March Income and Expenses

So its that time of the month again when my salary hits and it’s time to review what I have spent my hard earned cash on, and where I could have done better. It’s the last gasp of the tax year, so let’s see what has happened.

Income

So this month’s salary was padded out with my bonus…. rather nice if I say so myself!

This really is a major bonus (pun intended) to my ambitions. The entire delta of my post tax income against my normal income is going straight into my pension (unfortunately my company won’t put it straight into my pension) – I am not going to update my savings rate based on this one off as it does seem to warp things.

It will have an effect on my retirement plans as it will add a large chunk (possibly >10% depending on tax relief etc.) into my pension right before the end of year.  This has the added bonus of when I get round to doing my tax return (probably in May), then I will get a nice refund from HMRC to pay back for the misery they caused in December. Needless to say all of that refund will go into either ISA (most likely my other half’s) or Pension (less likely as I want some liquidity). The bonus that keeps on giving!

This really builds my positive feeling for the coming year – another large step forward (albeit in my least flexible pot), but means my networth for the year should have gone up significantly.

As always I don’t include any of my personal ISA dividends in my income statement, that is just part of the growth of those portfolios. The income thrown off by my other half is included, however this is an incredibly small amount at present (less than 1% of income) so it is more of a statistical error!

So, a nice bonus bump (although possibly bad market timing but best to be in the market), with the regular salary ticking along (no pay rise), and my other half’s ISA slowly adding further contributions.

Expenses

So this months expenses have been warped by a ski holiday earlier in the month. I foot the bill up front and as my visa bill trickles in we can divide up the costs across the group and I will get the funds back. This is annoying on one way – the money would have gone into my ISA just before year end and helped to increase that further as my last contributions. On the plus side it all went on my reward card, so I will get points. When I do get the money back from the other members of the group, that will all go into an ISA, so another way of protecting my savings, but this does mean it is not really a fair reflection on my holiday costs over the year.

Item Notes Amount
Things I choose not to avoid* Mortgage, Insurance, shared bills etc. – yes, we could move somewhere cheaper, not have insurance, reduce our bills a bit and so on, but we are where we are. 43%
Groceries All the food and other stuff needed for home  2%
Alcohol for home Home alcohol consumption only  0%
Bicycles / Car related Any costs related to either the bikes or the car  0%
Alcohol Out Generally, its the pub….  1%
Eating Out I include purchased lunches in this as well as meals out etc.  2%
Other My catch all for anything I may have missed….  1%
Holidays Any spending related to holidays, flights etc. 38%
Savings Anything left over! This includes money into ISAs, mortgage payments and non relief pension contributions. My company pension comes out before it hits my bank account so isn’t included, nor do I include the “top up” of money when my money goes into my personal pension (i.e. I put in £100, I register it as £100, not the £125 that gets credited in my pension) 13%

 

I will confess.. The 0% on alcohol at home whilst statistically correct, I didn’t spend £0. I did have to buy a few more beers for the end of the 6 nations. Still – the huge spend on booze back in February is mostly intact and I would be surprised if it doesn’t last well into May, but that will depend on the weather, a few nice glasses of wine out in the sun and it will go fast!

So a lower savings rate than I would have liked, although a little artificial. If I were to take only my share of the bills on travel then I would be up by a lot more than this, so it isn’t as all doom and gloom as it appears at first glance. It is also artificial as I still contributed the same amount to the other ISAs and Pensions via the flex in my Emergency Fund.

So how did I do on my dry run for this month?

Dry run 1: Savings.

Each month I will aim to put into my current ISA the same amount that I plan to put into the Go T’ Pub ISA and see if it is realistic. With some holiday booked and a few other challenges I am already aware of this is going to be a real challenge, but its important to setup for success as best I can

FAIL. Had I not gone on holiday then this would have been a success but I did, and so I failed. Miserably.

Dry run 2: Reduce my alcohol expenses.

This needs to average out over the months, as I tend to buy when the offers are on so it comes in peaks and troughs. I am going to aim to reduce my “Alcohol at home” budget by 25%. This really is going to be a challenge as the whisky collection has been hit hard over the Christmas break and so I do need to buy some more soon(ish) which will hurt.

