Stocktake: Q3 2019

So fought the Trojan boys in warlike play,
Turn’d and return’d, and still a diff’rent way.
Thus dolphins in the deep each other chase
In circles, when they swim around the wat’ry race.

This summer flew by, and I don’t even know what happened with the autumn. It’s almost Christmas, people, Christmas! Which I’m looking forward to spending in my underpants, seeing as we’re not going to entertain this year (thanked be the gods!).

I need a holiday. Yes, another one.

See, that’s why I’m certain I’d make an excellent early retiree. There’d be none of that what-shall-I-do-with-myself-slash-work-experiment bullshit. Are you bored staying at home? Get a dog. Take up scrapbooking. It beats the commute. I hate the commute. There, I said it. I love living in Surrey – the fresh air, the green wide open spaces – I only wish Surrey was in central London.

Enough moaning though. Let’s get on with taking stock of the third quarter.

Savings rate: 50%

I went off the rails with spending this summer. The occurrence itself isn’t unique, but the sheer magnitude of it is. Not good.

In case anyone wondered why I reduced my savings rate target to 50% this year (from 60% the year before), it’s because I’m overpaying the mortgage a little more than usual.

The tracker deal I got late last year has been working out alright so far with the Brexit uncertainty keeping the BoE rate low, and I’ve been making hay in this sunshine by utilising the unlimited overpayment feature. There isn’t much to invest in anyway at present, with the markets at record highs and the pound not that far off record lows.

Anyhow, the year to date savings rate is still 57%, so Pass.

3q19-savings-rate

Property wealth: reduce the mortgage by £45k

In progress. Might not happen, but we’ll see…

Pension wealth: use up all available allowance

Done.

Financial wealth: Emergency Fund & Freedom Fund

The Emergency Fund is full, and the ISA allowance is now fully utilised and invested.

My portfolio distribution is beginning to resemble what I’d like it to be…

3q19-pension

… and my Freedom Fund is slowly catching up with the overall progress to financial independence. I’ll need this pot of money to live on before I’m old enough to draw my pension, so it’s kinda important 🙃.

3q19-progress

The Freedom Fund is 60% world equity, 20% government bonds, 10% property securities and 10% gold. It’s not very adventurous, I know, but if I’m going to retire in 5 to 6 years, then the investment profile of this interim stash needs to be pretty tame. It’s different with my pension. I won’t be able to access it for a while still, and so I can afford to take more risk there.

Tax: pay no more than £47k of income tax in 2018/19 tax year

Done.

Stocktake: Q2 2019

Cakes
His country gods and Vesta then adores
With cakes and incense, and their aid implores.

What’s new?

New job, new house, new life…. Or at least that’s what it feels like.

I stopped watching the news. Because: depressing. And I’m behind on my portfolio tracking. Because: plenty of more exciting things to get on with 😉.

Savings rate: 50%

The actual year to date average is 64%. Pass.

Property wealth: reduce the mortgage by £45k

In progress.

Pension wealth: use up all available allowance

Done.

Financial wealth: Emergency Fund & Freedom Fund

The Emergency Fund is full at £30k.

I haven’t used up the ISA allowance in a sense that I haven’t transferred the cash into the S&S ISA yet, but I have the cash set aside for that.

Tax: pay no more than £47k of income tax in 2018/19 tax year

Will be paying £32k this year. Woohoo!

Stocktake: Q1 2019

Welcome to Year 4 of my quest for financial independence.

What’s new?

The featured image above was going to be my reaction to the Brexit day, which has now been deferred, but given how that gods forsaken process has been going so far, I believe the visual is still appropriate.

I’ve changed jobs. Some said I was crazy to resign a few months before the Brexit Day (ROFL), but it could not wait. I might explain in a different post someday, or maybe not. Probably not.

Anyway. Let’s see how I’m tracking against my 2019 goals so far.

Savings rate: 50%

The actual year to date average is 69%. Pass.

Property wealth: reduce the mortgage by £45k

This one is a stretch goal. We’ll see.

Pension wealth: use up all available allowance

Done.

Financial wealth: Emergency Fund & Freedom Fund

The Emergency Fund is at the level where I want it to be.

