March 12, 2022

We regularly monitor our Net Worth, Portfolio, and Budget and I would recommend this activity for everyone whether you are working towards retirement or already retired. During this chaotic time of Covid and now the Ukraine War, the market has been highly volatile so I thought it might be interesting to share an update.

Net Worth

We track our Net Worth using Personal Capital which is very easy. If you link your accounts, it will track everything automatically. The only downside is that it only works with US accounts. So, if you have bank accounts or investments overseas, you will have to track that elsewhere. Therefore, I also track our Net Worth in excel which I update a couple times a month.

The chart below shows how we are tracking on Net Worth. The dotted line represents our Target that we base our Budget on using a 3.2% Safe Withdrawal Rate. You can see that, before we retired, we changed our Target. We did this because we felt the US market was high (S&P 500 CAPE Ratio was at 34) and also we wanted to make sure we had a comfortable, achievable Budget in retirement that would allow us to live in any country in the world. We did not want to be forced to live in inexpensive countries and we wanted to make sure we could deal with unexpected costs.

The 3.2% Safe Withdrawal rate was based on historical data going back to 1871 which includes periods such as the Great Depression. For more details on this, please see the article “How Much Is Enough for Early Retirement“.

Our Net Worth does not need to stay above the Target level and it is very likely it will dip below that level during our retirement. In fact, some of the historical scenarios in www.cfiresim.com show dips of 60% from the starting portfolio value based on our asset allocations. So, the current US Stock Market drops of 12-13% are relatively minor so far.

In terms of Asset Allocation, we are heavily weighted towards equities. The US Stock portion is primarily invested in the index fund VTI tracking the Total US Stock Market. The Intl Stocks are invested in individual overseas stocks that were significantly undervalued based on P/E Ratios and Book Values. The Real Estate portion is property we own in the US and rent out. The Alternatives are mostly US REITS.

Net Worth Check – OK

Budget

Keeping our Budget in line while travelling from the US to Portugal and throughout the United Kingdom is challenging but also critical to our retirement. We also use Personal Capital to track our Budget since it allows us to see all our credit card spending and bank account withdrawals all in one place. It is also easily downloadable into excel so I can analyze it and add in any spending from overseas accounts.

The table below shows our spending for Sept – Dec 2021 and Jan-Mar 2022. I also split it by country so you can see spending associated with Portugal, United Kingdom, and the USA. At the bottom, I added in some one-time costs associated with buying our Cavoodle Puppy, Sydney, from a reputed breeder in London and also buying a used 2003 BMW 5-Series named Betty in Cambridge, UK.

Based on our costs so far, we are on track to spend approximately $65,909 USD this year. This is below our 3.2% Safe Withdrawal Rate, so we are on track.

In reviewing the costs, I was curious to know the estimated Annual Cost of living in Portugal vs. the UK. I could not compare to the USA since my data only included 2 weeks of USA spending in retirement and we were visiting my Mom during that time so it is not a good comparator.

If I look at our costs in Portugal and include the One Time expenses, we would be at $60,978 USD/Year in spending vs. UK costs of $76,669 USD/Year. So, based on my data, Portugal is about 20% less expensive than the UK. Note: These costs compare both areas during winter months which are significantly less expensive than summer months.

What is the breakdown of our spending?

In Portugal, many things have to be paid in cash so there are high ATM amounts. A significant portion of that amount was used for restaurants, buses, trains, surf transfers, etc. In the UK, we paid for almost everything via credit cards. During this time, we were also applying for various visas, which is why there is significant postage, cashier’s checks, and service charges.

For sure, we have opportunity to streamline our budget. However, our goal is not to spend as little as possible but only to stay within our Budget Target while living as comfortably as possible and ensuring that we do not waste money but spend on things that make our lives more enjoyable.

In summary, after almost 6 months into retirement, we are still on track and proceeding according to plan.