Stocktake: Q2 2018

On this the hero fix’d an oak in sight, The mark to guide the mariners aright. To bear with this, the seamen stretch their oars; Then round the rock they steer, and seek the former shores.

What’s new?

Another year, another failed relationship.

Thank the gods I’m better at managing my finances than I am at managing my personal life, otherwise it would be a complete effing disaster.

Savings rate: 60%

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

Property wealth: overpay mortgage by £20k

Only managed £5k so far. It’ll take a minor miracle to get to £20k by the end of the year.

Pension wealth: use up all available allowance

I’ve used up all allowance for the 2017/18 tax year. Next year shouldn’t be a problem, if anything, I’ll just clear out my emergency fund again.

Financial wealth: Emergency Fund & Freedom Fund

The Emergency Fund is coming along nicely, for a change, and should be full by the end of the year.

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

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

Nope. Not a chance.

I know I’ll owe the Tax Man money come January, so I haven’t even started filling in the SA tax return. I have a rough idea what I’ll owe, am planning on having the cash to pay it 😉 , but that’s about it for the time being.


Let’s Stop Pissing off Millennials with the Latte Factor


We need to talk about the Latte Factor. That annoyingly undead theory, bordering on ritualistic superstition, that keeps cropping up in money sections of the mainstream press and personal finance blogosphere alike, for no apparent reason save to piss off a generation of young people.

Early retirement cometh neither from the east, nor from the west, nor from the south.
But rather from giving up frivolous expenditure on coffee and such.
Psalm 75: 6-7

If you want to find out the precise amount of money you’ve blown by living as a human in developed world, all you need to do is plug this formula into a spreadsheet

=FV ( [annual interest rate] ÷ 12 , [your age – 18] x 12 , [monthly spend on coffee, magazines, fags, etc.] )

and voilà! Now you know the true extent of the wastefulness you should be regretting. And for the spreadsheet-challenged there are online calculators.

The amount is always staggering, and its computation assumes no transaction costs, no minimum investment limit (£3 can be invested immediately) and a constant real rate of return.

So where are all the No Starbucks millionaires?

I am yet to meet an early retiree who’s achieved financial independence by avoiding takeaway coffee and avocado toast.

Whenever I point this out to the Latte Factor adherents, they’re quick to explain that it’s not meant to be taken literally. No-one is claiming it’s possible to retire merely by quitting Costa Coffee, you understand. It is a metaphor that admonishes us to never underestimate the importance of budgeting.

Well, if it’s a metaphor then someone should send a memo to Tim Gurner. He appears to take it literally, poor soul.

Dumb financial decisions are the province of the young

When you’re young, doing dumb shit with money is a rite a passage. You get your first job and you’re instantly transformed from a destitute student to a wage-earner with spare cash. Suddenly you can afford the cover charge at clubs, a Sunday paper, takeaway coffee, both avocado toast AND banana bread for breakfast, impulse shopping when the urge overtakes you, and best of all, you don’t have to worry too much about being able to afford it. Because: you’re earning a salary.

I don’t begrudge the millennials their avocado toast any more than I begrudge them their ridiculous lack of grey hair, their freakish metabolisms and stupid flat stomachs. If they want to blow their pay on overpriced granola in Shoreditch, fuck it, it’s their prerogative.

I don’t think they’re much worse – or better – with money than the generations that came before them. They’re just young, and about as financially dumb as I was at their age. And there’s nothing wrong with spending money on processed sugary food for breakfast, really, enjoy you 20-something metabolism while it lasts. Only please recycle the packaging, you know why.

Willpower is a depletable resource

The ego depletion theory has taken a hit recently. Apparently experiments carried out on small batches of hungover Psych students tasked with solving silly computer problems in a lab don’t hold up to statistical scrutiny. Never mind. Larger studies of dieters and smokers facing real life challenges do.

Call it what you want – will depletion or mental fatigue – it’s real. Motivation goes hand in hand with reinforcement, effort requires a reward, and the latter has to be in a form of something enjoyable. Few of us are able to rejoice in Excel spreadsheets with graphs that track our net worth. Just sayin’.

Small regular expenditure adds up, but

It’s not just about what you save, it’s what you do with the savings that counts.

