2014 Financial Independence Progress

Welcome to 2015 and a new year of FI (Financial Independence) and SH (Seeking Happiness) opportunities!
Before ploughing ahead (literally for us) on some new articles for the year I thought a personal re-cap of the mistakes and learnings (in dark green) our tribe encountered on our FISH journey in 2014 is in order.

Happy New Year!

2014 a year of change and constant learning

We spent the majority of 2014 in our new country, France. Here are some of the main activities about FISH from last year:

• Activity 1: We have spent a lot of time recharging the batteries and de-toxing (mainly mentally - the wine is great here as well!) from work stress (no more long hours, difficult people, lots of travel, changing work, the "grid" performance scorecard and its intensification - all horrible and why in the h*** do we do it to ourselves - pointless management manipulative exploitation) from our long term corporate jobs.
• Learning: A dramatic change to our work / life balance is a challenge. Work provides challenges, deadlines and meaning (e.g. I am an engineer and this is what I do each day). A dramatic reduction in work and routine naturally leaves a void - a good void that needs to be filled - what should you fill it with?
• Activity 2: We have explored and enjoyed our local area and made lots of new friends (the Gascon accent is quite a challenge, food, weather and landscape a joy). The kids love their new school (anyone seen the French movie The Chorus?) - unfortunately for me their French is now better than mine so I have to be careful what they say behind my back!
• Learning: Moving to a new area is fun if it is approached in the right frame of mind and for the right reason. Moving for more money or a dream can have a detrimental impact on happiness if it is not thought out thoroughly.
• Activity 3: We have found a run down property that we have bought to renovate and call home mortgage free (it may be falling down in places but it is ours and we don't have to give money to someone else - YEH).



Mrs Renovator

Learning:  Paying someone else to do the work is VERY expensive. You are in effect paying double taxes (the taxes to earn the money in the first place followed by the taxes on labor for the renovation work).
Do what you can yourself and learn something along the way.
For example we now know how to cut holes in walls (accidentally as well), tile floors, make a concrete floor, insulate rooms, cut down trees and make firewood, repair windows, fix a roof and create a new ceiling out of floor boards,... to name a few.
• Activity 4: We are running over our monthly budget (still renting) and need to keep our expectations in check for the house renovation costs.
• Learning: Make sure you know what the end goal is. Overspending and finding out you do not have enough free cash to move in = a trip to the bank and debt.
• Activity: We have changed our residency tax status (confusing to say the least)
• Learning:  Get it right or get in trouble. Shop around for the best FX companies to convert money at the best rate. Minimise tax liabilities where possible when making large changes in capital allocation (e.g. capital gains taxes).

FI(sh) - Financial Independence in 2014

What happened?

Our finances have been a bit all over the place (for once) due to the purchase of the house.
During 2014 we had the oil collapse shock, gold going nowhere and general stock indexes up. This is how the 3 tiered portfolio we run fared:
1. HYP - High yield portfolio (Dividend value growth stocks) and Commercial Property Investments - objective to pay our monthly bills
  - down in value due to the oil price drop
  - dividends overall have dropped but still have special dividends propping up the income for now.
2. GROW - Growth asset portfolio (low to no dividends) - objective to provide a hedge and capital gains. This is the speculation portfolio and also contains our pensions
  - All SOLD to buy the house except the pensions which gained 7%....All those gold mining shares sold before the recent gains DOH!
3. PROTECT - Cash, Cash Equivalents and Physical Assets - objective to have liquid funds when we need them -  Cash has been used to buy and renovate the house.....bought in Euros which is a currency dropping like a stone and an area looking down at a deflationary gun barrel - what will European QE accomplish? Another DOH!
SUMMARY: a slight loss on the year from a GBP perspective... or should I consider it a gain in barrels of oil or USD? What should wealth be considered in? At the moment it is the ability for us to pay the bills and what percentage we can save.
From an original 40,30,30 split of the portfolios (all assets \ net worth) above this has changed to:
HYP dropping to 27%
GROW dropping 22%
PROTECT increasing to 50% (Mainly assets (house and stuff to fill it) and some cash)
We feel comfortable with the current mix due to the addition of the house. Our next step is to gradually change the allocation to something closer to 40,30,40 to increase income \ cashflow.

What did we learn?

