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Zen and the art of staying on target...

General discussions about equity high-yield income strategies
AsleepInYorkshire
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Re: Zen and the art of staying on target...

#486058

Postby AsleepInYorkshire » March 12th, 2022, 11:35 am

TUK020 wrote:If I can add a couple of points from my own experience:
Background: I stopped all paid work about 8 months ago, and had shifted down to a reduced hours (4 days a week) for the 18 months previous to that.

Reducing hours is a useful exercise, and brings home some interesting points.
I found my stress level overall was not so much correlated to the working hours, but more inversely correlated to the recovery time in between. Going from 5->4 days week work, increases your weekend by 50%.
At our stage in life, a very significant portion of your disposable income goes into savings for retirement. Reducing earnings but still keeping them at a level that covers your current expenditure - in effect stop saving extra - still builds your safety margin simply by postponing the point at which you draw savings/pension down.
The very progressive nature of our tax system means that the ratio of hours worked to net income is surprisingly non linear if you get anywhere close to either LTA on your pension assets, of withdrawal of personal allowances on your income. This was really brought home to me as I was trying to work out how to avoid a marginal tax rate of 2/3rds.
The right answer would have been to start drawing my pension and continue work 2 days a week and this would have kept my net income at the same level. Unfortunately this was incompatible with my role, so I bit the bullet, and stopped altogether.

Early days, but no regrets so far. Residual worry about what inflation is going to do to me.

Very interesting that we all share the same sort of concerns - fears if you are like me :shock:. I am about to take some similar steps. And I'm not sat here thinking it will work. However, my age and health are taking their toll and I feel now is the time to go on a four day week.

Before I go any further I realise this is a little off-topic but parts of it will come back on topic. Please bear with me.

Both Dod and IAAG are exceptional contributors to this community and they have both discussed how they look after their finances. Three weeks ago my SSD broke. I didn't realise that it contained my desktop memory. So my backups weren't of any help as I was just (without understanding it) backing up my HDD.

I've lost my "spreadsheet". I had information in there regarding pension projections. It can be replaced. The point I am making is not only did it allow me to know what I was spending it provided a form of emotional support for me. At any time I could look at the bigger picture and know how robust the family finances were, especially in case of "shock".

I've three figures locked into my head.

1. Essential costs per month - currently £1,600.00 month and my good lady's salary just covers these - a first line of financial defence
2. Essential cost per month plus a holiday and a glass of wine £2,200.00 - a second line of defence as I only need to earn £600/month to lift us to this standard of living - I don't have a set income but it's about £350/day.
3. As 2 above but paying £9K a year into our daughters JISA. £3,000.00 - a third line of defence as we can always resort to the essential only budget if life referee awards a penalty against us.

Assuming we retired tomorrow our wish would be to have a retirement income of £36/year. We want to continue to help our daughter financially after she is 18. Whilst it's a wish, it's an important wish for us. We can't retire tomorrow then :shock: I have 7 years to go before state pension age and my good lady has 12 years. We can't really rely on this income for some time then :shock:

Before Putin we did feel we could get somewhere towards 100% of our needs within the next four years. We're in equities. I'm guessing we may need to suck up another 2-3 years in work due to the invasion of Ukraine. As another "line of defence" against downside and "shock" I/we are looking to put double our needs into a pension pot. Then the next time Putin invades another country we can sleep at night and not have to massively reduce our standard of living. See 3 above.

I have managed to work out that at the same time as I drop to a 4 day week I should still maintain my annual income. My skills are in demand with the construction industry at the moment.

So a four day week it is. We have sufficient emergency cash to pay for option three above for about 30 months without any other form of income. That helps me partially. But as a "born worrier" I still need my spreadsheet and as IAAG says I/we just need to keep plugging away until the numbers say "time to retire me old".

AiY(D)

88V8
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Re: Zen and the art of staying on target...

#486078

Postby 88V8 » March 12th, 2022, 12:24 pm

MDW1954 wrote:Wow! Do my eyes deceive me, or is that a 174-word sentence, IAAG?

