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Fragilista - Part 2

By The Contender @The__Contender

Fragilista - Part 2

Low cost fuel and no moving parts - a robust heating solution

Have you ever wondered how some people get rich and are able to grow their wealth?
In part 1 I covered the principles of financial independence and shared a planning tool to work the numbers. I highly recommend you check it out here  before reading this post.
Today it is all about taking "Talk the Talk" about wanting to be financial independent, happy and resilient to reality by "Walking the Walk".
I gained an interest in wealth accumulation through a very dynamic friend Chris in university. He would read every autobiography of a successful person he could get his hands on and say that was going to be him one day.
My take at the time was to get a good job work really hard and work my way up the ranks. Little did I know at the time that this actually takes a long time. After a few years I started to read up about rich people like Chris did. My general take at the time that they were not afraid to invest and take risks. So I changed jobs and started investing badly. I had a severe lack of financial knowledge and was letting myself to be guided by speculative investment newsletters.  
My first breakthrough was coming across the blog "Early Retirement Extreme" which turned on the light bulb of frugality = increased investments and a few blogs on dividend investing. Eventually I joined the dots to frugality = increased investments = increased passive income => financial independence + increased freedom.
My second breakthrough was understanding the need to build resilience. This was triggered by two topics. First the blog LATOC - Life after the oil crash website (which no longer exists) which highlighted that the world is not infinite so some self sufficiency is a good thing.
The second topic was the tech boom and bust followed by the sub prime meltdown and oil price crash which moved our investments all over the place. Importantly we waited it all out teaching us to be long term investors. We are unable \ lack the knowledge to "trade" short term effectively
Finally I started to read about "Black Swans", "Business Cycles" and "Capital Flows". This made me realize that we needed to be serious about resilient living. This allows us to continue to live frugally and use the savings to re-invest in even more income investing assets. This is to help us ensure we can keep the financial independence dream alive indefinitely.
So today this post is all about what we are doing to keep the FI dream alive:
  • A look at some potential risks we want to counter (several graphs)
  • Our "Walk the Walk" anti-fragile changes we are making to our lives (financial and at home)
    • Personal - Family education \ health 
    • Sustainability \ Antifragility - reducing our reliance on outside help
    • Community - Engage in the local community and with friends
    • Financial - building diverse assets and income (Our latest financials)
  • Inter-generational wealth building
  • How you can start on the road to antifragility  

Why we want to be Resilient

Over the last 10 years I have read, learnt, been lost by and perplexed by economics and life. My lifestyle has been cajoled by consumerism, dazzled by technology and awed by my ability to travel. Our modern world is great and we want to participate in it.
We are looking at a substantial period of time without "jobs" and have two kids to raise. We need to make sure our standard of living remains the same or improves by:
"Hope for the Best, Plan for the Worst"
In hoping for the best: we are waiting for battery storage to make the next step, solar panel efficiency to go to the moon, nuclear fusion, 99% recycling and an iRobot to do all our heavy lifting.
While we wait for this Utopia we should "hedge our bets" and "plan for the unexpected".  I want to point out we are not Doomers but Realists. Risks may be small but we are well aware black swans can appear. For example having some alternative sources of lighting if a storm takes out the power lines for a few days is appropriate and cheap to implement.
Other risks are harder to mitigate. Here are a few risks worth considering:
  1. Fragilista - Part 2


    Fragilista - Part 2


    Society is now rapidly ageing\ retiring in the west and dependency ratios are rocketing.
    Pension funds are massively underfunded and assume large percentage YoY growth. Risk: large liquidation of stock and housing by boomers paying for their retirement. Tax rises to pay for services and entitlements that are underfunded by the tax receipts caused by a drop in the workforce to retiree ratio?
  2. CHART OF THE WEEK: European Debt-to-GDP Ratios | The Economic Voice


    Debt has been piled on at staggering rates. It is only really backed by the faith that some poor fools will foot the bill (us the tax payers). Risk: Debt jubilee, high inflation, currency devaluation, new currency?
  3. Assumptions on property prices are

    Fragilista - Part 2

    Is it time for interest rates to rise.....The million $$$$ ?

    potentially widely wrong - low interest rates and credit have driven prices sky high. They are unaffordable to the young who can not get the high paying jobs needed to even get a deposit together. Risk: Onerous under water mortgages suppressing property values and rental incomes or a period of high inflation eroding their real value?

