In this latest instalment of our regular series we meet a reader who made themselves effectively financially independent in some distant corner of the world – long before they’d heard of FIRE. Discover how Mark left work to travel on the back of an actively-managed portfolio that continued to grow.
A place by the FIRE
Hey Mark! How do you feel about taking stock of your financial life today?
Great! I’m hoping to demonstrate that a person with a relatively modest income can achieve Financial Independence given time, determination, and a healthy dose of luck!
How old are you?
I’m 59. My partner is a bit older. We have been together since I was 25-years old.
Do you have any dependents?
Once I discovered what I wanted to do with my life, I realised having children was incompatible with the goal of long-term travel. My partner had kids from a previous relationship so was fine with that.
Whereabouts do you live and what’s it like?
We live in a seaside town on the North Sea coast and like it immensely.
When do you consider you achieved Financial Independence and why?
I was never really thinking about Financial Independence as a concept. I just needed to make sufficient returns to finance my life of travel.
When we set off in 2004, my net worth was £210,000. We were spending £10-14,000 per year so I would have been pleased to cover that.
In the event I was lucky to compound my capital over the years to reach a comfortable position, but it could so easily have gone the other way.
What about Retired Early?
We were travelling around the developing world for 14 years. I considered myself a professional investor, but I looked retired to everyone I met.
I still spend hours a day reading and researching investments. But I imagine most of my neighbours think I live on benefits.
Assets: equities and more equities
What is your current net worth?
My net worth tipped over the one million quid mark in 2021, dropped below in 2022, and I am back in a similar position today.
I don’t follow it throughout the year. There were many occasions when I took a kicking during the year only to be fine at the year-end. I don’t think there is much value in obsessing over share prices.
What are your main assets?
My house (8%), shares (89%), and fixed interest (3%). There’s no mortgage.
The shares component is highly-diversified and reflects my biases. I don’t hold any index trackers.
What’s your main residence like?
We own a modest but surprisingly spacious terraced house along the North East coast – bought for £83,000 in early 2019.
Do you consider your home an asset, an investment, or something else?
We were looking for somewhere to settle down.
I don’t really think of the house as an investment because I’m not looking for a return.
Earning: financially unrewarding
What was your job?
I graduated with a degree in Biology in 1984. I had a couple of jobs as a laboratory technician earning modest amounts (£7-12,000) until I took a year out to go travelling from 1990 to 1991.
On my return I took jobs in laboratory management starting at £16,000 in 1991 and ending on £32,000 in 2004, at which point I quit that job to go travelling on a permanent basis (I hoped).
How did your career and salary progress over the years – and to what extent was pursuing financial independence part of your career plans?
I was continually dissatisfied throughout my career, largely because although I was successful in my roles I was unsuccessful in translating this into a decent income.
After taking the year out, my ambition became to save up as much as possible to enable me to go travelling for the long term. I recognised my only chance of doing this was to make money on the stock market. I began to save obsessively and put all the money into a few investment trusts to start with.
Did you learn anything about building your career that you wished you’d known earlier?
Before I started working I assumed that achieving targets and getting results would lead to career progression. It took me a long time to work out that making your boss look good is much more important.
Do you have any sources of income besides your main job?
Since leaving work in 2004 my income has been derived exclusively from cash thrown off by my portfolio through sales, takeovers, and dividends.
Did pursuing FIRE get in the way of your career?
As I said, I never consciously pursued FIRE. It occurred as a side effect of what I was trying to achieve. In fact, I never even heard the term FIRE until I was well into my travels.
Saving: fuelled by frugality
What is your annual spending? How has this changed over time?
When we were travelling we would typically spend £10-14,000 per year between us. At some point my partner’s pension kicked in and she became able to cover her own costs.
We settled back in the UK in 2019 and my personal spend has yet to reach £10,000. Fortunately we don’t have a mortgage or rent to pay.
Incidentally, any tips for would-be global nomads?
A good proportion of the problems we encountered were to do with banking and plastic cards. I’ve arrived in a town to find all of the ATMs out of order or that my bank has unilaterally cancelled my credit card through security concerns.
A digital nomad definitely needs a backup plan in place.
Do you stick to a budget or otherwise structure your spending?
Not at all. I can now afford to do anything I want, but my wants are few and far between.
What percentage of your gross income did you save over the years?
From the point I decided to save as much as I could to when I left work, I estimate my savings rate was about 65% of my net income.
