2015: The Year We’ll Crush It

This blog post was originally written in January 2015 for our sister website – The Money Muppet. We set that site up in January 2014 as we embarked on our journey to financial freedom. The Money Muppet site no loner exists, so we’ve incorporated our financial journey into our travel blog.

Happy 2015 folks!

Time for a quick review of where we’re at on our quest for financial freedom. Things are looking very good.

We’ve set up multiple passive income streams: two rental properties (one paid-off house, one bungalow with a 55% LTV interest only mortgage), a small shop which we’ve now rented out, two residential solar PV arrays which should pay out around £1k a year, over £30k in dividend-paying Vanguard ETFs (shares), £10k in premium bonds (we’ll be using these funds for more renovation work later in 2015, or else we’d have also bought more ETFs) plus we have smaller passive income streams from Julie’s part time job (julieandjay.co.uk) and royalties from our books we’ve written.

We have one last stream to set up: we need to renovate an old outbuilding in the house/shop unit we have, which will give us somewhere to live while we rent out the two rooms in the house. We have the planning permission, we just need to earn the rest of the money and get the work done. Job for later in 2015.

Once this final stream is set up, believe it or not, we’ll have hit our target, more or less. Our initial aim was to be bringing in £25k per year in passive income by age 50. Since then we’ve tracked our budget and found we’re actually spending £16k a year living in the UK. The above income streams will be roughly £23k per year before costs (making various assumptions about void periods on the houses, costs of repairs etc), which will be split evenly between us, so the tax bill will be small.

Actually, there is a final final income stream as we each have a number of private pensions which, depending on what future governments choose to do, we may be able to start accessing from age 55, which would add around £15k a year in today’s money into the pot. That’s 13 years away though; we need to get there first ideally without having to sell any assets.

Effectively, in 2015 we should become financially free. My existing IT project management contract now runs until the end of June 2015, which, alongside Ju’s salary, will pay for the rest of the renovation work, plus give us a cash buffer. Once we make the decision to actually quit the 9 to 5, we’ll need a buffer as we expect our income and expenses to fluctuate year-on-year. We don’t know exactly when that will be, but it could potentially be this year, which is massively exciting.

Although having said that, neither of us can quite believe that our strategy is going to work. It’s such a massive thing. We’ve realised that we don’t want to give up work completely, and expect to earn something over the coming decades. However, our financial plans and long-term modelling have assumed we’ll earn nothing above the income streams listed above. We’ve also assumed that we’ll get no state pension, and that we’ll receive no inheritance. It’s probable that at least some of these are false assumptions, but we’re trying to take a conservative stance.

So, that’s it. We’re taking a few days out over Xmas and New Year to breathe after a frantic 2014. On Jan 5th we’ll be back in the fray, back into our respective offices, but now with the knowledge that before this time next year we’ll be free.

Cheers, Jason

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