- 1 Preamble
- 2 Let me introduce Fred
- 3 Background
- 4 Crisis in the 90s
- 5 Philippines to the UK
- 6 Identity Crisis
- 7 Meeting my missus
- 8 High Risk, High Reward Bets
- 9 Starting Chuffed2Bits Blog
- 10 Our FI wake-up call
- 11 Our FI plan
- 12 Living costs in the Philippines
- 13 Children
- 14 Family back home
- 15 What if…
- 16 Mount Pinatubo 28 Years Later
- 17 Advice to people pursuing FI
- 18 Final Thoughts
- 19 More from the Blog
This post is part of the Humans of FI project which tend to be longer than usual.
They are less concerned about the numbers, but more about the human story which led them to the path of financial independence.
The stories can be raw and un-sanitised.
Please contact me if you wish to get involved.
Let me introduce Fred
Fred is in his 30s and lives in the UK with his wife and son.*
As the title suggests, his family struggled financially growing. However, this pales in comparison to other events in his life.
As you read his story, you will be shocked as I was that English was not his first language. Despite all that his family has gone through, today, he has a net-worth of £250k whilst still in his mid-30s.
By the way, I did not pay him to write that comment about FI Score Test. In fact, I didn’t even know he took it until after he sent me the draft!
Fred also mentions some of his current specific investments. They are not recommendations and as always, do you own research (DYOR).
So without further ado, over to Fred…
We are a family of three residing in London, England. I am 35 years of age. I work as a Software Engineer (contractor).
My missus is 32. She works remotely as a part-time admin – mainly organising Xoom or Skype meetings for busy tech clients. We have a 9-year-old son.
I was originally from Central Luzon, Philippines.
My earliest childhood memories were in the late 80s. I don’t remember my family struggling with money in those days. My mom had a teaching job at a local Elementary school. My dad was a machine operator in one of the largest sugar mills in the province.
[Sugar mills were common due to the abundance of sugar cane]
We had live stocks, root crops, and fruit-bearing trees in our yard. If we ever go hungry, we could just catch one of the guinea fowls or pull out sweet potatoes off the ground or pick ripe bananas.
We were probably in the lower middle-class band by Filipino standards with a stable monthly income and a sustainable livelihood.
Crisis in the 90s
Our lives started to change drastically due to the downside in the 1990s.
In 1991, Mount Pinatubo erupted destroying towns just hours after the eruption. Our town was about 20 Kilometres away and was one of the worst affected.
The day was turned into darkness as the mushroom-shaped cloud covered the sky that no sunlight can penetrate through.
It was really dark.
Electricity was cut.
It felt like the end of the World.
The ground was shaking violently that lasted for 2-3 days. For days there was a foul smell of sulfur dioxide. Children like us were asked to wear respiratory masks even inside the house.
The eruption coincided with the monsoon season which made it worse than already is. Ash got mixed up with rain creating deadly mudflows. Livelihoods were destroyed – mud deposited in rivers killing freshwater fish, farmlands and crops completely covered in volcanic ash and live stocks gone!
Pretty much everything was decimated, including the sugar cane plantation. Sugar cane became scarce.
The mill filed for bankruptcy.
My dad lost his job.
Fortunately, he did receive a severance package (redundancy pay). He used the money to buy one of these bad boys.
We call it a tricycle. It’s a lightweight transport vehicle (kind of like a Tuk-tuk) to take passengers around small towns. My dad became a tricycle driver just so he can continue supporting us.
I used to ask him, how much he’d make in a day… “150 pesos son” (this was £4 back then). A day for him is usually from 4 am to 4 pm. He was working 10 hours a day to make £4.00.
In 1992, my mom was diagnosed with chronic kidney disease. She underwent dialysis treatments weekly. Medical treatment in the Philippines is expensive. She refuses because she already knew the outcome and she didn’t want to drain their savings, but my dad didn’t want her to die.
The kidney transplant was not an option. It was only available for the elite politicians, celebrities and rich business people. Over time, her body rejected the treatment.
My beloved mother passed away at age 44 in 1993. I was only 9 at that time. I’m the eldest among three siblings.
Finance became tight. We were living on one income, my dad’s £4.00 a day.
Life was tough.
Another crisis, this time financial
The ripple effect of the Asian Financial crisis from 1996 to 1999 can be felt through the rising costs of living and basic consumer goods. [I now know this is called inflation]. I was a 12-year-old kid, what did I know about economics and financial crisis?