Don’t get me wrong, quitting smoking 9 years ago was one of the best decisions I ever made. I feel better, I am fitter, and I’ll likely live longer. It has also saved me c.£100 per month on fags plus another £100 on Starbucks skim lattes, which I liked to drink while smoking. That’s £2,400 p.a., which is approximately how much two weeks’ kitesurfing in Dakhla costs.

Would I be much richer now had I not been blowing my money away for years before quitting? Unlikely. If I hadn’t spent that money on holidays and Apple gadgets, I would have spent it on Ho’s Keep. The only reason I didn’t buy more or more expensive bricks way back when was because I didn’t have the money.

And this is my main issue with the Latte Factor. It assumes that your goals and priorities have remained constant over time. Which is abject nonsense. None of us are now the same person we were at 19 or even at 29. It surely would be nice to have more money in my pension now, but I didn’t start a UK pension until I was 32. Yes, not starting a pension earlier was indeed a stupid move, but no, quitting smoking earlier would not have increased my pension savings. Because: I didn’t have a pension then.

Waste is never a good thing

Because: the planet.

But putting aside what single-use plastic bottles and styrofoam cups do to the environment, I couldn’t retire on takeaway coffee savings any more than a millennial could by a house by forswearing avocado toast. I believe the correct scientific term for any such notion is bullshit.

Over time we learn and grow

Don’t get me wrong, I’m not crazy about today’s young adults. As a group, they can be both overconfident and amazingly thin-skinned. It’s a rather annoying combination of traits: the first one ensures ample supply of dumbass mockworthy pronouncements, but because of the second one, the poor sods can’t take the mocking. 😉 I hope they grow out of it. Not everything is a personal attack, ok?

Yet I don’t think it’s fair to call the millennials spendy merely because they’re in the process of learning how to use their paychecks and credit cards. Most of us have been there and done the same. So let’s cut them some slack.

10 Years May Not be Enough

The shore that Phoebus has design’d for you, At farther distance lies, conceal’d from view.

I’ve been playing with spreadsheets again, and I’m not liking what they’re telling me, which is that 3652 days may not cut it. It might, but it’s not very likely. My expectations of investment return have been optimistic, and unless we soon have another market crash a’la 2008 followed by a 10-year bull run, come 2025 I may not have enough to retire on.

How much is enough

Nobody knows for sure. Retirement calculators, Monte Carlo simulation and stress testing can give us a reasonable idea, but we don’t really know. Hence we end up using some sort of an estimate, and usually that estimate has an inbuilt layer of fat, just in case.

My estimate is a million in invested assets, including pension, indexed for inflation (December 2015 = 1), and no mortgage. That would give me about £1.9k post-tax income per month – enough to fund my life and leisure in retirement. It’s more money than I spend now, but I’ll need more when I retire. Because: I’ll have more time to travel.

Why this sucks

All that headspace which my work occupies – I need it for personal use. In a recent Banking Standards Board survey 26% of respondents said work had “a negative impact on their health and wellbeing”. I’m no wimp, in fact I don’t have much patience for weakness, but I’m getting sick and tired of being knackered all the moverloving time.

I want to retire so I that can slow down, take more trains and fewer planes. I want to know what trees are called, where they come from, and which tree families they belong to. Ditto rocks. I want to use my Natural History Museum membership more, I want to go to movies when I feel like it, not when I have time, I want to read more books, see more of this weird and beautiful planet we live on, maybe learn a couple more languages, or at least improve the ones I’ve tried learning in the past, my German sucks, for example. I want to kitesurf, sail, swim, walk, cycle, climb, discover. I need more time to do things, and I want to take my time doing them. I don’t want to get home at 3am from a weekend away and have to be at work by 9am the following morning.

What to do, what to do

Reducing my working hours is not an option in my role, my contractual 7 hours a week are a joke anyway, since I’m paid for results and not the time spent achieving them. Changing employers would solve nothing, I’ve tried that a couple of times before. I can’t be self-employed; as much as I’d like to dodge some tax and NI, it’s not possible in my industry in my line of work. So what’s left is biting the bullet – hard – and hanging on ’till it’s over.