I was always an admirer of Bernard Levin, who famously wrote the longest sentence to appear in a newspaper - The Times - 1667 words.
Officially, he had no children, otherwise one would be wondering......

Jolly interesting to see the progression of IAAG's figures. I'm afraid I took a much more cavalier attitude, but then my wife was still working at the time and so continued for five years which helped.

A key imponderable for those of us heavily reliant on dividends is when rather than if the tax rates will be 'harmonised' with income, and to what extent our tax shelters will remain sacrosanct.

Having retired early - 56 - I do recommend it if only for the deletion of the daily 3 hour train/tube commute, and had it been necessary would have been willing to make some sacrifices towards that end.

V8

tjh290633
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Re: Zen and the art of staying on target...

#486087

Postby tjh290633 » March 12th, 2022, 12:42 pm

I was made redundant at 57, but was fortunate to be asked to join a company that I knew well for the final 8 years before retirement. I had always regarded my investments as an insurance against redundancy, but in the event it was not needed.

However, when the time to retire came, I found that the total of investments and pension income was not far short of my retiring salary.

Year to       Pensions   Investments   Total              
05-Apr-00 65.25% 23.08% 88.33%
05-Apr-01 66.79% 24.12% 90.90%
05-Apr-02 69.18% 25.75% 94.93%
05-Apr-03 71.02% 26.72% 97.75%
05-Apr-04 74.54% 32.14% 106.68%
05-Apr-05 75.23% 35.58% 110.81%
05-Apr-06 77.50% 48.00% 125.50%
05-Apr-07 79.33% 53.78% 133.11%
05-Apr-08 82.05% 69.04% 151.10%
05-Apr-09 85.18% 64.91% 150.09%
05-Apr-10 88.35% 43.60% 131.94%
05-Apr-11 90.07% 55.56% 145.63%
05-Apr-12 93.16% 64.45% 157.61%
05-Apr-13 97.08% 68.28% 165.36%
05-Apr-14 100.08% 79.55% 179.63%
05-Apr-15 102.88% 78.82% 181.70%
05-Apr-16 105.04% 75.08% 180.12%
05-Apr-17 106.79% 78.58% 185.37%
05-Apr-18 109.24% 94.80% 204.04%
05-Apr-19 112.52% 98.63% 211.15%
05-Apr-20 115.63% 106.01% 221.64%
05-Apr-21 118.67% 71.51% 190.18%


Bearing in mind that various deductions no longer applied, like NICs and pension contributions, and that personal allowance rose after pension age, it meant that I had more free cash available than before retirement. The RPI had increased from 100% to 177%, rebased to 100% from date of retirement.

Had I not found employment so easily, I had thought about going down the consultancy route, or found a job locally which I could enjoy, but never had to in the end.

It is a little like the traditional response of Rolls Royce, when asked about the power of their engines - "enough", when the question is raised about how much one needs in retirement.

TJH

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Re: Zen and the art of staying on target...

#486117

Postby funduffer » March 12th, 2022, 3:19 pm

The interesting thing in IAAG’s data, is that as he is invested in IT’s, there is no dip in income in 2020 when the pandemic took hold. This shows the value of smoothing provided by IT’s compared to a HYP, which would have shown a likely >30% drop.

My own HYP & IT’s portfolios show something pretty similar.

This suggests to me the buffer in the holding account does not need to be as large for an IT portfolio compared to a HYP. I don’t know how big that buffer should be, and it is certainly difficult to logically come up with something in these turbulent times.

FD

Itsallaguess
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Re: Zen and the art of staying on target...

#486136

Postby Itsallaguess » March 12th, 2022, 4:53 pm

funduffer wrote:
The interesting thing in IAAG’s data, is that as he is invested in IT’s, there is no dip in income in 2020 when the pandemic took hold.

This shows the value of smoothing provided by IT’s compared to a HYP, which would have shown a likely >30% drop.

My own HYP & IT’s portfolios show something pretty similar.