As well as saving out of my earnings I also paid the maximum allowed into a pension and AVC fund1 and had mortgage payments on a house.
I sold the house when we were preparing to go travelling. A few years later I transferred the deferred pension and AVCs into a SIPP with a surprisingly high out-turn, due to declining interest rates.
What’s the secret to saving more money?
I was completely motivated by having a goal. Every spending decision can be framed as “Does this move me closer or further away from my goal?”
That’s not to say we didn’t have holidays and so on. But we didn’t push the boat out.
What about spending less?
I quite enjoyed being frugal and finding new ways to be even more frugal. It can become habit forming.
For example, once I started saving, I virtually stopped drinking alcohol.
It’s important not to take it too far. When we were travelling we would typically be eating out two or three times a day. I was always aware that I was arbitraging costs between the two countries and usually left a decent tip. In the instances where I failed to tip, I would always carry guilt for the rest of the day. So it was better for my psyche to keep it up.
One of my favourite concepts is to become best friends with your future self and then act in their best interest.
What was the psychological transition like going from earning and saving 65% of your salary to spending – even in low-cost countries?
There are loads of psychological aspects of my story that I have pondered, but this isn’t one of them. (I must admit that for my first six months abroad I did wonder what was going on at work.)
We were spending what we needed to on a daily basis, but not much more. There was no point buying more stuff to carry around. Even as I came to feel financially secure in the second half of the period, there was still no need for egregious spending.
I can trace a psychological shift from ‘doing’ to ‘being’. But that is actually very cost-effective.
Do you have any passions or hobbies or vices that eat up your cash?
As a motorcyclist, I have a modest but fun machine that is not expensive to run. I fill the tank every couple of weeks.
Investing: the evolution of a stockpicker
What kind of investor are you?
My intention is to have core holdings of a few investment trusts and then satellite holdings of selected shares. In practice, I always have more ideas than cash so the number of individual shares has multiplied over time.
My approach has changed over the years. I started out buying bulletin board favourites, which worked very well indeed. As I learnt about investing I moved to a Ben Graham value-style which, applied inexpertly, picked up a fair number of value trap losers as well as re-rating winners.
After the GFC2 I developed a spreadsheet method based on Earning Power Value. Filling in the data was very labour intensive, but I learned how to interpret accounts in detail.
The results here were fairly decent. I have never heard of anyone else following this approach as a core strategy, possibly allowing me to have the fabled ‘edge’.
Since moving back to the UK in 2019 I found that I had lost my motivation for data entry and, anyway, my thought process had been moving towards ‘strategic’ positioning for a while.
These days there are a host of reasons to expect Armageddon some time down the track. I have been rebalancing in a defensive direction over the last few years at the expense of my small-cap portfolio. I now find myself to be an increasingly cautious capital allocator, having been far too gung-ho over the years.
I am also aware of the anti-doomsters who forecast a future of abundance. Should that come about I am sure I will benefit along with everybody else. I’m not going to gamble on it though.
What was your best investment?
I bought my first computer in the year 2000, got on the internet, and discovered The Motley Fool website and, in particular, the company discussion boards. I was soon spending a few hours there every evening.
I opened a Stocks & Shares ISA and began buying various bulletin board favourites.
My first three shares were called Emblaze, Geo-Interactive Media, and Soco International. The first two quickly petered out. But Soco International went on to be a 24-bagger3 for me over the next few years. Of course, I was not clever enough to get out at the top but fortunately managed to sell off a decent amount on the way down, between £14 – £17. The remainder provided a headwind to my returns over the next decade. My numbers would look a lot better if I had managed to sell the lot.
The best performer in my portfolio currently is Burford Capital. Unusually, I bought a double allocation to this company at £1.20 when I first looked at it in 2014. This was because I was excited by the clearly compounding business model. From there it rushed up to a high of £20 in a few years. I toyed with the idea of top-slicing for a while but never executed. Then in 2019 a short seller issued a report which caused a deluge of sales, dropping the price to below £7.
I lost over £100,000 before lunch that day. I read the short report and thought it was a bit thin so I held on to the shares. Looking at the graph they bottomed around £3 on the Covid drop and have had a volatile journey back towards £11 today.
Psychologically, I haven’t suffered much from all this as I was following the company rather that the share price.
Did you make any big mistakes on your investing journey?
Where do I begin?
I remember hearing around the time of the GFC that Warren Buffett had never had a total loss. I had already had about five, so I decided I must have been too adventurous. I can’t remember having any more since then – mainly because I’ve got better at selling the losers on the way down.