  4. Source Click to Enlarge

    Source: Newscientist click to enlarge

  5. We all live on one planet and consume more of its resources each year than can be replaced by equivalent alternatives. Liquid fuels, metals, fish, lumber and soil. This is just another form of debt we are piling on and the bill will become true at some stage. Risk: Lack of resources to build out our technological society of the future?

  6. Fragilista - Part 2


    It is about time food production is  re-thought to re-build soils that have been degraded by the green revolution. Organic farming (including pest and weed control), low tilling soil and replanting hedgerows and trees are gaining ground around the world.
    Perhaps the days of the 6000 mile lettuce has almost had its day - you can easily grow one in your basement with the right setup. Risk: large increase in cost of food as more resources are dedicated to its production?

What Resiliance means to us

My personal take on resilience is OPTIONS. Lots of them. Options to move, different income streams and multiple ways to provide the basics (food, water, shelter and warmth).
As early retirees we have a likely 40+ years ahead of us. A lot of things can and will happen in those 40+ years. Most of them will be surprises good and bad. OPTIONS will either allow us to take advantage of these changes or ride them out.
Staying financially independent = fix up our place, be 50% + self sufficient and build excess income streams.
We need to be able to offset the risks we have listed above (and others) and setup our investments to to take advantage of any opportunities.
This "work" has taken priority over this blog in the last year. We have been super busy but the benefits have been amazing for us. We are so happy that we have taken steps to anti-fragile our lifestyle which has relieved some of our anxiety of going it alone.
First up here are our Anti-fragile / Resilience goals:
  1. We want to provide a normal middle class up-bringing for our kids and afford them opportunities to grow. This requires us to at least maintain our inflation indexed income and ideally grow it. We need to be able to ride out any large unexpected bills and save for the kids education.
  2. Not to be a burden to the state \ provide adequate funding for our lifestyle through low living costs, excess passive income and a small amount of paid work. We will pay our fair share of taxes on time and limit our impact on local amenities (e.g. less waste, support fund raising for the school etc.)
  3. Reduce our reliance on external resources - we will source as much of our food, building supplies and fuel locally.
  4. Look after our health (again reducing the cost to state) eat our own organic food and fruit, cutting wood, cycling instead of driving etc.
  5. Engage with other people, to share resources to help with maintenance issues for example.

4 action areas

We have decided to consolidate our actions in to 4 main areas
  • Personal - Family education \ health 
  • Sustainability \ Antifragility - reducing our reliance on outside help
  • Community - Engage in the local community and with friends
  • Financial - building diverse assets and income

Starting with our Personal Gaols

Adult Education - We continue to read up on wide ranging topics (Super-forecasting, Logic, Perma-
Fragilista - Part 2culture \ Market Gardening, the 1930's, Solar Energy to name a few) and most importantly put these into practice. An example of this covered in more detail below is our ability to grow our own food and generate some of our own energy. This improves our finances and health.
Fragilista - Part 2Kids education - we continue to encourage the kids to learn through play and experience.
The TV has long gone. This been a brilliant thing to do as their play is more beneficial helping them to develop personal / communication skills, anger and conflict management. The both take judo classes which we hope will help with confidence, control and respect.
We take them to museums (locally we have a school and a bee\ honey museum, down the road we have the Airbus museum).
We engage them in day to day activities, cooking, gardening, cleaning, painting etc. They are learning 4 languages.... wowser!  I struggle with English let alone French.
Lifestyle - An added bonus is lifestyle here in the south west of France. It is a holiday for us. Our local town has just been added to the Michelin guide. In fact our whole area is a hot tourist area with lots of things to do. We have easy access to the Mediterranean and Atlantic coasts as well as the Pyrenees mountains.
We continue to improve our house and land. We are renovating, planting, repairing and cleaning. We love our flowering pots around our terrace, the picturesque views and starry nights.