I have the money set aside to deposit into the ISA, but haven’t done it yet. Because: those fuckwits Hargreaves Lansdown. I’m currently having a bit of a dispute with them with regards to a matter that relates to their complete and utter incompetence. I haven’t decided whether to accept their offer for resolving the complaint or to wait for the ombudsman.

Tax: pay no more than £47k of income tax in 2017/18 tax year

Done.

Rental DIY Step 1: Find a Tenant

The quarters of the sev’ral chiefs they show’d;
Here Phoenix, here Achilles, made abode;
Here join’d the battles; there the navy rode.

For those who missed don’t give a shit about the latest update from my personal life, I’m moving in with my other half, who owns a house out in the sticks. Surrey – brace yourself – here I come! 😉

And so it happens that I’ve become an accidental member of the landlord class.

I’ve been reading this property blog, and I like it. One gets a distinct impression the author doesn’t have much time for high street estate agents. He thinks they rely on Rightmove and a busy rentals market, and little else. And their fees are extortionate.

I agree.

Having considered taking the conventional approach, which involved having two high street estate agents come ’round for a rental valuation, I’ve decided to do it myself and use an online agency instead. The fees that the high street guys and gals were proposing to charge me beggar belief, but what really put me off what their refusal to fuck off after the tenant is found, referenced and settled.

I agree that it’s fair, in principle, to charge a fee for a property management service. But if there is no ongoing management service, then the transaction should be simple – they find me a tenant, I pay them, and then they leave me and the tenant in peace.

The agents I spoke with didn’t want to hear of it. In addition to me paying them between 11% and 9% of my gross annual rent for putting a tenant in place, they wanted to continue to stick around to collect the rent (via a direct debit from the tenant’s account) before paying it on to me later, and to charge me again each time a rental agreement expired. Say you sign up a tenant for a year, and after the year is up they want to stay for another year. Then I’d pay the same fee again for the so-called “renewal”! Based on an annual rent of £25,000, that’s a 2,500 for nothing. Literally. Because: once the Assured Shorthold Tenancy Agreement expires, there’s no legal requirement to do anything at all. Because: it automatically rolls into a Periodic Tenancy.

So yeah, I went the DIY route. I had to use an online outfit to post my ad on Rightmove and such, but only because Rightmove, Zoopla, et al don’t do business with individuals. Instead of the £2,500 plus sundries I paid just over £100, which included a Rightmove premium listing. And I had to fork out £26 for a set of iPhone camera lenses on Amazon. Because: wide angle photography.

It took 6 days and 4 viewings to find a tenant. I didn’t go for the maximum rent that the high street agent valuations suggested. Pricing it at mid-point in their range allowed me to pick the tenant I wanted from the 3 offers received. It still gives me a pre-tax rental yield on cash invested in home equity (i.e. not the total property value) of 8.6%, which isn’t bad at all. Also, the tenant signed up for 2 years, which hopefully means less hassle by way of not having to re-advertise in 12 months.

As for the rental agreement, I used the Model Agreement provided by the Ministry of Housing, Communities and Local Government. It doesn’t appear to be updated for GDPR, but who cares. The IO registration that’s required of all private landlords is ridiculous anyway, and the repercussions are zilch.

Oh, and the just in case anyone needs practical advice on renting a property, the Property Investment Project blog is a great starting point. The author sounds like a reasonable landlord, who takes it all seriously.

It’s a Tracker!

Who dare not give, and ev’n refuse to lend
To their poor kindred, or a wanting friend.

I remortgaged in October. It’s a tracker. Factoring in the expected BoE interest rate rises over the coming two years, it’s very obvious that I’ve gone for the most expensive of the four options I looked at. And no, I’m not addled.

Since the beginning of October 2018, when I signed on the dotted line, the number and likelihood of BoE rate hikes have been revised down 😀 , albeit I suspect not enough to materially alter the numbers in my mortgage comparison spreadsheet. Because: Brexit uncertainty is grinding the economy to a halt.