Whilst investing is about looking to the future, most of my losses have come from putting money into companies where the future looks particularly bright. Even if it comes to fruition, something could well come out of the woodwork so that the investor is not the one to benefit. Lowball offers, political interference, and management greed and incompetence are a few examples.
What has been your overall return, as best you can tell?
I have calculated my net worth annually since I became dedicated to saving and investing. My portfolio now has a 28-year IRR4 of 8.25% with a fair amount of volatility.
With hindsight, I would probably have done better sticking with my original line up of investment trusts. (But then I wouldn’t have the thousands of hours of reading and research to reflect on!)
How do you calculate your returns?
At each year end I calculate my NAV and then calculate the % change over the year – after taking account of my spending – using the XIRR function in Microsoft XL.
XIRR doesn’t work for a negative year, so on those occasions I had to work around a little bit. That might add a slight error.
Note that I am not withdrawing £10,000 to £14,000 spending on top – that’s included in the return calculation. I’ve also added some chunks of capital to the portfolio from when I sold my house and later monetised my company pension.
I put all those annual results into a formula to calculate the geometric mean return (IRR), which comes out as 8.25%.
I know it is Round Number Illusion, but I felt strangely satisfied when my net worth passed £1 million in 2021. I was not surprised to see it drop back a little in 2022. Hopefully it won’t be for long!
How much have you been able to fill your ISA and pension contributions?
Despite having no earned income I’ve been allowed to contribute £2,880 into my SIPP every year since I opened it. I have had a policy of moving value from my trading accounts into ISAs to the extent that I am pretty much 100% tax-free on any returns these days. I’ve never been liable for capital gains tax.
To what extent did tax incentives and shelters influence your strategy?
Only to the extent that they were available, so I used them.
How often do you check or tweak your portfolio or other investments?
I follow the results and reports for all my holdings but I don’t check the share prices except by chance.
When I buy a share I then forget about it until the RNS start coming through. I don’t want to make decisions based on share prices but on company performance.
I do an annual review and at that point I decide where to mould my asset allocation for the forthcoming year. I then keep my eye out for investment opportunities in those areas. I rarely sell positions, so this is more of an incremental course correction that will play out over the years from cash generated within the portfolio.
I also have to take my living expenses from this cash.
Wealth management: steady as she grows
We know how you made your money, but how will you keep it?
I rather hope that my portfolio will continue to gently compound without much input from me. Mathematically, it’s unlikely that the long run result will veer much away from the 8% mark without a few big outlying individual yearly results.
I will continue to develop my portfolio with an eye to reducing equity risk over time.
It’s remarkable how your portfolio compounded even as you lived your dream. I guess you hadn’t heard of the 4% ‘rule’, given FIRE was unknown to you. But did you have any particular thinking on managing cash withdrawals? Or was it all ad hoc?
To be honest I was just hoping for the best. It felt like the right time to be getting on with my plans, but I didn’t know what my spending would be in relation to my pot.
Things were obviously more expensive by 2004 than they’d been in 1990, but still manageable in developing countries. We’d typically pay £11 for a double room, and £5 between us for a main meal.
At first I had the cash from the house sale to spend and invest. By the time that was used up my withdrawal rate was already below 4% (not that I monitored it).
To answer your question specifically, I never had a cash policy. By the time I’d used up the cash reserves, the portfolio was generating enough cash to cover both my spending and capital recycling.
When we left the UK my assets were all in cash and stocks to a total value of £210,000. To risk it all to go travelling at 40 seems foolhardy, seen from today. But you can’t live your life in a spreadsheet!
Fortunately I was completely ignorant of Sequence of Returns Risk, which was considerable at that point.
I thought the main risk was just spending down the capital until the lifestyle became unsustainable. So I’d simply need my stock market returns to cover our ongoing spending over time.
In reality, if I’d got the same returns I achieved but in a less favourable order, then I would have been back and on the dole queue in year two.
So you saw big early wins that enabled you to sustain your traveling lifestyle?
In the early years of travel, I didn’t realise that we were in the late stages of a boom and initially my stock market returns were very gratifying.
At one point in 2007 I was worth half a million quid! Largely thanks to the progress of Soco International. I sold down some of my investment trust holdings and put the cash into small cap value choices.
Then came the Global Financial Crisis. For me it was also a gut-wrenching personal crisis, as my portfolio value tumbled back to where it had started.