PASS. So I spent more on going out on alcohol this month for a variety of reasons however still low on rolling budget this year – the plus side is that a number of these nights out were company sponsored 🙂

Dry run 3: Reduce my “Other” expenses.

This is going to be a lot tougher one as these really are other things (e.g. the Weekend FT, a taxi home from town etc.). There was a large one off expense in this category this year which won’t be repeated so this is a little bit of a cheat, but you never know what the future holds, so I will still focus on reducing this.

PASS. This I will class as a success as apart from a few taxis (shock horror – how dare I when I am not FI!) home in an evening, it was pretty good.

* This covers a number of things that I would class as essential for me. Yes, I could move to somewhere cheaper to reduce the mortgage (which in turn would reduce the insurance I have to pay), yes I could reduce my bills by switching energy supplier etc. but it comes down to what I am happy with. There are a few other things in there that are classified as essential that others may object, and so I have just lumped it into there.

 

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2017-2018 (Tax) Year ahead and Goals

So as I continue to be an outlier in the personal finance space, and do everything based on the tax year, it’s time for me to start thinking about what I want to do in the coming financial year. I haven’t ever bothered putting down goals like this before, so this is quite a new one for me, so be gentle 🙂

It did occur to me the other day that I may be missing a trick as this combines the year end and tax side of things to the same time, so maybe I wont get as many posts out of it, but who knows.

In terms of looking forward to the new (tax) year, I am very optimistic. I think it is going to be an absolute corker of a year, but not without some challenges. Why am I so positive?

  1. Work. I continue to be employed and I am throwing myself into trying to setup for my next promotion. This is a multi-year task / investment and my most optimistic guess is that I will get there by 2020. Like investing, it takes patience and time to get there, but the rewards will be worth it. This will mean my time is even more taken up by work, but it’s an investment I am willing to make
  2. Pay rise. Ok, so I got a 0% pay rise this year. The silver lining is that this month I finish paying back taxes from the 14/15 year so I will actually get a reasonable increase in take home pay from that which will make things a little easier
  3. Assets / Net Worth. The last year was truly spectacular, however this was not due to any particular skill on my side really, but mainly due to overall rising market conditions. This makes me positive on two counts. Firstly, if markets continue to rise (I doubt) then my investments will continue to go up (and hopefully my dividends). Happy days! Secondly, if markets crash, I will be buying even more for my money in the knowledge that at some point they will go up again. Happy days again
  4. Increasing dividends. My other half’s portfolio will continue to throw out increasingly larger dividends which will allow me to pay more and more off the mortgage, or reinvest further. Already it is really starting to throw in some non negligible additional income so this really is starting to be beneficial
  5. Go T’ Pub Portfolio. I am really super excited for this to get started, especially having seen the income grow from my other half’s portfolio I really can’t wait to see this starting to kick out some serious cash. If I can get it to cover my yearly ski trip I will be really chuffed!
  6. Tax Refund. As I am going to put my entire bonus into my pension before the tax year end (assuming it arrives in my March pay!), this means once I have filed my tax return I will get another bonus on it in the form of tax rebate further in the year. This will go straight into my other half’s ISA and further build that income stream

So I have lots of reasons to be positive, and also I think positiveness breeds positiveness. It would be easy for me to look at my dry run goals and say I have failed on them (pending March update and reveal, maybe not), what is the point of even trying and drown myself in a sea of cheap lager and re-runs of Dads Army (or something similar, take your pick). Rubbish I say – look on the positive, I know this should be possible, it will be short term pain potentially, but then I may get a quarterly shop paid for in dividends. Or that trickle of wine will slowly grow in to a full blown river 🙂

With that in mind I started noting down a bunch of goals to come back to and fill out exactly what I would target on them and how to measure them. As I started writing up all the different goals (all financial), it became very clear that a lot of these are really rather similar – increasing my ISA values, reducing my mortgage, increasing my net worth etc. etc. They all boiled down in effect to one thing only.

My Savings Rate.

Yes I can pay down the mortgage or put more in to ISAs or pension, but that is only possible based on the savings rate. Why say I will over pay X on the mortgage and put Y into an ISA. Lets just go back to there is only one target.

