It's been a while hasn't it. I hope you're keeping well.
Lou and I have finally settled in to our new home in Cambridge. We still have work to do, but the tasks are becoming less relevant and most people wouldn't notice them.
It feels like 'home' already, which I am quite surprised by, and most importantly, we're happy with our lives down here.
I've received some emails from people asking me how I am, and what I'm up to nowadays (Thank you to those that have checked in - it's lovely to see that people care). I thought I would write a post on where I'm investing my money as I love this stuff, and thought a few of you might be interested too. But first of all....
Are we REALLY FI?
Financial Independence is the point in which your income from passive streams (not having to work) surpasses your living expenses.
My Kindle income dilutes this definition for me because it's semi-passive. I haven't worked on Kindle for about 6 weeks now, and yet I still earned over £8,000 in Oct and I stand to receive over £6,000 in Nov - Not bad for not working! My eBooks require re-promoting and attention, whilst my paperbacks and audiobooks are 100% passive once set up. Between my paperbacks and audiobooks you could say I've 'technically' been FI for over a year now but my original aim was to cover my expenses with income from stocks and shares alone. As of today, my forward dividends do not cover this. However, the recent house sale has freed up the capital that would allow me to become 'officially' FI if I were to invest it all now, which I'm not going to do.
How I plan on investing my money
1) ISA - My first priority is to fill my stocks and shares ISA every year. I don't have a cash ISA, I use my full allocation on Shares. I've already paid a chunk into this years allocation, and I plan on continuing to drip money into this each month to ride the market wave.
2) Personal Development - I've set aside money to invest in myself - arguably the most important investment you can make. I'm currently in the process of hiring a coach to help me implement my business plans for Kindle Publishing, my own coaching program, my Self Publishing course, my new business idea, Blogging, and general Self Development. I've also set aside money for attending a Personal Development course, which I'm yet to do this year, as well as money for books and online courses. Self Investment has changed my life, and I'll never cut myself short in this area. Each time I've invested in me the ROI has always made it worthwhile.
3) Property - I had a goal at the start of the year to invest in my first buy-to-let property. Off the back of my declaration, I received advice from multiple people suggesting that I don't as it requires a lot of time and effort. I still want to diversify my money into property, so I've invested a chunk of money into a P2P lending platform, secured against UK property called Saving Stream. They offer a fixed 12% return for investors, which they pay out monthly @ 1%. Even after tax is a fine income for me.
I plan on putting enough money into P2P to cover my living expenses, as well doing the same in Stocks and Shares. The P2P will grow a lot quicker than my ISA due to it not having a funding restriction and a guaranteed high yield. The following formulas excite the hell out of me...
72 divided by x (interest rate) = Time (in years) to double your account
114 divided by x (interest rate) = Time to triple your account
144 divided by x (interest rate) = Time to quad your account
If I take Saving Stream's 12% yield, I can forecast the following:
72 divided by 12 = 6 years to double my account
114 divided by 12 = 9.5 years to triple my account
144 divided by 12 = 12 years to quadruple my account
If I invest £20,000, it'll return £2,400 a year or £200 per month.
If I choose not to contribute additional capital, and reinvest all of my income, I'll have the following capital and income in my account:
In 6 years = £40,000 capital. £4,800 pa / £400 pm income
In 9.5 years = £60,000 capital. £7,200 pa / £600 pm income
In 12 years = £80,000 capital. £9,600 pa / £800 pm income
I've currently invested a lump sum of money into Saving Stream but I plan on contributing to it on a monthly basis after my ISA and Personal Development investments (and other expenses) have been funded. I currently forecast that I can cover my living expenses in under 2 years, and get to £100,000 in less than 5. I'm using this Blog post for accountability.
I like the fact you can sell parts or all of your loans to get money back out of the company if needed. As a trial, I sold part of a loan to see what the process was like. I put over £1,000 on sale and it was purchased within 15 minutes. That's not to suggest that every sale will be that quick, but I was reassured.
Saving Stream is not protected by the FSCS, like most UK banks, so if they were to fold, my money would be lost. I'm prepared to take on that risk after spending time researching the company, and being fortunate to know someone that has used the company for 3 years and has a considerable amount of money in them. Saving Stream will not be a safety net for me. It's just another finger in another pie.
If you're interested in joining Saving Stream, I do have an affiliate link. As a thank you for using the link, I'd be happy to answer any questions you have about them, just drop me a note in the contact box on the right hand side and I'll email you direct.
I've chosen not to include the link in this post, as I want this to be informative, rather than a sales pitch. I'd prefer you look into the company and benefit from them, than earn a few quid.
4) Easy Access Cash - I have a lump sum of money in a savings account. It's a much smaller amount than 1 and 3, but I want to have some cash around in case I plan on setting up a new business or find a new investment opportunity. I don't like cash sitting around doing nothing, and at less than 1% it's doing nothing! Cash does give you options, but I'd prefer to receive cash in income from investments than have it sitting around.
.....and that's it!
I don't plan on investing any money into my SIPP. The only reason I have one is due to me transferring my work pension into one after I left my 9-5. I'm 34 now, and I'm not comfortable with my money being tied up for 21 years (at least) before I can get to it. I can access money from my ISA, Cash Savings, and Saving Stream if I need to, although I don't plan on touching them for a while yet.
It's also worth pointing out that I've allocated a chunk of money to guilt-free spending. I've bought a new smart phone, watch, clothes and other crap that I don't need to make me happy for 2 weeks.
How about you?
If you had a 5 figure lump sum, how would you invest it?
Labels: Blog Update, Early Retirement, Extra Income, Financial Independence, Passive Income, Personal Development, Saving Stream, Strategy