This suggests to me the buffer in the holding account does not need to be as large for an IT portfolio compared to a HYP. I don’t know how big that buffer should be, and it is certainly difficult to logically come up with something in these turbulent times.


Which highlights an earlier point I made about the free 'stress tests' we investors seem to have lived through over the last few years, and that whilst they're difficult to cope with when trying to take a zen-like approach to things, they do help to show any underlying resilience that our individual approaches might be capable of, and yes, I've been very pleased that there have been those resilience-based chinks of light over recent years, during these repeated and often lengthy testing periods.

With that said, and also related to your point above, I should say again that I have been re-investing dividends and adding fresh capital for a long time now, whilst I'm still working full time, and the figures I've shown in this thread will include any ongoing underlying benefits from those regular additional funds, so I would urge at least a little caution in taking too much away from them in terms of 'headline figures', whilst also acknowledging that I've been pleased too, with the underlying resilience of my primarily IT-based strategy, during these particular COVID-based periods.

I would also agree that, at least in the early years of any walk-back from full-time working, I will almost certainly be erring too far on the side of caution with carrying too much of a safety-buffer at first, but that'll definitely be 'by design' at first, and whilst I will happily concede and acknowledge that, I would also expect to be able to modulate that safety-buffer a little over those early years, once I gain a bit of confidence and get used to the feel and play of the financial-independence tiller rope...

Cheers,

Itsallaguess

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Re: Zen and the art of staying on target...

#486141

Postby kempiejon » March 12th, 2022, 5:15 pm

Early retirement anxiety about how big a buffer and safety margin is probably not too dependent upon investment vehicle choices though I do take the point about ITs and their inbuilt smoothing ability. My HYP did indeed see a daunting % drop in income. Indeed a free stress test.
Whether it be Global tracker/IT/HYP/bonds I think a larger safety margin and buffer of cash would be prudent for any of us walking away from work before normal retirement age with our own pots. Hopefully a state and work pension would be able to replace some of the jobs done by the safety margin and cash buffer. If I was just a couple of years away from being able to lay my hands on an extra £700 a month I'd be much more sanguine about having just 111% of my expected income from my investments and I probably wouldn't need 3 years of expenses being eroded by inflation.

I've long moaned that financial independence in my 50s would lead to me being heavy with capital and excess income should I get to my 80s and I'd like to borrow some of my inheritance now. Still, there are worse problems to have.

Dod101
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Re: Zen and the art of staying on target...

#486142

Postby Dod101 » March 12th, 2022, 5:27 pm

88V8 wrote:
MDW1954 wrote:Wow! Do my eyes deceive me, or is that a 174-word sentence, IAAG?

I was always an admirer of Bernard Levin, who famously wrote the longest sentence to appear in a newspaper - The Times - 1667 words.
Officially, he had no children, otherwise one would be wondering......

Jolly interesting to see the progression of IAAG's figures. I'm afraid I took a much more cavalier attitude, but then my wife was still working at the time and so continued for five years which helped.

A key imponderable for those of us heavily reliant on dividends is when rather than if the tax rates will be 'harmonised' with income, and to what extent our tax shelters will remain sacrosanct.

Having retired early - 56 - I do recommend it if only for the deletion of the daily 3 hour train/tube commute, and had it been necessary would have been willing to make some sacrifices towards that end.

V8


I wasn't sure how to describe my attitude but cavalier would be about right, especially when compared to the likes of IAAG's record keeping and that is not a criticism of his methods because we are all different. Strangely enough, I am much less cavalier nowadays.

Dod

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Re: Zen and the art of staying on target...

#486144

Postby scotview » March 12th, 2022, 5:52 pm

Thanks Itsallaguess for posting such an interesting thread. I was very fortunate to retire at 52 (18 years ago) on a DB pension from a Global Co. I am fully aware how my situation was very fortunate indeed, apart from having the foresight to buy AVC additional years. I could have worked longer and earned a lot more but I thought my time was more valuable than money.

This post has given me great insight into the thought processes/risks/decisions that those generating their own income stream take. Thanks to all the posters for such an interesting thread.

vand
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Re: Zen and the art of staying on target...