I decided that I would put three levels for the goal:

  1. Base. This is the minimum – so what I should hit if I don’t change anything at all, anything below would be an abject failure!
  2. Goal. This is what I would like to achieve, what most would put down as their standard goal, and whilst a challenge shouldn’t be impossible
  3. Stretch. This one really should be something that pushes and hurts to try and achieve, but will have major impact if successful

Goal: Savings rate

My average savings rate over the last year or so has been pretty lousy – I can justify this due to some personal circumstances that has meant I haven’t always been able to plan as well as I would normally, and some special holidays and some unexpected purchases, but there is no getting away from it. If you want to FIRE you need a high savings rate. What I would say is this savings rate excludes my salary sacrifice into my company pension, and the tax uplift I get when money goes into my personal pension, hence it looks lower than it actually is.

I won’t include any bonus payments in this (even though they will go straight into my pension), nor will I include any tax refunds (that will go straight into various ISAs), so this is purely on my normal monthly pay.

Why not include them? Simple, the bonus I feel will warp my savings rate, and I wont get a bonus in retirement (I suspect). My overall retirement savings will continue to jump up and knock months off my retirement date from the added savings, but the amount I save / spend out of the regular income will remain there.

Base So, I know what I have spent over the last 18 months and what my savings rate has been, so I am going to set my base at a 20% savings rate average for the year. If I can avoid some unexpected big bills then this shouldn’t be hard but famous last words and all that.

Goal: Achieve a 30% savings rate average over the course of the year. Whilst I know this should, in theory, be easy to do, it is something I have failed to do over the last year – in fact only 3 months was it above this rate. If I can hit it I will be super chuffed!

Stretch: Achieve a 40% savings rate average over the course of the year. So I showed that I could do this as a one off back in January, but that was not normal circumstances. Will I be able to do it over the year? I honestly doubt it with a few big things this year, but this will hopefully drive me towards the higher 30s rather than the lower 30s

When I refer to savings, this is any money that is put away into one of the following:

  • A regular cash reserve fund
  • My ISA
  • My other half’s ISA
  • My Pension
  • Overpaying the mortgage

So… how will I do? Who knows – watch this space to find out!

What about you – what are your plans for the new tax year, if any?

Go T’ Pub – ISA Provider

So as part of getting ready for the Go T’ Pub I wanted to share the thinking behind the broker platform and how I went about selecting it.

My Needs

Firstly, what will I be holding in the portfolio? I am not planning on holding any funds, as I don’t want to have to pay a percentage (even capped) of my portfolio just for them to hold my ‘stash. If I find one that works well in terms of overall cost (I.e. zero cost for purchasing the funds, and a cap of £5 a year then it could win out). This would be the VWRL as an ETF or their Fund equivalent (I may do a lifestyle strategy 80/20 if I really do find a cheaper result). In addition to this I will be holding some Investment Trusts, so it needs to be worth while holding these as well.

Future needs. So I need to also think of the future needs here, and by that I mean what happens if I am not adding new funds, how do I avoid inactivity charges or even prohibitive transfer out fees. Given that I expect this portfolio to build up to a substantive size over time, I am happy to take an upfront hit on a higher charge in the early days for cheaper longer term and not have to have the hassle and cost of a transfer.

Based on this, and the fact that I expect the ISA to grow significantly, I am going to look primarily at Fixed Fee only (I may entertain a %age in case)

So, with that in mind, and utilising the wonderful Monevator reference, lets take a look at the options. These are not in any particular order in case you are wondering!

Interactive Investor

Regular Investment cost: £1.50 (£4.50 per quarter, or £18 per year)

Quarterly Charge of £20 which covers the first 2 trades. This includes the regular saving so in effect per quarter I would get 1 free trade, and 1 just over half price trade. ETF purchases are normally £10 per purchase. I am not expecting to be buying an ETF every single quarter, so this isn’t too appealing.

Total cost per year: £98, plus any costs for more than 4 trades per year (highly unlikely – I would expect at most 2 or 3 for extra cash going in, however a plus if then I have say £500 and it’s a “free” trade as part of the quarterly charge then I may put money to work sooner – worth considering).