During my first year in high school, we had no money to buy basic school supplies – pens, notepads, backpacks and school uniforms. My dad’s income was barely covering our food and monthly bills.
My classmates had brand new notebooks, scientific calculators and nice backpacks. Their parents sent money every month from Saudi, Emirates, Qatar, US, Australia, Canada, and the UK.
Their parents are known as OFWs (Overseas Filipino Workers).
I remember asking our neighbour’s son (he’s a few years older) if I can have old school uniforms that he is going to bin. He gave his old trousers and shirts for me. What a nice chap!
In the rural Philippines, it’s all about friends, families, and relatives.
I’m thankful to all our relatives who took care of us when we got sick while our dad was working. They allowed us in their house when it rained hard during the Typhoon season. They fed us when we got hungry.
I’m forever grateful.
Philippines to the UK
My mom used to tell me that my dad was a good-looking guy when he was young.
He looks a bit like Thanos.
No seriously, he looks like Josh Brolin. He’s got this rock star appeal in him. That’s why we weren’t really surprised when he said he’s remarrying.
He met a very nice British woman and they became pen pal/phone pal (whatever they call at that time). Their relationship developed and they got married.
You could say we were very fortunate; a single lady marrying a guy with 3 kids. I was 14 at the time and she took all 4 of us to the UK.
She guided us. She taught us that getting an education is important. That’s her way of saying you get more options in life with a good education.
We don’t call her by her first name. We call her mom.
Once in the UK, I did quite well with my GCSEs. My teachers were surprised at how many A and B grades I got!
The high school system in the Philippines is slightly ahead compared to the secondary school system in the UK. I was maybe 2-3 years ahead in Maths and Science.
I remember being called names and be told to “go back to your country”. As a monitory, Filipinos who were born here were calling me F.O.B. I didn’t know what this meant at the time – “fresh off the boat”.
I shrugged most of it off and didn’t really pay attention at the time because I was just focused on adjusting to a new culture and new way of life.
During my college days (A-Levels), I got involved in the wrong crowd. I was lost for a while finding the right crowd.
We smoked pot and got involved in fights in other schools.
I flopped my A-levels… U in Physics, D in Maths and C in Business Studies.
What happened to A and B grades? “Oh no… I didn’t meet the minimum UCAS requirement to go to a decent University”.
I was at a crossroads when I was 17, fortunately, mom was there to guide us once again. I found a very good University that allowed students who flopped their A-Levels to do a foundation course and a 3-year Engineering course.
Thanks to mom for setting us on the right track once again.
Meeting my missus
After 7 years of living in London, I visited my grandmother in the Philippines. It was very hot and humid.
I went to a store to buy a bucket of ice cream for the family and there I saw this beautiful young lady, she was 18 and I was 21 at that time.
We got married 3 years later. 11 years later, we’re still going strong. The rest is history!
High Risk, High Reward Bets
I have invested in some of the fastest growing start-up companies in the UK. Monzo, WiseAlpha and JustPark. It’s a concentrated bet on risky but high-quality start-up/growth stage companies. The failure rate is quite high. Hence, I had to choose wisely.
Some of my investments returned 2000% on paper.
@naval is widely quoted in the FIRE community. I’ve been following him since 2015 (in my other twitter account). I have attended his periscope sessions. The guy is a wealth of knowledge and wisdom. He is like a modern Buddha, Ray Dalio, and Charlie Munger all in one persona. I’ve read many books recommended by him.
He is also an advocate of blockchain technology and cryptocurrencies with a particular interest in Bitcoin and privacy coins such as Monero and Zcash.
I was a non-believer at first. But over time the more I read about it, the more I’m fascinated by it.
Imagine for a sec, you’re fleeing a war-torn country and you want to preserve your family’s wealth. Cash and gold can be seized easily by looters, rebels and even the government. Cash can be deflated easily as we have seen in Venezuela. Cryptos, on the other hand, are outside of the government’s control.
My wife and I discussed how best to enter this space. We’ve decided to allocate no more than 2% of our net worth into cryptos.
We’ve opened up coinbase, bittrex and binance accounts. Put in £2,000 (£1K from each of us). We’ve allocated it in the following projects: BTC, XLM, ZEC, LTC, NEO, ETH, and VTC.
7 months later, the portfolio value increased to £6K. That is a phenomenal increase. We don’t get that kind of return in other asset classes.
HOWEVER, cryptocurrencies risk-adjusted return is poor in comparison to the stock market or bonds or commodities. The expected volatility of cryptos is 90% or more, therefore expect some gains of 1x to 3x in a year but expect some losses of -90% or the total wipeout of capital.
