Welcome to the latest Project 1000 update! This is where we share the progress of our 1000-day journey to freedom once a month. New readers: If you have not read our plan yet, I recommend you do so now and then come back here.
In line with the changes discussed in our recent “500-day course correction” post, we have updated the charts we use to present our monthly progress updates. Instead of tracking four different buckets we can keep things a lot simpler moving forward. This is great because it allows us to keep our eyes on the prize: Flamingo FI!
Unfortunately, we went backward last month. Our Flamingo FI nest egg shrunk from 69.8% to 68.1% of its target size in September. This is a shame, especially because we were so so close to crossing the 70% mark.
The main reason for this decline is that the estimated market price of our investment property went down a bit more last month. I use a mix of different websites (On the House, realestate.com.au, propertyvalue.com.au), the ANZ property report and the Commonwealth bank estimate and calculate the average. I also have a look at recent sales of comparable houses in the area (not many, so that makes it a little harder) to see if the automatic estimates are way off. I am still not sure what the best approach is, especially because the estimates seem to jump around a lot, but that’s what we’ll use for now.
The value of our employer shares went down around 3% last month, so that did not help either. As I mentioned in the last update, we are slowly selling down our holdings because I am getting more and more uncomfortable holding so many shares of the companies we work for and the risk of under-diversification. We will soon start using the proceeds to buy ETFs. More on that in a future update. Our other shares (mostly index and growth funds held in Super) went up a little along with the broader market.
Nothing was added to the nest egg last month apart from Mr. Flamingo’s employer Super contribution. I will finish up my maternity leave and return to work in the next few months, so the money tap will soon be turned on again.
This is what our current asset allocation looks like:
As you might have noticed the asset allocation chart looks different from the previous ones. We have decided not to include Super as a separate asset anymore. That never really felt right because at the end of the day Super is not an asset class but simply a tax environment. Instead, we have now included the different assets we hold in Super in the percentage calculations. These are mainly shares (a mix of index and growth funds), but there is also some “fixed interest”. This is the employer-sponsored portion of Mr. Flamingo’s Military Super. Unfortunately, we are not able to move this money to a different fund. It is basically a CPI-indexed lump sum.
I am aware that many in the FIRE community are against including your Super in your FI nest egg, but I have always held a different view on this. You obviously need enough money outside of Super to support yourself (4% rule) until you can access the funds in Super, so the younger you are when you reach FI, the more you should have outside of Super. If you “retire” at 40, 50% of funds outside of Super should be plenty. Mr. Money Mustache has written a fantastic article on this topic: How to Retire Forever on a Fixed Chunk of Money. I Live Off Dividend’s article Reaching Financial Independence under Australia’s Superannuation System and the “Two Bucket” Method is another great read on this subject (get a cup of tea and get comfortable before you read it – it’s long!).
With Flamingo FI this “issue” is even less problematic as we won’t touch our FI nest egg for quite a while after we quit our full-time careers. During semi-retirement, we will still earn some money for our day-to-day living expenses while our FI nest egg compounds in the background. We aim for about 40% inside and 60% outside of Super by the time we hit Flamingo FI.
And here is our current split between assets inside and outside Super:
Thanks for reading! See you back here for next month’s update!