Dividend reinvestment is 1% up to a maximum of £10, and it looks like there is an additional £1 charge for any purchase over £10,000 and there is a 1% FX charge for foreign currency (not likely to impact this). Not the cheapest but in large volume that could be helpful to be capped.

They will let me purchase both Fund and ETF for VWRL or LifeStrategy, so based on the costs not a lot of difference as well as various Investment Trusts.

Summary

From an ongoing perspective this seems very compelling to not only allow me to do dividend reinvestment (not sure if I can do that with ETFs) and means I could do either Funds or ETFs as well as my ITs and the ability to then do a relatively low value trade for “free” as part of the charge is quite nice and will be even more use in the future when I start getting larger levels of dividends.

When I stop contributing on a monthly basis at some point in the future means I need to have at least £80 a year in income just to pay for maintaining the ISA – not great

Score: I will rate as an 8 as this seems very attractive option for my needs, the only downside is the ongoing charges – 2 grand just to have the account then. Not great.

Motley Fool Share Dealing Service

I spent a while looking through their costs and offering and this seems to be pretty much identical to to Interactive but with their own branding, so at this point I decided not to dive into too much detail on this.

Summary

Score: I will rate as an 8 as it seems identical to II

Halifax Share Dealing

So there is a regular investment option, but at £2 per month this is higher than what seems to be the normal flat fee of £1.50 but when the dividends are much higher this would be cheaper than the %age cost.

There is an admin charge of £12.50 per year, so cheaper than II / Motley with their £20 per quarter.

Dividend reinvestment is 2% up to a maximum of £12.50 which again is more expensive than the others, so another negative for HSD.

One off share purchase cost of £12.50. A little more expensive than the £10 above, but of course II / Motley you get the “free” trade out of the admin trade, so if I were to do one active trade a quarter then this would tip the balance back to II

Summary

Score: I will rate this as a 6. The cheaper admin charge is a real plus, but the more expensive monthly cost and dividend reinvestment, and the cost of a one of purchase makes this a less favourable option and so a no go.

IWeb

So, a £25 one off opening fee and then no further charges or administration costs.

£5 dealing charge, regardless, but no monthly saving option it would still be £5 – not so great for a regular investment portfolio.

Summary

Score: For the Go T’ Pub ISA whilst building, this is a 5. The costs are an interesting one. Supposing I go for the regular monthly £5 charge, and I invested for 5 years. This would rack up an increase of £210 in charges above say Interactive Investor. It would then take a further 2.5 (ok a bit over) to then get the costs back in admin charges. Of course, this excludes any other trades I may have done over the time (dividend reinvestment?).

I think I would take this had the dividend allowance not been reduced recently as an addition to the ISA area, but for the Go T’ Pub, this is a no .

TD Direct

TD Direct currently provide my actively managed ISA, so are discounted from the Go T’ Pub options, but for completeness the reason I use them is:

No inactivity fee (I have more than £5,600 invested). £1.50 dividend reinvestment.

The downsides are you can’t do a dividend reinvestment if you use the regular contribution approach, which I find very frustrating. They do every so often allow you to trade shares or ETFs for either free or £1 which is handy.

Summary

From my own experience I am a big fan of TD, just not if you want to do dividend reinvestment and regular savings. Once you select regular savings you can’t change it back.

Self Trade

Monthly Investment cost £1.50

One off trading: £11.50, or £9.99 for ETFs (bonus!)

Dividend Reinvestment: £1.50

Trading inactivity fee: £10 per quarter. Dividend reinvestment counts as activity so provided there are shares or ITs that pay out quarterly there would be no charge, and if you pay a Fund Holding Fee there is no inactivity fee – but does mean you are paying to hold funds.

There is a sliding scale %age charge for holding Funds (capped at £1,000 per year) so I would be limited to ETFs and ITs – not a problem as I had planned this.

£150 cashback if I open an account and trade for 6 months – that’s not bad!