We are conscious of the fact that we could lose the two grand investment.
Starting Chuffed2Bits Blog
“Chuffed to bits” is a British term meaning “thrilled by something”. It’s the first phrase that comes to mind when I see other people reaching financial independence and fulfilling their dreams of being free from the 9-5 shackle (it’s more like 8 to 6 when the commute is included).
I’m thrilled because many of them are average working people like us. They inspire us. If they can achieve FI so can we!
I’ve read many FIRE blogs before, but I never got the opportunity to apply any of their lessons for myself until recently. I don’t really know why I waited this long.
Maybe I was living in my own bubble for a long time. I was too busy enjoying work. It never felt like work. We were 14 strong in that company. We were agile. We shipped products and software features every week. The building we’re in is nice with a terrace overlooking the city.
We volunteered to the poorest communities in London. We were like brothers and sisters from different nations. The dream team. I could stay there forever.
And then the uncertainty surrounding Brexit happened. We lost some of our key European contracts. I lost my role as a Software Engineer.
Our FI wake-up call
I’m now in my 5th month with a big organisation.
I feel miserable here.
I look around, people don’t talk to each other. That’s when I know something ain’t right at this place. I told my wife I’ll persevere for a little while (that was 2 months ago).
Lately, I’ve been struggling to cope with mediocrity at work. I can’t take it anymore….It’s my wake-up call. I need to do something about it (a*) leave, (b*) journey to FI (have some sort of fu money), (c*) do both or (d*) or maybe I’ll just have to accept the fact that this is the real world.
[I’m still in contact with all 14 of the people from my previous company via WhatsApp, 4 of us have this cunning plan to rebuild the team via our own start-up but that is a long way away.]
A famous quote from the Dalai Lama resonated with me:
“The Dalai Lama, when asked what surprised him most about humanity, he said: “Man. Because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health.”
I learned at a very young age that life is short.
My wife and I thought very hard about life. As @naval once said:
“the purpose of having money is so that you don’t need to be at a specific place at a specific time doing things you don’t want to do”.
We don’t want to be stuck in cubicles until we croke.
There’s no need to sacrifice our health for money! Instead, what we want is quality time with our family and more options for us to choose our work when we want, where we want and with whom we want.
Fortunately for her, she’s kind of living it already by working remotely for a Tech client and she’s only doing it part-time. I’m not quite there yet.
Our FI plan
The plan is to make some sacrifices today to make money work hard for us to buy our future time.
My wife will be responsible for building our passive income generating assets in the Philippines while I’ll be focusing on building our UK assets.
So far, we’re earning £130 a month in passive income – it’s about to increase to £280-£300 a month by year-end when she completes our real estate project.
We created our 10 Year Passive Income Roadmap. I’m pretty sure the roadmap is not something that will follow 100%. It is there to keep us on the right track.
With our current annual expenses of £40,000 per annum in the UK. We’d need about £1M in investments for that 4% safe withdrawal rate.
FI London, the UK versus Central Luzon, Philippines (Geo-arbitrage)
We felt Cashflow Cop’s FI ScoreTest to be well suited to our particular circumstances compared to others we have tried.
According to the calculation, our years to FI in London is 20.97 years.
If we are to geo-arbitrage and move back to the Philippines, our expected annual expenses would be around £20,000 per annum for a family of 4 (we’re looking to have one more child).
We can expect to achieve FI in 7.91 years.
20.97 years in London, England vs 7.91 years in Central Luzon, Philippines.
We’re entertaining the idea of living in the Philippines for 1 year while we rent our our flat in London, just to get a feel of what life is like. But before we could do that I need to detach my job from a geographic location i.e. find a remote software engineering job that allows me to work anywhere in the World.
Living costs in the Philippines
I have factored in healthcare costs which also includes health insurance for all three of us in our FI calculations.
Water, internet, and electricity tend to be expensive in the Philippines due to monopoly of old companies. Some of these companies were established during Spain’s colonisation of the
Philippines and are owned by the same family for many generations now.
Universities used to be cheap in the UK compared to the Philippines. I remember paying £1,200 a year for my University fees, these days Universities in the UK can cost up to £9,000 per year (excluding accommodation).
If we go to the Philippines, we can live in one of our rental properties (mortgage free). Whereas, in the UK, one third of our monthly expense goes to our mortgage payments.