#486150

Postby vand » March 12th, 2022, 6:40 pm

Itsallaguess wrote:
|||||    2018 |    2019 |    2020 |    2021 |    2022
Jan | 37.09% | 40.59% | 36.39% | 79.10% | 72.03%
Feb | 66.56% | 75.60% | 92.59% | 104.21% | 127.28%
Mar | 63.93% | 57.93% | 75.16% | 62.90% | 65.67%
Apr | 50.57% | 74.67% | 55.73% | 62.80% |
May | 120.11% | 134.29% | 138.88% | 198.45% |
Jun | 146.29% | 140.33% | 160.90% | 169.22% |
Jul | 37.50% | 79.19% | 72.08% | 79.93% |
Aug | 131.86% | 101.13% | 125.73% | 156.61% |
Sep | 133.73% | 154.78% | 77.09% | 92.27% |
Oct | 31.51% | 34.45% | 66.35% | 94.87% |
Nov | 105.21% | 110.15% | 176.14% | 202.74% |
Dec | 80.59% | 93.28% | 20.04% | 19.89% |




My question is although the monthly coverage numbers seem quite lumpy, presumably this is due to the dates of the dividends payouts arriving into your account?

Are your living expenses reasonably consistent from month to month?

So long as the HYP income covers 100% of your annual expenses the lumpiness of the income stream shouldn't be a problem.

In practice you would hopefully have a cash buffer of several months of living expenses, from which you draw money for your day to day spending. The dividend income will go to refreshing this buffer as and when it comes in.

Also, I presume that you have been adding to the portfolio from your own earned income? Once you give up paid work this tailwind obviously stops, and the portfolio will then have to sink or swim by itself. You will then be faced with the usual problem of Sequence of return risk that all retirement portfolios face (yes even dividend HYPs), being that even if your income covers your living expenses from day 1, it has to continue to grow enough to be able to provide an inflation adjusting income into the future, and any shortfalls would have to be met with redemptions of the capital base which would then further hamper the portfolio's ability to sustain your expenses.

moorfield
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Re: Zen and the art of staying on target...

#486170

Postby moorfield » March 12th, 2022, 8:43 pm

AsleepInYorkshire wrote:Three weeks ago my SSD broke. I didn't realise that it contained my desktop memory. So my backups weren't of any help as I was just (without understanding it) backing up my HDD.

I've lost my "spreadsheet". I had information in there regarding pension projections. It can be replaced.



A similar thing happened to me a few years back, whereupon I painstakingly rebuilt all of my record keeping on Google Sheets, and haven't looked back since. I'd highly recommend looking at this. Beyond the interest of many here perhaps, but I also now rent a "virtual" Windows PC on Amazon Web Services (few quid a month) which has backup installations of all the old software I still rely on eg. Microsoft Money. The beauty of these is that I can now access all my records easily from any device anywhere, as can Lady M should the bus with my name on it ever suddenly arrive.

Itsallaguess
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Re: Zen and the art of staying on target...

#486196

Postby Itsallaguess » March 13th, 2022, 12:31 am

kempiejon wrote:
Still, there are worse problems to have.


A great reminder, kempiejon, that we're a lucky bunch here to even be contemplating these sorts of financial 'problems' and issues...

As the years fly by, I'm acutely aware that there's a very real chance of missing the bus I've worked long and hard to get a ticket for, and I feel immensely privileged to be able to discuss these issues with others who are aiming to jump on at their own stop, or who have been on the same journey for some time already, and freely offer their very welcome experience of their journey so far...

This site works best when we're supporting each other towards collective goals. The routes may, of course, be different, but the destinations are often the same...

Cheers,

Itsallaguess

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Re: Zen and the art of staying on target...

#486219

Postby stevensfo » March 13th, 2022, 9:32 am

moorfield wrote:
AsleepInYorkshire wrote:Three weeks ago my SSD broke. I didn't realise that it contained my desktop memory. So my backups weren't of any help as I was just (without understanding it) backing up my HDD.

