $30k along with their supers (one has over $40k at 24) and compounding and time are now on their side
Mark (aka Ice Cream Fi) and Proud Dad
Mark,
Appreciate your response and great to hear what your boys have achieved.
I’m in a similar boat following FI since 2011. I’m 52 and have 4 boys (twins x 29, 25 & 12 yr old). We are all based in Melbourne. When my older lads were teens I started to plant the seed back then which is now harvesting. Taught them to get part time jobs in high school which led to each of them buying their 1st car in cash. Never had credit cards and only afforded to buy what they could. The jobs they got into allowed them to save hard in the early years with some forward planning put in place. I’m grateful each of my older boys have managed to purchase their own homes back in 2018 & 2019 with a good deposit. All 3 older boys are now married which allows me to take a step back now and let them live their life. I’m in a fortunate position that I only need to work part time now (3 days a week). My wife works full time in a role she loves, so she can continue doing this until there is a time. The amount we have invested (inside & outside of super) will no doubt compound in years to come (salary sacrificed to the max for the past 12 years) but we know exactly what we spend each year with food, bills & general spending.
I never went to Uni either but had been in a corporate management role for 20+ yrs which I resigned from 18mths ago. Life is short & precious, especially when you go through a health scare.
With Money Flamingo’s chart, I was curious whether her FI number took into account the life changes her children will bring as they grow up.
All the best!
We have definitely included some “fat” in our FI number for changing needs/wants over time. We save separately for larger one-off expenses, money to potentially help the kids out, transient costs, etc. I hope that makes sense.
Hey Tom,
To be honest I haven’t thought about the car topic much. I get that it’s a big thing in Australia but to be honest, I don’t understand why it’s the parents’ responsibility to plan for this, especially because my kids will most likely live in an urban area with lots of transport options when they get to that age. Who knows, maybe we’ll all ride in driverless car share vehicles by then. 🙂
We have money saved and invested for our kids, but I’m not sure I see this money going towards cars.
Yes, we’ll definitely encourage the kids to get part-time jobs when they are old enough, so they can save for a car if they want to.
My kids will be eligible for free university in Europe, so they can do that or pay for their own degree here in Australia. We might give them some money towards a house deposit or living expenses as we see fit.
There is absolutely no way I will pay for their weddings. I know many people feel differently but to me it’s the biggest waste of money and if they want an expensive wedding they should pay for it themselves.
HI Mummy Flamingo 🙂 Thanks for the update and inflation clarification. Important when CPI was as high as 5.1% in 21/22 and 7.9% in 22/23. quick question regarding your living or annual expenses that you use as a multiplier on your fab graph. Does this include your rent or allowance for mortgage payments? I think you were looking or have purchased a property in SE queensland? Regards Chris
Hi Chris, our FI plan includes a paid-off house (which we track separately as part of our total net worth). We see mortgage payments as transient costs, so they are not included in our FI number.
Glad you’re going well! I was going to cancel my family zoo pass, then suddenly went to the zoo 3 weeks in a row!
Anyway, I started seriously debt recycling and investing in 2021, and then we all know how 2022 went… But I’m finally back in the positive! The future is pretty uncertain at the moment though…
Just a question: when you say you’re no longer adding to your investments, are you reinvesting the dividends or not? Most assumptions of 7% average growth assume reinvesting dividends I believe (but you pay tax on the dividends anyway). With inflation and interest rate as they are, I actually turned off DRP and just added the distributions to my mortgage offset instead. But that will obviously slow down my portfolio growth so not sure what to do…
Hi Kevin, isn’t the future always a bit uncertain? 🙂
We don’t use DRP, we have the dividends paid out, put some of the money away for tax and then reinvest the difference.
Amazing update. I find myself in a similar situation thinking about schools and playdates 😉
I think I finally understood what you meant about adjusting for inflation on a quarterly basis. I’m guessing you had a FIRE number when you started your journey and each quarter you are updating it according to CPI.
I used this hand calculator to help me understand https://www.rba.gov.au/calculator/quarterDecimal.html
Ultimately you want to see the percentage of the journey, not the value as the goal post keeps moving slightly ahead every quarter.