Summary

Score: 9. The ability to void any ongoing charges when I stop contributions is an excellent option and the ongoing costs are reasonable

AJBell YouInvest

I had a quick look, but there is a charge for holding shares or funds on a quarterly basis (capped at £7.50 per quarter for Shares, and percentage on funds without a limit). Given these charges this becomes a no for me as well. I really don’t like having to pay charges if I can avoid it – but this is cheaper than Interactive.

The charge for regular investments is a stonking £1.50 with one off purchases at £9.95.

Summary

Score I would give as a 7 – and not too bad an option but the lack of a cap on the funds holding charges put me off.

The Final Decision

So this is a really difficult one for me. Interactive Investor and Self Trade are the leaders in this decision, but which to go for?

Self Trade I can avoid any ongoing charges, and a low regular investment and one-off trade costs are good. Interactive Investor I could invest in Funds which means every last penny I put in will go to work the day it goes in, however I will have some ongoing charges to pay.

This is a real tough one and I have thought long and hard about which to do. In the end I am going to go with Self Trade as I avoid the charges, and whilst my emergency fund is rather low at present, it means money not invested can act as a small additional buffer before it gets reinvested. Also, at this stage I am only going for equities for a few years so this will maximise the growth potential. Given that once the portfolio grows to over about £50,000 I will no doubt look to yet another provider to spread the risk (4 ISA providers is enough spread for me) in which case I should have recovered my emergency fund, and then I expect I will go with Interactive, provided they haven’t been bought out! This will also let me go for an equity / bonds split more cost effectively than buying both each month.

Based on the above – which would you have chosen? 

 

The “Go T’ Pub” portfolio

The moment you have all been waiting for (I like to kid myself!) – the “Go T’ Pub” portfolio! So for me, I have my Financial Advisor who does most of my pension and some of my ISA investments, but I also do my own ISA investment as I have said before.

For my main ISA I don’t follow any golden rules (although I am trying to get these setup) of rebalancing or asset allocation. I haven’t, until recently (to try and establish some form of guidelines), used any trackers either.

I buy and sell individual shares, from major FTSE-100 all the way down to my smallest AIM listed stock which has a market cap of just over £6M. I use screeners, bad news reports in the media and general investigation to find things to buy. Both my ISA and my IFA portfolios have beaten the benchmarks to date (over the course of each financial year), so I’ve been quite happy. There is however a very high level of volatility in my ISA, and as the value of the portfolio has grown and grown, I am starting to get to the position where individual holdings are getting larger, I thought I ought to sacrifice some of the growth potential for a bit of stability and not worry.

I do check my ISA portfolio far more often than I ought to which led me to the idea of doing the experiment I will describe below, and also timed with the need to find yet another ISA provider to spread my risk (the bulk of my portfolio is with TD Direct as for me it was the cheapest provider). I will cover the assessment of which provider I will go with as part of the overall approach, and then provide updates. The aim of the “Go T’ Pub” portfolio is that I can do exactly that – I don’t need to think about what I am going to buy or do, it’s on auto pilot. I will share every purchase, dividend received and charges along the way, hopefully to help others on their course to FIRE.

In addition to this I will be looking to use the earned income from it to cover more of my daily expenses, so that a larger percent of my salary can go into savings. This may seem a bit odd – but given the new levels of ISA I am not sure I will be able to fill up 2 lots of ISA holdings and my pension. If I get to that stage then I will stop taking money out! The sort of thing I already have lined up to spend the dividends on instead of direct income are things like new glasses, maybe our wine in the future when there is enough coming in (thus creating a never ending river of wine…. now I like the sound of that!).

I accept that I will probably be putting in more per month than most people may be able or willing to do, however don’t let that put you off – all it is doing is increasing the speed of the snowball (think of it as firing it from an RPG down the mountain rather than just a gentle nudge).