Currency, diversification and strategy learning

• Positives
• Finding the FX service Transferwise to move our money from GBP to EUR. The peer to peer money conversion service created by the guys who invented Skype (another favorite of ours) is transparent and have very very low fees.
• Highly diversified pension funds continue to perform strongly 
• Lost Opportunities
• HYP portfolio's capital value has dropped - primarily driven by the performance of commodity stocks. Does diversification win each time - should the HYP NOT BE individual dividend value growth stocks but an income fund instead?
• Renting can be expensive but can be a good investment by giving you a serious amount of time to find the right property at the right price.
• Capital loss sales (Ouch!) to buy the house (growth funds and utility stocks) - When is there ever a right time to sell? - ALL our investments would have benefited from a trailing stop loss to lock in gains / minimise losses.

Risk and asset allocation learning

• We now own awreck property mortgage free - a core pillar stone of freedom and financial independence.
  This has significantly de-risked our portfolio - replacing PAPER investements with a physical ASSET. It is an asset that is a LIABILITY as it costs to live in it however it replaces our need to RENT.
  Is this going to be a good investment? Well that depends on the rennovation costs \ problems we encounter! For starters the pipes were frozen and cracked (as was the boiler), woodworm infected timber has had to be removed and replaced, a main wall partially re-built to stop it taking a barn down, numerous timbers and walls eaten by vermin, toxic roofing. It should will yield some benefits:
• You are not beholden to interest rates and currency fluctuations.  
• You can make your house cheap to run 
• Invest in lots of insulation
• A solar hot water solution
• Cheap heating solution. (we have installed a wood gassification boiler system with a large buffer tank - very efficient and we can cut our own wood)
• Use a well if you have one (we are setting up an irrigation system for the vegetables from our well)
• Plant a forest garden (We have our own fruit trees and plenty of land to grow some of our own food) This increases your resilience from the system and you can reduce your food bill.
• We have diversified \ de-risked our asset mix (the majority of which was in stocks and cash) through the purchase of the property.
• Diversification is very important - at the same time making sure the diversification a) provides an income OR b) reduces your spending is highly desirable.
• A speculative bet on a stock, industry, new business is a huge risk to your earned cash. As they say ONLY speculate on what you are willing to loose. 
• In our experience ideally become financially independent first then speculate with spare cash. We would have saved a lot of precious time following this approach - reduced research and reduced losses.
• If you have to speculate keep it to a very small percentage of your total pot (say %5) - If you win take some off the winnings off the table periodically e.g. re-balance at least once a year0
• We now live in an area where there are less temptations to spend money (and we avoid advertising and mainstream media).
• No shop windows on every corner (we still have too many gadgets 4, laptops (2 very old and need to go to re-cycling, 4 mobile phones (2, pay as you go and one a contract 2 euros a month with FREE MOBILE. We do accumulate phones.... a kindle for cheaper \ free books - still no TV, Blue Ray player, Projector, etc.)
• No keeping up with the Joneses such as flash cars.... but we have 2 of them! We have bought a second hand 1.5 Diesel Eco2 Clio that sips fuel compared to my old car which now serves as a backup and spends most of its time in the garage)
• Slow Internet connection (horror - it takes ages to rent a movie - we do rent quite a few)
  
• We are conscientious of our health (Temptations are a problem with the great wine, French bread, pastries and cakes) and are taking steps to improve it to avoid future medical costs.
• Being responsible for some land and house means you have to be more active. It is just a question of how active you want to be (such as choosing a manual lawnmower instead of a sit on.)
• Access to fresh locally grown food
• Living in an un-polluted area
• Sunny :)

(fi)SH - Seeking Happiness - Looking for more Tranquillity

It has been said that seeking happiness actually makes you un-happy in doing so. I can understand this point of view. If you cant be happy with what you have now how will you ever find happiness? It can imply that you constantly have something un-happy in your life - glass half full instead of reflecting on how good you actually have it.
We enjoyed the city life in London, we always had distractions and entertainment and were surrounded by people, noise and lights. It was not a very tranquil place which we believe we have found here.
At night we can see a carpet of stars with the only noise being your own breathing and the chirping crickets.
Our other main love is the space, open the doors and you are in the countryside. Our kids (and ourselves) are not forced into a small living space and can run wild and safe outside for the majority of the year. We now have little to no concerns about the danger of cars, people and pollution.
Here are a few learning's \ things the TRiBe need to continue doing ;)

• Appreciate what you have it can always be worse
• Likewise do not dwell on what you don't have
• Give yourself the gift of time, peace and quiet
• Get outdoors - nature is a great healer
• Ask - is it really necessary to get angry?
• Move on - THE.PaST has happened enjoy today!

Peace, prosperity and happiness
CoNTeNDeR
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