Here’s what I’m not prepared to do:

  1. Increase my savings rate. There’s nothing else I can cut without turning my life into a miserly existence. I am aware that there are people with lower discretionary spending budgets than mine. It sucks to be them, and it would suck to be me if I were one of them.
  2. Take in a lodger. I had a lodger, and I didn’t like it. £7,500 a year tax free sounds like a good deal until you consider the downsides. I guess one gets used to not having to share.
  3. Matched betting. Again, I’ve tried it, it wasn’t for me, although it should be noted that it works for some people.
  4. Any “side hustle” that requires effort to generate income at an hourly rate that’s lower than what my job pays me, and particularly Kindle eBooks. I like books, and I find the idea of writing low quality ebooks to flog on Amazon almost … upsetting.

Having said this, I’d make one exception to expending effort at a low rate per hour, and that is acting as an extra in a Bond film.

Story time

Back in the day, when I was young and good looking, the company I worked for had a leadership development programme[1], which involved, among other things, an international secondment. I was one of two people selected from our office. For the secondment part I could pick any international office, provided they had a vacancy and agreed to take me. At the time, aside from the usual suspects, being our branches in global financial centres, there were vacancies the Bahamas and the Cayman Islands.

I, being a boring idiot with no imagination, went to a proper city with a financial services industry, whereas my colleague… didn’t. He went to the Bahamas, and promptly started flooding my fucking inbox and later facebook feed with photos of sunny beaches and pool parties. Also, boat parties[2]. Then when Casino Royale came to the Bahamas to film their beach scenes, he signed up as an extra, the animal, and got paid to play frisbee in the water with some girls in bikinis.

So, ok, having thought about it, maybe I’d do it too. Even if I were retired at the time, I’d make an exception.

Going back to spreadsheets

I’ve looked at it this way and that, and the earliest I can repay the mortgage is 2023. That assumes that I don’t get sacked from my job, use all my pension allowance and ISA allowance, and don’t invest anything[3] in taxable accounts, except my portfolio allocation to gold ETFs, which could be about £6k p.a.

Given that I want to retire with 4 years’ worth of expenses in cash outside of ISA and pension, and given that I’d have to live on that cash plus the ISA until I can access my pension… it’s tight. And I haven’t even begun thinking about whether or not I should continue paying NI contributions post-FIRE in hopes of maybe someday getting more by way of state pension.

And then there’s the joker – am I or am I not going to buy a boat? It’s a cheap way to travel near, but it’s a fixed cost at home when you’re away traveling far. Do I want it enough to work 2 years longer than I’d do otherwise? Am I sure that I don’t want it enough so I could say no to it and never regret it? Also, if I bought a boat and then things went south later, I could rent out my place and go live on the boat. If I couldn’t afford moorings in the UK, I could take it to France or Holland. The Med is tricky in summer, but winter is usually fine, and there’s always Turkey.

So I can laugh at RIT changing his delivery date every 9 months, but my own cojones are an untested quantity. There’s nothing safe about a 4% safe withdrawal rate. I’m aiming for 2.5%, and it looks like time ain’t on my side.


  1. I know. It sounds like cringey ENTJ bullshit with a side of “how to lick your boss’s ass”, but really for the most part it wasn’t like that… it was quite good, actually. I guess every experience is what you make of it 😉
  2. How he found time to get any work done is, to this day, unknown.
  3. SAYE shares don’t count. I can’t do anything about it other than to not participate, which would be akin to leaving free money on the table.

Death and Taxes

Get place and wealth, if possible with grace; if not, by any means get wealth and place.

They say I won’t be able to take it with me. I say it’s a rebuttable presumption, and even so, I hope it will be a few years yet before the disposition of my assets after my demise occupies more of my headspace than trying to figure out how they’re going to turn back that dead ice dragon in Game of Thrones. Surely they’re not going to perma-kill Viserion, right? … Right?


The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.

— Jean-Baptiste Colbert

I’ve been lately contemplating on tax. This year my income tax and NI will come to £37k or thereabouts, which is more than double the amount of my annual expense budget, including mortgage interest. Add to this number the council tax, VAT, IPT, alcohol duty, airport taxes and import duties, and it soon becomes apparent that I render unto Caesar three times more than I expend on my own worldly pleasures.

This begs the question: what the fuck?

And why, even with me paying this amount of tax, do I keep hearing about the country’s finances being a mess, teachers, doctors and policemen overworked and underpaid, and don’t even start me on the infrastructure. How do Normandy and Brittany afford their acres of marina moorings – mostly public property owned by local communes – when my council in London has to economise on garbage removal?