My dream looked like it was going to collapse in ruins and I updated my CV to prepare for the worst. But the next year saw a bit of a bounce and by year end 2009 my NAV5 was back over £300,000.
I felt I was still in the game but my confidence was severely damaged. It took about six years to I regain my pre-Crisis asset value.
Has your investment strategy changed with the end of your travels?
These days I’m more concerned about the risks in the markets. I’m moving towards large caps, preservation funds, and even some commodity and fixed interest holdings.
My withdrawal rate has hovered around 1% for the last few years and I still have the State Pension to look forward to – hopefully!
My National Insurance contribution record is somewhat woeful. I’ve bought six years worth of Class 3 contributions and this year I’m experimenting with registering as self-employed to become eligible to pay Class 2 contributions.
Which is more important, saving or investing, and why?
I was a compulsive saver, but a know-nothing investor. In the early years I just chucked the money at the stock market hoping for the best. I then spent 20 years trying to pick winners before I realised that I should really be focusing on building a compounding machine.
In this analogy, savings is the fuel, investing is the engine, and compounding is the outcome. It becomes useful to consider the ins and outs of compounding alongside the factors of successful stock selection.
Do you have any further financial goals?
As I approach 60 I’m a lot more comfortable reaching old age with a secure pot of assets behind me. I would not want to be relying on the government for my future care, so I think financial security in old age is more important than at any other time.
However, it is not as important as living an interesting life on the way there.
Is the hardcore traveling done for now? How do you plan to keep busy for the next 30 years?
When we returned to the UK it felt like ‘turning the page’ on long-term travel. Now I won’t mind if I never go into an airport again.
In my daily life I now struggle to find enough time to do things which were previously on the backburner. I want to focus more on friends and family. And hopefully go hill walking and volunteering on farms.
What would you say to Monevator readers pursuing financial freedom?
Whenever I read articles about FIRE, there is always someone in the comments who declares that it is impossible for ordinary people. What they are really saying is that it impossible for themselves.
It takes time, application, and a fair wind but, barring disaster, the worst that can happen is that you end up with a decent chunk of capital. And you might just end up living your dream!
Not another day at the office: Mark at Machu Picchu on his 50th birthday.
Any other business?
When did you first start thinking seriously about money and investing?
I always had to save up out of my pocket money if I wanted anything as a kid. I guess that set me up well for adulthood when I began to think about my goals.
I made my student grant last throughout the term and into the holidays. I wondered why many of my associates couldn’t manage their funds well enough to prevent running out two weeks before the end of term.
We all had the same grant so, to me, it was simply a case of dividing the grant by the number of weeks of term and aiming to have a bit left over.
Can you recommend any favourite resources?
I currently follow about 200 blogs and websites. It is remarkable how many super-intelligent people are keen to share their thoughts and insights with the world at large.
Some of my favourites are:
Vishal Khandelwal at safalniveshak.com. He distils the common sense lessons from the hubbub of investment noise. A bit of an Indian Jason Zweig.
John Maudlin writes a weekly newsletter, Thoughts From The Frontline, which provides a helicopter view of the developing investment landscape.
Victor Hill at MasterInvestor provides us with deep understanding on a wide array of subjects affecting the economy.
Pippa Malgram has insights on geopolitics which often confound the top-level view.
Morgan Housel, a sort of modern-day Plato.
What is your attitude towards charity and inheritance?
When travelling, we found many opportunities to help people out. We tended to hang around for ages in our favourite places and we were always open to making friends with outgoing local people.
Once we knew them a bit, we would easily notice ways we could help out with their daily lives. Being involved with people on a one-to-one basis is much more rewarding than sending off a donation to a good cause, which we do nowadays.
I can’t claim much interest in thinking about what’s left over though. Having a capital sum in case of care home fees seems prudent. The remainder might well be left to Comic Relief, if I’m the last to go.
What will your finances ideally look like by then?
If the compounding machine works and Armageddon fails to arrive, I expect my portfolio to last longer than I do.
I see some of myself in Mark’s unusual story – I found the Motley Fool just a couple of years before him, and we’re both active investors for our sins – and it does make wonder whether I too might have left the grid a decade ago and ended up in almost the same place. What about you? Questions and reflections welcome, but please remember Mark is a reader sharing his story, not a seasoned blogger. Constructive feedback is fine. Personal attacks will be deleted. See our other FIRE case studies.
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