Here’s the rest of my thinking:

  1. Assuming the Parliament does not pass Mrs May’s deal, and assuming a two-year time horizon:
    • If there’s a No Deal Brexit, I’m betting on a recession. The BoE will dare not raise the rates. Tracker = good call.
    • Even if it does dare, it won’t be by much. The pound will crash in the short term, so the global stock markets will be expensive for a British investor to buy into, and the best use for my money will be to overpay the mortgage. That’s when unlimited overpayments on my tracker will come in handy. Tracker = good call.
    • If there’s a second referendum and No Brexit, the rates will probably rise, albeit the BoE is likely to proceed with caution. But the pound will rally, which will make me very happy, as the global markets will be cheap again for any Earned O’the Mighty Pound. Hence any pain from my mortgage will be mitigated by a share-buying opportunity, plus the general happiness of their not being a Brexit. Tracker = bad call, but I don’t care.
    • If there’s a delay in Article 50, while the Tories sort out their shit, the most likely outcome is that the pound rallies a bit, but rates don’t rise until there’s clarity. Tracker = good call.
    • If there’s a Corbyn government and a delay in Article 50, my pension allowance and ISA allowance are likely to be slashed and taxes increased. The pound will probably stay about the same or fall a little, and there’s likely to be a further slowdown in the economy, if not a recession. Because: more uncertainty and the expectation of the same shit charade we’ve all been watching for two years now. So: (1) With less ISA and Pension allowance and higher taxes I’d have even more incentive to overpay the mortgage, and (2) I recon the BoE would probably put any rate increases on hold. Tracker = good call.
  2. Assuming the Parliament passes Mrs May’s deal (unlikely):
    • The pound will rally (How much? Nobody knows), which will put a lid on inflation and somewhat mitigate the need for the BoE to raise interest rates. Also, the current Brexit-induced stockpiles of inventory will have to be used up/ sold down, so the GDP numbers won’t be splendid (again, the BoE won’t be in a rush to raise interest rates immediately).
    • Eventually the rates will increase, and, assuming I make no overpayments, I’ll lose out on a tracker vs the best-buy two-year fix I could have had. However, I’ll be renting out my digs shortly, so some of the interest will be tax deductible, and that will take some bite out of any (eventual) movements in interest rates. Tracker = not great, but not a disaster, either.

It appears to me that there’s more on the upside than on the downside here. What do you think?

Stocktake: Q4 2018

No “New Year / New Me” here. I’ll be the same honest asshole at 12:01 that I was at 11:59.

Happy New Year, folks. Albeit if the old year was in any way different from the new, would we still require a massive piss-up to mark the occasion?

What’s new?

Virtually everything, or at least that’s what it feels like. The times they are a-changin’. It’s mostly personal, but also work, albeit that is also kinda personal, in a way.

I’ve provisionally consented to live in sin with my other half. Meaning: Ho’s Keep is going to go on the rentals market shortly. So technically, Ho&Co are going into the BTL, at what appears to be a rather bad time for that sort of thing. But anyway… move over, Fergus and Judith.

Savings rate: 60%

The actual year to date average is 62%. Pass.

4q18-savings-rate

I managed to pull my shit together in November and undo some of the damage I had inflicted on my finances in summer.

Property wealth: overpay mortgage by £20k

Didn’t happen. Barely managed £8.4k, so it’s a fail, I’m afraid.

Pension wealth: use up all available allowance

Done. The total wealth distribution is coming closer to where I want to be, albeit my Freedom Fund requires some work. Evidently.

4q18-pension

Progress towards The Day is nothing to write home about (and hence the writing is relegated to the blogosphere 😉 ).

4q18-progress

Total net worth is up (good)…

4q18-total

… in spite of the fookin’ markets, which have taken a bite out of my savings (bad). Check this out:4q18-saving-hard.png

Ya, ya, I know, cheap shares, a buying opportunity, ya seen nothing yet young’un. I know. I’ve been waiting for this. And yet, it fookin’ hurts’ ok? I’ve been saving and hoping, and it’s fucked up, and I don’t like it.

I do like cheap shares, though 😉 .

Financial wealth: Emergency Fund & Freedom Fund

The goal was to top up the Emergency Fund, which I have finally managed to achieve. 😀 It’s a pass, people, it’s a fookin’ pass!

Continue with regular savings into the S&S ISA. Pass.

Tax: pay no more than £25k of income tax in 2017/18 tax year

A complete and utter fail.

Where Is the Snowball?

It’s lovely outside. Unseasonably warm for mid-October and sunny. 700,000 people in London are marching against Brexit. I’m in bed with a nasty cold, my new love interest is in France having fun without me, and I’m in a crabby mood. If you started reading this post today looking for some cheer, you needn’t read any further. Honestly.