I've lost my "spreadsheet". I had information in there regarding pension projections. It can be replaced.



A similar thing happened to me a few years back, whereupon I painstakingly rebuilt all of my record keeping on Google Sheets, and haven't looked back since. I'd highly recommend looking at this. Beyond the interest of many here perhaps, but I also now rent a "virtual" Windows PC on Amazon Web Services (few quid a month) which has backup installations of all the old software I still rely on eg. Microsoft Money. The beauty of these is that I can now access all my records easily from any device anywhere, as can Lady M should the bus with my name on it ever suddenly arrive.


Wow! Two very useful ideas in the same thread! I don't personally store a lot on the desktop but I'm always having a go at my wife who seems to use her desktop as her main folder. Just seeing her desktop gives me a headache!

I have never heard of Amazon's virtual PC, but it sounds extremely useful. Thanks!

Steve - still meaning to back-up 1000s of family photos and upgrade old desktop from Windows 7. :oops:

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Re: Zen and the art of staying on target...

#486223

Postby moorfield » March 13th, 2022, 9:47 am

stevensfo wrote:
Wow! Two very useful ideas in the same thread! I don't personally store a lot on the desktop but I'm always having a go at my wife who seems to use her desktop as her main folder. Just seeing her desktop gives me a headache!

I have never heard of Amazon's virtual PC, but it sounds extremely useful. Thanks!

Steve - still meaning to back-up 1000s of family photos and upgrade old desktop from Windows 7. :oops:


We certainly now are drifting O/T (apologies), take a look at: https://docs.aws.amazon.com/AWSEC2/late ... arted.html
(I've PM'd this to you too in case this post gets removed!)

88V8
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Re: Zen and the art of staying on target...

#486238

Postby 88V8 » March 13th, 2022, 11:10 am

moorfield wrote:We certainly now are drifting O/T...

Well not really, because record keeping is a key part of the investment hobby, and it never hurts to be reminded that digital records are a fragile thing.

I back up our PC - our only digital device - every week, but I discovered a while ago that there is a problem with the photo path so the photo backup is not working. Even being retired I don't have time to upload 25,000 photos to Photobucket... and retitle them....

V8

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Re: Zen and the art of staying on target...

#486301

Postby stevensfo » March 13th, 2022, 3:13 pm

88V8 wrote:
moorfield wrote:We certainly now are drifting O/T...

Well not really, because record keeping is a key part of the investment hobby, and it never hurts to be reminded that digital records are a fragile thing.

I back up our PC - our only digital device - every week, but I discovered a while ago that there is a problem with the photo path so the photo backup is not working. Even being retired I don't have time to upload 25,000 photos to Photobucket... and retitle them....

V8


May I ask why you're uploading so many to Photobucket? Why not an external HD, SSD and maybe CDs/DVDs for extra security?

When I retire in a year or so, sorting out old photos and Family tree stuff is top of my 'To do' list. I have to admit that since digital cameras appeared, our PCs (and wife's bloody phone!) are filling up with zillions of photos, most of which can be deleted. I already started this a few years ago when she wanted me to download photos from her phone to free up space. Hmm, wonder why? 20 pics of her brother sitting in a ferry from 20 angles? As the Cybermen like to say, "Delete!" ;)

A relative, already retired, said that they simply went through their photos year by year, holiday by holiday, chose the ten or so best ones for each occasion and had them all printed in albums that they did professionally online. Seems a good idea.

Crikey, now we really are going O/T.

Steve

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Re: Zen and the art of staying on target...

#486329

Postby moorfield » March 13th, 2022, 5:44 pm

stevensfo wrote:
Crikey, now we really are going O/T.




Zen and the art of staying on topic... :lol:

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Re: Zen and the art of staying on target...

#552624

Postby Itsallaguess » December 6th, 2022, 9:25 am

Itsallaguess wrote:
One of my long-term income-investment aims has been to one day switch over from paid employment to instead taking regular income from my primarily IT-based income-portfolio.