The Scandinavian model

No discussion about income tax goes far without some social justice warrior pointing out that top marginal tax rates are higher in Scandinavia. If we only taxed the rich[1] more, then all would be well and good.

I find it funny hearing people, some of whom haven’t even been to Scandinavia, speak of The Scandinavian Tax System as if they knew what they’re talking about. Also, Scandinavia is a geographic region – not a nation. Here’s a crash course: Norwegians can be eccentric at times; they mostly keep to themselves. Danes are a little fatter and louder than the rest, but generally good fun. Swedes are alright, and just so we’re clear, Finland and Iceland are not in Scandinavia.

Going back to tax, personal income tax rates in Sweden and Denmark are higher than in the UK, and the Norwegian top marginal rate is 0.1% lower than in the UK. Yet all three Scandinavian countries raise significantly more tax revenue – both as a percentage of the GDP and the share of the aggregate tax take – from individual income taxes than the UK does. That is because tax rates are not the most important feature of these countries’ tax systems. Their tax takes are high because their taxes are quite flat: they tax most people at high rates, not just the taxpayers in the top income decile. Below are some numbers from OECD Data and OECD Stats that help illustrate this point:

  1. Top marginal effective income tax rate including employee national insurance / social security:
    Norway Sweden Denmark United Kingdom[2]
    % of income 46.9% 60.1% 55.8% 47.0%
  2. Tax revenue raised from individual income and payroll taxes, including national insurance / social security:
    Norway Sweden Denmark United Kingdom
    % of GDP 21.2% 27.9% 24.7% 15.3%
    % of total tax take 55.7% 63.3% 53.8% 46.2%
  3. The level of income at which the top marginal tax rate kicks in:
    Norway Sweden Denmark United Kingdom
    Times the average wage 1.6 times 1.5 times 1.2 times 4.1 times

So the next time you hear someone pipe up about taxing the rich like they do in Scandinavia, please feel free to point out that if the UK were to adopt, say, the Danish model, this would mean that all income over £43,885 (1.2 times the average wage of £36,571) would be taxed at the top rate of 55.8%. There’d be no tax free allowance, income up to £5,400 would be taxed at 8%, after that the basic tax rate would be about 40%. Also, Denmark is the only Scandinavian country with inheritance tax; spouses are exempt, by everyone else pays a flat 15% on any inherited property over £33,500.

I’m not suggesting that if Britain adopted the Danish (or Swedish, or Norwegian) tax rules, that would be a bad thing. The country needs a broader tax base. And we’d get a lot in return – free universities, free healthcare, very heavily subsidised childcare and aged care for most, free for those who pass the means test. I could get decent and affordable moorings for my retirement yacht … it’s preferable to an allotment.

No welfare state without a welfare society

However, in practice, the Scandinavian model may be difficult to replicate. Henrik Kleven in his 2014 paper demonstrates what we kinda already knew. Social attitudes matter. In Sweden the rich, however defined, don’t to support the welfare state. The society pays for its own welfare through taxation: everyone pays a lot, and those who can afford to pay more do so, generally without excessive hissing.

Socialism, just like democracy, works better on a small scale; when it comes to spreading the wealth, it helps to have a relatively small, homogenous population. People are happy to chip in to help out us, not so much them. Social welfare without social cohesion is a real hard sell – that’s one of the reasons why polarising events (see: Brexit) aren’t good for the welfare state, nor are polarising politicians (see: Corbyn).

The Starbucks subsidy

When it comes to personal taxes, the UK is running concentration risk: 50% of income earners pay 90% of all income tax, 40% pay none, and 1% – about three hundred thousand people with incomes over £160,000 a year – are responsible for 28% of the tax bill. Three hundred thousand people is the population of Wandsworth.

As for the 40% who pay no income tax at all, I submit it as my opinion that it’s a mistake to have working people pay no income tax. All that it accomplishes is cut the payroll bill for low wage employers, e.g. in hospitality and catering. I call it the Starbucks subsidy. People work for net pay, not gross, so personal income tax is largely borne by the employer, but for those who distrust the invisible hand of the market, there’s a tool called the minimum wage. It should be set at such a level that a person with a job is able to both live himself and contribute towards supporting the young, the old, the unlucky, and those who are unwell.