Sustainability & cost reductions \ savings

Fragilista - Part 2

Our preserves from the garden and batteries for
off grid solar system

Fragilista - Part 2 wind solar off grid system

  • We have built an intricate gravity and solar fed irrigation system - reducing our demand for mains water and allowing us to grow lots of lovely veg.
  • Done as much renovation work as possible by ourselves saving thousands
  • Replaced lots of damaged roof tiles
  • We have started to build a perma-culture garden, permaculture mounds, a couple of ponds and a poly tunnel.  
  • We have invested in manual garden tools.
  • We have invested in preserving equipment and Mrs C has been really busy canning (Bocals)
  • We have purchased a sun oven to cook and preserve our food
  • We have planted more fruit and nut trees
  • We have started making our own compost without fuel and fertilisers. It has no requirement for machinery only hand tools.
  • We have installed an off grid solar and wind system and are currently adding the option to run the whole house off it as required. It is a 1.4KW system (1KW solar and 400W Wind) with 4*130AH batteries.
    This system running at 1/3 of capacity daily = 1.4KW * 1/3 * 24 = 11.2 KWh per day
    Our average house consumption we believe is around 8.3 KWh per day (350 AH per day @ 24V)
    The only issue is that the battery bank (the 4 batteries give 260AH @ 24V) is not large enough for a prolonged period without the system running at 1/3rd of capacity. 

Fragilista - Part 2

Our Permaculture "mounds"
which have now been planted with fruit bushes

  1. We can save and invest more each month increasing safety nets and future options 
  2. We are growing our own organic food - this is exercise, provides healthy meals (Vegan) and saves money
  3. We are able to use resources on our land (we have solar electricity and hot water, a gravity fed water source, trees for firewood, fruit and nut trees, and we are developing good soil).
  4. Our kids are learning real world skills with us such as solar system installations and calculations, water flow and management.
  5. We are not buying loads of rubbish "entertainment" for the kids - they play outside making their own games.
  6. We can repair things ourselves which is satisfying, saves time, money and stress.
We have reduced our necessary living costs (2 adults and 2 children) to ~£900 (1,050 EUR, ~1,170 USD) per month (property tax, food, utilities, school fees and cars) as of Sept 2016. We can live on much less if needs be.
From an Antifragile standpoint - we are able to provide for ourselves in an emergency and have reduced our "fixed" living costs. We have learnt additional real world skills that allow us to do things for ourself.

Friendships & Community

We have abnormal living arrangements in a normal community of hard working individuals. The "abnormal" part is that we do not have "normal" work and "normal finances". Talking about financial independence and resilience building seems almost taboo... We try not to talk about unless someone specifically asks.
Financial independence is a bit like talking about how much you earn (ironically it is fine to talk about how much you spend;) see the following article. I often wonder why this is the case. Surely it would be beneficial to know if you are being paid fairly? Wouldn't a discussion on money, budgeting and investing be beneficial for people to have? So talking normal finances or investments is not really touched either.
Work has become so hectic and all encompassing most people do not have time to have a go at sustainable living. After all it is a lot of additional "work". Do you have the energy to dig the garden, chop some wood or insulate the house when you get home late and exhausted from work?
Promisingly on this topic we are finding that people are more interested in this area and are taking small steps.
Sport, weather, holidays, kids, homes and mainstream hobbies are all in the easy bucket. A good way to chat over a beer. We live in an outdoor party area so BBQ's are great places to catch up and make friends.
Ultimately friendships take time and a lot of work. We can definitely do better. We want to have fun and relax with friends so it is important we build rapport by talking about stuff they are interested in.  So KISS (Keep it simple stupid!) really works here :)