The Rules

As the saying goes where would we be without rules (if you are wondering, the answer is France)? So, the basic rules are as follows:

  • Monthly investment. I will put in a monthly investment. I had originally thought to do a split 80/20 equities bonds and did contemplate just using a Vanguard fund, but that would come with the cost of the funds ongoing from the platform, and I want to keep it a little more interesting. Given my aggressive timescales I have decided that for at least the next 3 years (until 2020) I will go 100% equities. The Equities will be in Vanguard All World (VWRL)
  • Any new money added into the Portfolio (i.e. not from dividends) will be put to work the day it is added, regardless of where the market is (so none of my fun trying to time the market), subject to the following rules:
    • Regular monthly contribution will go in on auto pilot
    • No transaction will be for less than £1,000 (including fees / costs) unless part of the cheap regular monthly subscription
    • It will purchase more VWRL funds, or
    • It can be used to buy Investment Trusts should I choose (I like to top up my SMT holdings each year if I can) – part of this is that at some point in the future I will stop adding to the account, so to avoid charges I want something that I can use as a valid trade to avoid inactivity charges – from my investigations to date some consider dividend reinvestment as an active trade
    • I don’t hold any gold in any of my portfolios at present, and I think I ought to. It will never account for more than 10% of my entire portfolio (excluding home equity). I suspect I may never get around to buying any as it doesn’t yield anything but as an insurance policy (plus I don’t want to hold gold bars!)
  • I can hold up to £5,000 (provided my emergency cash levels are at their required level, if not then I can go above this up to the level of the emergency cash allowance) in cash in the account of re-earned income as part of the emergency fund (and means I could potentially try and time the market I will just have to be honest on this). This means the maximum cash balance at any time would be £6,999.99 (subject to emergency cash balance)
  • I can withdraw re-earned income out of the ISA should I need it (my other ISAs are considered sacred and I don’t dare pull money out until I pull the FIRE trigger)
  • I also plan to transfer in half of one of my cash ISA holdings. This will be used to buy an IT, which I will automatically reinvest dividends. Why? Everyone says that you should hold cash for emergency funds, and I agree, but I have held this cash for years, never touched it and it is growing poorly. I will aim to report monthly on how the Cash Value is going against the IT Value to challenge the perception that you should only hold cash for emergencies. Even with the two large hits I have taken in November and now December, the cash in the ISA is still in no danger of being touched, and I could cope with another hit like this in January and still not need to. Note: Everyone’s circumstances are different – you really should have at least some cash reserve!

So there we have it – my fire and forget approach and see how it progresses over the coming months and years.  From my last review (and with help from Monevator’s table), it looks most likely that I will use Self Trade – with a single purchase a month it will cost me £1.50, and then the cost of any one off purchases, and dividend re-investment on top – I will make sure I keep a note of all of these costs.

So the question will be to see how this progresses, and can I start using my dividend purchases to pay for things I would normally purchase with my salary, and slowly replace my salary with passive income. This means the capital will continue to grow. It may seem odd, and I will revisit if I get to the stage of filling up my entire pension allowance, and both ISAs then I will stop taking money out, but until then….

Final thoughts

Why take this approach? I can always find an excuse not to invest money, whereas this will mean each quarter I will in effect get a cheque which I can split over the next 3 months and do as I please – either use to reinvest, to cover some expenses (for example the need to stock up on alcohol – the thought of a river of wine here is very tempting!) or any other thing I can think of (such as new glasses, food shopping etc.). This means that my taxed income will generate non taxable income going forward.

The only other question is then how will I report on the performance? My initial thinking is that any money that comes out will be deduced from the contributions. For example if I put in £100 per month, but I took out £50 that month, then although the capital will go up £100, the contribution was only £50. On reflection I think I will in fact just keep track of both. As this is starting from scratch I may look at unitising the portfolio, but that does feel a little bit like hard work.

As always – I welcome your thoughts and feedback on the approach!

February 2017 Performance

So a slightly late one this month, apologies I will explain why in another post, but time to look back at how the portfolios have done over February. Going forwards I think I will drop the Income column for this.

So, without further ado, onto the numbers….