Below is a table showing monthly portfolio-generated dividend income, as a percentage when set against my forward-looking monthly expenditure requirement (which equals my expected yearly expenditure divided by 12) -

|||||    2018 |    2019 |    2020 |    2021 |    2022
Jan | 37.09% | 40.59% | 36.39% | 79.10% | 72.03%
Feb | 66.56% | 75.60% | 92.59% | 104.21% | 127.28%
Mar | 63.93% | 57.93% | 75.16% | 62.90% | 65.67%
Apr | 50.57% | 74.67% | 55.73% | 62.80% |
May | 120.11% | 134.29% | 138.88% | 198.45% |
Jun | 146.29% | 140.33% | 160.90% | 169.22% |
Jul | 37.50% | 79.19% | 72.08% | 79.93% |
Aug | 131.86% | 101.13% | 125.73% | 156.61% |
Sep | 133.73% | 154.78% | 77.09% | 92.27% |
Oct | 31.51% | 34.45% | 66.35% | 94.87% |
Nov | 105.21% | 110.15% | 176.14% | 202.74% |
Dec | 80.59% | 93.28% | 20.04% | 19.89% |


As we're nearing the end of the 2022 calendar year, I thought I'd compile an updated 'relative-income' table to map my steady progress towards one of my long-term income-investment aims, which is for the bulk of my regular outgoings to hopefully be covered by dividend-income from my broadly IT-based income-portfolio.

Here's how things progressed since the March entry above, with all percentages shown in direct comparison to my average expected monthly outgoings -

|||||    2018 |    2019 |    2020 |    2021 |    2022
Jan | 37.09% | 40.59% | 36.39% | 79.10% | 72.03%
Feb | 66.56% | 75.60% | 92.59% | 104.21% | 127.28%
Mar | 63.93% | 57.93% | 75.16% | 62.90% | 65.67%
Apr | 50.57% | 74.67% | 55.73% | 62.80% | 94.86%
May | 120.11% | 134.29% | 138.88% | 198.45% | 183.58%
Jun | 146.29% | 140.33% | 160.90% | 169.22% | 175.70%
Jul | 37.50% | 79.19% | 72.08% | 79.93% | 89.24%
Aug | 131.86% | 101.13% | 125.73% | 156.61% | 183.36%
Sep | 133.73% | 154.78% | 77.09% | 92.27% | 92.95%
Oct | 31.51% | 34.45% | 66.35% | 94.87% 105.03%
Nov | 105.21% | 110.15% | 176.14% | 202.74% | 207.28%
Dec | 80.59% | 93.28% | 20.04% | 19.89% | 21.22%


In total, the above 2022 yearly income works out at 118.19% of my regular 2022 outgoings, with the progress of the yearly data for that particular metric presented below -

2018     83.75%
2019 91.37%
2020 91.42%
2021 110.25%
2022 118.19%


I should note here that given recent inflationary issues, I am likely to need to upgrade my base-line monthly requirements to some degree, which, whilst it does contain some level of cash-margin, probably needs revising for next year and onwards. My long-term goal is for regular dividends to cover regular outgoings with a moderate level of margin, and I will also have other cash or near-cash assets for additional safety margin going forwards.

Please note also, as I've mentioned earlier in this thread, that I intend to utilise a 'holding account' for the above incoming dividends, which would itself build up a level of internal cash margin before being expected to start 'paying out' any regular cash in the form of an 'investment wage', so I would never expect month-to-month dividend payments to actually turn straight into 'expenditure'. That 'holding account' would then receive the regular back-filling dividends, whilst maintaining a level of margin 'float', and then hopefully continue to slice off in the form of a direct-debit, regular payments for my own use...

As I'm currently still working, the above data presents a steady and welcome pathway towards my long-term retirement goals, and with a nod towards the thread title, I shall continue to re-invest this income, as well as take opportunities to top-up investment capital from working funds, as and when such opportunities continue to arise.

I'd like to take this opportunity to wish everyone a great Christmas, and offer my best wishes for 2023 to all.

Cheers,

Itsallaguess


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