Our financial plan is quite simple - take part in the ownership of productive "cash flow" assets. Have skin in the game. Our trading accounts are invested in individual companies. Our pension choices are limited to funds. We have part ownership of some commercial real estate.
Thankfully building income is easy and can be done in small increments over time. We do this primarily through share and bond ownership. Lending clubs have also become popular.
Unfortunately very few people we know actually"invest" perhaps due to the risk warnings written across all financial products. They rely on earned income. Any spare cash is generally not put to work but "saved" as cash or spent.
Inflation means cash "value" is eroded instead of growing and providing an income through positive interest. Investing in dividend stocks opens the door to capital gains and cash flow.
Admittedly you need to hold some cash - it gives you quick access, options to deploy the cash to an opportunity.
Ownership can be expanded to other assets such as forestry, agricultural land, commercial property, private company investment etc.
Our financial actions to increase our assets are as follows:
  • We have opened tax efficient share savings vehicles in France (PEA - stocks and shares)
  • We are saving cash in multiple currencies (GBP, EUR)
  • We continue to re-invest dividends
  • We are investing in alternative diversified real assets (Sustainability projects, REIT (commercial real estate))
  • Mrs C's has setup as a small business
  • We have been saving for the kids who both have savings plans based on the permanent portfolio approach. (25% fixed income, 25% Shares, 25% Cash, 25% Commodities)
  • We have made our wills
Our preference is a take on the permanent portfolio the moment we are overweight global stocks and underweight bonds and cash and commodities due to historical reasons and the way our pensions work (limited choice).
Global Stocks (EQ)
Bonds (BN) - Final Salary Pension Scheme mainly high quality bonds
Commodities  - (GLD)
These have seen phenomenal gains on a small investment 500%+ since inception due to matching contributions from employers and the power of compounding. Both Mrs C and I joined our schemes as soon as we started work. We cannot access this money for 25 years......
Dividend growth stocks (EQ)
Commercial Real Estate Investment Trust (PR)
Fragilista - Part 2French PEA tax exempt stock and share account after 8 years of holding (EQ)
GBP and EUR (small holding as neither currency is great at the moment) (CA)
On the EXPENSES front our current budget is 1,709 Euros per month (~£1,450, ~$1,828 - FX is moving all over the place).
This includes 300 Euros per month for holiday and entertainment, school fees (150 Euros) and after school activities (70 Euros).
Our "bare bones" costs if we had to extreme economise would be 730 Euros per month.
Fragilista - Part 2
We have ample safety nets, live a comfortable middle class lifestyle and do not go without anything. Our activities make us more robust and able to be in control of our lives.

Now Build Your Resilience

There are major benefits of building resilience and many steps will actually get you to financial independence earlier.
  1. You will reduce your living costs (hence save more)
  2. Learn to do things for yourself such as basic plumbing, gardening
  3. Start to adapt to a new way of life - a financially independent way of living
  4. Be risk aware and adapt your plans accordingly
Considering these points (and some of the above risks) I believe that building resilience is an absolute must. Again
"Hope for the best and plan for the worst"
Considering the needs of resilience building this means early retirement is MUCH more than just investing to replace earned income to retreat to the beach.
You can't leave all your eggs in one or two baskets or leave them to chance. I suggest you need to continue to live well within your means. Consider emergency planning (which usually requires more money than you think). Be able to look after ourselves in a time of difficulty such as a natural disaster.
Additionally we need to take opportunities when they come our way (such a a bit of paid work). Use our new found freedom from debt and wage slavery to develop new skills to keep our mental skills sharp and hopefully gain a cash flow from them.
Some resilience building strategies that come to mind are:
  1. Aim for low "fixed" living costs and continue to drive them lower - we have below average bills for utilities, cars and fuel.
  2. Some self sufficiency in water, energy and food - make sure you live somewhere where you can provide some of the necessities of life on your own.
  3. Easy to get a job if you need to (CV up to date etc) - can you work from home \ setup an on line business - give it a go and perhaps it could become your job.
  4. Diverse income streams - Property, Shares, Work, Interest, Bonds, Capital gains.
  5. Continued monthly saving - 10% per month as a minimum?
  6. Have a large rainy day fund - 6 months + of living costs?
  7. Speculate to accumulate (have 5% of your savings going for big gains at high risk)
  8. Do stuff you enjoy - if you are not happy perhaps early retirement was not for you?
  9. Continual learning - great for spotting opportunities and problems.
    I believe this is a good balance between opting out and keeping a good foot in the real world. Isolationism we believe is a dangerous approach to take when you need the help of others and want to have normal relationships. Extreme frugality (without excess cash flows) leaves you vulnerable and open to shocks. Lack of resilience could have you back to work to recover a capital \ cash flow shortfall quicker than you think.

Fragilista - Part 2

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