As for the rest of you…. read on.

When one finds oneself spending a day in bed because of two zillion common cold virus particles lodged rent free in one’s respiratory tract, the usual pastime is to mess about with net worth spreadsheets, with a view of drawing some new cool graphs. So that’s what I’ve been doing today.

The results are, frankly, discouraging.

No snowball

I thought it would be nice to see where I’m at in my FI journey. Y’know, escaping the camp, breaking free, telling The Man to engage in sexual self-gratification, aka gaining financial independence and retiring. Below are two of the graphs I made. The first shows how I’m tracking in each category of wealth that I need to accumulate before I pull the plug on work. It doesn’t look too bad, right? I’m a bit behind with my FIRE Fund, but Pension and Mortgage Repayment are approaching the midway milestone, ya?

Then I thought I’d do one of those total progress graphs I’ve seen on other people’s blogs, and … what the fuck, I’m not even halfway there??!!

What bullshit is this? This can’t be right.

But I’ve looked at the numbers, and it is right. Ok, so far I’ve only spent 3.5 years actively trying to become financially independent through a combination of saving and investing, I did plan for the whole process to take me about 10 years in total – hence the 3652 days – but somehow I thought I’d be way ahead of the plan at this point. And here’s why being 40% there is not good enough: because I didn’t start at zero! I only gained 25% – a quarter of the way! – in 3.5 years, which implies that, all things being equal, I’m more than 8 years away from my goal.

A young Apollo, golden-haired,
Stands dreaming on the verge of strife.
Magnificently unprepared
For the long littleness of life.

Although Brooke didn’t have the FI crowd in mind when he wrote this, it fits us perfectly. The road to financial freedom is – by far – not a victory march, but a long wearing trudge up a seemingly never-ending hill.

And there is no snowball, ok? Produce evidence, you say? My pleasure:

3q18-investing-saving

We’ve all seen calculations that demonstrate how in a regular investment scenario where returns are re-invested, each year income from investments contributes an increasing proportion of portfolio growth. Well, let’s just say this hasn’t been my experience. My total net worth is growing because I’m chucking everything I have at it. The markets… not so much.

If you’re investing steadily for 25 years into a market that’s producing a fairly constant return, it might work – on the average. But real markets don’t produce constant returns, market bull runs last longer than bear slumps, and if I wait 25 years for the markets to do their magic, then I’ll be retiring at 65! That’s not what I’d call early.

Fookin’ taxes

I should’ve mentioned at the start: one of the reasons for my crabby mood is that I paid my tax today. Could’ve waited until January. Really, I should’ve waited until January, but I hate owing money. It puts me on edge – must be one of the shit money “values” I got from my financially illiterate upbringing.

We all have unconscious value-based money beliefs, and they’re like herpes: once you’ve got them, it’s for life[1]. Logically, I know very well that it’s stupid to not take the opportunity to borrow from the Tax Man interest-free for 4 months whilst paying interest on the mortgage, but the little crappy part of my reptilian brain that’s been infused with shitty financial dogmas by my mother (no, I don’t want to talk about that right now) immediately starts nagging me about it being dishonourable, immoral even, to not pay a debt as soon as may be.

And I’m like, “Are you fucking serious? It’s the fucking HMRC we’re talking about! They’ve been borrowing interest-free from me for years. And remember that one time when I owed them money because they forgot to tell me to do the SA tax return when my income hit the threshold? They made me pay interest on the tax I owed, even though the entire mess was due to their oversight, and they tried to fine me, made me go through a stupid appeals process before waiving the fine sans an apology!” And my reptilian brain is like, “You should always pay your debts.” Then I start to lose it: “Who do you think I am, you dipshit, a fucking Lannister?”

But the reptilian part of my brain just carries on, “You should pay your debts. You know it.” And then I just can’t cope with it anymore, and think, fuck it, if paying £400 a few months earlier than I have to buys me some peace, then it’s a good investment. And then I pay it.

As you might’ve guessed, I’m not one for stoozing, either 😉 .

 

Notes:

  1. Somehow, weirdly, at this point I feel compelled to clarify that I do not have herpes. 🙂