I have estimated that with £17K-20K a year, equivalent to P1M – P1.3M a year is enough for us to have a comfortable life there.
Our children will have dual nationalities just like my wife and I. This means they will have the option of returning to the UK in the future if we decide to move back to the Philippines.
My children’s education was our initial concern long before we thought about pursuing FI. On Twitter I keep seeing graduates burdened with student loan particularly in the USA. UK is not that far off. Tuition fees here are around £9K a year already.
When our son was born we made sure we contributed around 3-5% of our take home pay into his Junior ISA on an adventurous portfolio, hoping it’ll grow large enough to fund his college.
Nine years on, his portfolio grew and can cover two years worth of University fees (today’s value). He’s still got another 7-8 years before he can access that portfolio though.
The choice is theirs once they are old enough to make decisions – study anywhere and work anywhere. We can only support them and make sure they are given options when they are ready to move out.
Family back home
In the 90s my relatives were barely getting by. Most of them were living off their lands.
It was only due to the economic miracle from 2005 to present day that has continued to lift people out of poverty.
The majority of my relatives in the Philippines are doing ok these days. Their businesses are booming mostly to do with Business Process Outsourcing (BPO) arriving en-masse. [Typical businesses they have are commercial land leasing, hog raising, travel agencies, rental properties and mini grocery stores].
My mom’s brother is into Warehouse leasing. He’s making a fortune out of the booming e-commerce logistics. I would love to venture into warehouse leasing but the capital requirement is quite high.
The British pound lost 40% of its value against the Philippine peso currency over the past 10 years. Perhaps it is me wanting the same opportunity they are experiencing right now.
I sometimes think about what my life would have been like if my mum was still alive, or if my dad didn’t meet my step-mother.
Growing up, I had a tough life for sure. This was the 90s and early 00s. A period of political and economic turmoil in the country.
Losing my mom was the lowest point in my life.
I had to grow up and mature fast to guide my younger siblings. In the Philippines it’s usually the eldest sibling that will do the sacrifice first to lift their family and younger siblings out of poverty. I would imagine my story would be similar to the “Praying hands painting” story.
Mount Pinatubo 28 Years Later
This is Mount Pinatubo’s crater now. It’s one of the top tourist destinations in Luzon. The province survived a decade long economic crisis and it’s now one of the richest provinces in the Philippines.
Land value has gone up 40,000%.
According to PWC, the Philippines will be a Trillion $ economy by 2030 and will be in the top 25 largest economies. This is one of the reasons why my wife wanted to invest heavily in the Philippines.
Advice to people pursuing FI
- Start now. I wished I started 10 years ago!
- Focus on accumulating dividend champions. They are companies or funds with many years of track records of increasing payouts in-line or above inflation year-on-year. Companies such as Unilever, Johnson and Johnson’s, McDonald’s, Reckitt Benckiser and Diageo.
- If you are going to speculate short term make sure the amount is no more than 2 % of your net worth.
- Use tax-advantaged accounts such as ISA or SIPP in the UK. When you can, max out your employer’s contribution.
- Read @naval tweetstorm about how to get rich without getting lucky.
- Give your children a head start by investing in their future.
That’s quite a journey right? I can’t imagine what it must have been like to lose his mother at that age. Too young to fully grasp and take in what has happened, but old enough to remember the pain.
I like how Fred is keeping his options open and is thinking through his FI plans carefully to include healthcare and children.
I don’t touch crypto-currency, but that’s down to not having the time to research it thoroughly.
My golden rule is never to invest in something I don’t understand.
From what little I know about it, it is definitely in the realm of speculation. Perhaps even in some grey area between that and gambling. However, I am speaking from a position of ignorance.
Fred has been sensible here by only allocating no more than 2% of his net-worth into it. I know of Police Officers who ‘invest’ in bitcoin. I have tried to encourage them to look into Index Investing or buy added pension in the past with no luck. However, when all the frenzy surrounding bitcoin happened, they were on it!
I am most interested in his potential plans to return to the Philippines. How will he manage that conversation with his son (and any other children he has in the future)? If it is FIRE to the Philippines in 8 years time, his son would be 17 by then. Would he want to remain in the UK to finish his studies or move with parents?
This, to me, is one of the best things about achieving financial independence.
It gives Fred options.
He can do what is best for his family when the time comes and adjust his plans accordingly.
I wish Fred and his family all the best and will be following him on his journey.
So now it’s your turn. What do you think about Fred’s story? How has it inspired you?
More from the Blog
Humans of FI