There also should be a link between public spending and people’s own purses. How else can we claim that we as a society together decide how our money is spent? Anything other than this is merely a gimme-more-of-yours, which is both unhealthy and unsustainable.

The wage gap

It all boils down to one main question: can we have a welfare state with a low-wage economy? I say we cannot. One or the other has to give. By OECD standards, the UK’s average wage is not that low. And yet 40% of people don’t earn enough to pay income tax. If we’re keen on keeping the welfare state intact, then the median wage needs to come closer to the mean. The minimum wage has to go up, and all working people have to start paying tax.

Would there be job losses? Yes. But would it really be such a bad thing? At least then we’d  be able to identify the people in need of re-trainign and redeployment. Perhaps then the productivity would finally begin to improve. The UK has had a productivity problem since the 50s, and any economist will tell you that productivity growth is the only way of ensuring long-term prosperity.


Widening the tax base is doubly important now that we’ve effectively terminated the lease and served an eviction notice to foreign capitalists who, until Brexit, have been using Britain to gain access the European single market. This New York Times article explains why, but if you don’t fancy reading it, here’s the gist:

The UK’s favorable financial and legal environment helped draw foreign capital. But it was access to the EU that allowed this to happen on a large scale. Since the early 1980s, leading global corporations have located plants and offices in Britain, sometimes taking over British businesses in the process, using British soil as a terrestrial aircraft carrier to assault the single European market. Trade figures for the past three decades show with brutal clarity how dependent the UK is on this aircraft carrier status, and how much it stands to lose if a full Brexit is carried out.

In the City of London quite a few of the 300,000 people who pay 28% of income tax depend on foreign – mostly American – capital. Some of these people are foreign-born[3], and some are not. Regardless of their place of birth or the location of their client base, they pay taxes in the UK, which help support the NHS and other public goods.

Pos-Brexit, their jobs will not move to the continent immediately: people and their personal situations are complex, companies want to retain good performers, also, there aren’t enough people in the EU-27 with the right skills to take them. But as people relocate, resign and retire, eventually these jobs will follow the capital which they service, and so will the tax revenue. Britain needs a plan on how it’s going to replace this revenue. Broadening the tax base could be an option, if only we had a political party with the cojones to do it.


  1. the rich /ðə rɪtʃ/ noun [plural] those who earn more than I do.

  2. For simplicity’s sake, let’s ignore the anomaly of the 62% effective marginal tax rate on incomes between £100,000 and £120,000.

  3. immigrant /ˈɪmɪɡr(ə)nt/ noun  a foreigner living in Great Britain. As distinguished from expat.
    expat /ɛksˈpat/ noun  a Briton who lives in a foreign country.

Stocktake: Q1 2018

And while he rolls his eyes around the plain In quest of Turnus, whom he seeks in vain, He views th’ unguarded city from afar, In careless quiet, and secure of war.

What’s new?

Stephen Hawking is dead.

Also, there will be no special Brexit deal for the City. To be honest, we knew that – I spent this past year getting ready for it. I thought I’d get used to it, my anger would morph into something like acceptance. It hasn’t happened.

Granted, the manner in which the so-called process is carrying on isn’t helping. It’s like watching a slow motion train wreck. The EU are asking Britain to tell them what Britain wants. Britain is terribly sorry, but is unable to oblige: apart from a general preference for eating cake and having it, Britain hasn’t yet settled on what it wants, specifically. Can someone please send our government a memo reminding them of the seven habits of highly effective people? Number one: begin with a fucking end in mind.

Also, I don’t have any more carried forward pension allowance, so my tax rate is going up, just in time to start paying for this clusterfuck that our gullible xenophobic half got us all into. My pleasure.

Savings rate: 60%

The actual year to date average is 73%. Let’s hope it lasts 😉

Property wealth: overpay mortgage by £20k

Not yet.

Pension wealth: use up all available allowance


Financial wealth: Emergency Fund & Freedom Fund

Emergency Fund: not yet, but there’s hope.

Freedom Fund (aka S&S ISA): ongoing.

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

Fail. It’s going to be more like £30k+

No new stuff year

I’ve decided that I don’t need any more stuff this year, and am trying to restrain myself from buying anything non-perishable. I’ll admit, it’s harder than I thought.