Portfolio Performance Income Notes
Company Pension 2.28% 0% No income generated as all funds are in growth or reinvested
Personal Pension 2.26% 0% No income generated as all funds are in growth or reinvested
ISA 1 2.33% 0% No income generated as all funds are in growth or reinvested
ISA 2 2.1% ~0.1% The performance does not include the income that was paid out into my account, but is covered by the income so really need to consider both in conjunction.
ISA 3 0.9% 0% Although dividends are paid out, they remain in the ISA wrapper, and will get reinvested for growth. The performance figure includes both the Capital growth, and also income received which will get reinvested. The Income is the %age paid out by the portfolio but remains inside the wrapper to buy more goodies
ISA 4 N/A N/A N/A – not yet set up
FTSE-100 2.31%   This excludes any dividends
FTSE-250 3.43%   This excludes any dividends
FTSE-All 2.47%   This excludes any dividends
S&P500 3.93%   This excludes any dividends
Dow Jones 4.95%   This excludes any dividends
VWRL 4.43%    
VHYL 3.59%  

So… overall not a great performance across the board for my portfolios compared to the benchmarks for once, I guess it had to happen eventually!

Notes:

Company Pension: This consists of a number of actively managed funds – I don’t have any choice of trackers etc, but I will take the matching, that will more than cover the fees, and I will just live with it. The monthly contributions still make up a large chunk of the total investment and so this does skew the numbers

Personal Pension: This is managed by my FA and contains Actively Managed funds. I continue to contribute each month and the contribution is included in the performance – before my FA has taken their cut (e.g. if I put in £100, and they charged me £5, so only £95 went into the account, I would still class that as £100).

ISA 1: This is also managed by my FA, but no new contributions going in (nor planned).

ISA 2: This is also managed by my FA, however its slightly more complicated than that. There are 3 sub portfolios within, each of which have funds added each month, but each portfolio has different levels of contribution. The total contributions still make up a large chunk of contributions as well so this also skews the numbers a little.

ISA 3: This is the ISA I manage myself. The last contributions added to it will be this tax year, 2016 – 2017 until some of my other ISAs  have grown to a similar size

ISA 4: This is the Go T’ Pub ISA that is being held for now for reference, but will start from the new tax year in 2017 – 2018

 

February Income and Expenses – HMRCs final bite

So, it’s that time again where we look back over the last month and see what happened, was I good or not? Well as the title gives it away, the tax bill continues to hurt, but hopefully the last time!

Income

So as always I had my steady Salary drop into my bank account, always nice.  I don’t include any of my personal ISA dividends in my income statement, that’s just part of the growth of those portfolios. The income thrown off by my other half is included, however this is an incredibly small amount at present (less than 1% of income) so it is more of a statistical error! Always nice to see the cash flow in, but makes me realise just how much I need to ensure I increase my passive income stream to replace the main income stream.

So, steady as she goes on income – very slowly creeping up, never as fast as I would like of course, but it is still going up.

Expenses

Item Notes Amount
Things I choose not to avoid* Mortgage, Insurance, shared bills etc. – yes, we could move somewhere cheaper, not have insurance, reduce our bills a bit and so on, but we are where we are. 43%
Groceries All the food and other stuff needed for home 4%
Alcohol for home Home alcohol consumption only 18%
Bicycles / Car / travel (non holiday) related Any costs related to either the bikes or the car 1%
Alcohol Out Generally, its the pub…. 1%
Eating Out I include purchased lunches in this as well as meals out etc. 1%
Other My catch all for anything I may have missed…. 1%
Holidays Any spending related to holidays, flights etc. 0%
Savings Anything left over! This includes money into ISAs, mortgage payments and non relief pension contributions. My company pension comes out before it hits my bank account so isn’t included, nor do I include the “top up” of money when my money goes into my personal pension (i.e. I put in £100, I register it as £100, not the £125 that gets credited in my pension) 30%

 

So on first view, ignoring the rounding error that means the totals only go up to 99%, a savings rate of 30%. Not too bad! But wait… it’s not quite that good sadly. HMRC are still taking bites out of me, which drops my savings rate to 15%. Whilst this is really depressing after trying so hard to keep things under control, it does mean I won’t let myself fall for that problem again. Next time I get a bonus it will be going straight into my pension rather than topping up my emergency reserve. All told it wasn’t too bad overall, but definitely room for improvement.

So for the eagle eyed, you may wonder just how I managed to spend 18% of my income on alcohol for home…. the answer is worryingly easily! It was a combination of factors unfortunately (or fortunately), and something I really do need to keep an eye on. If I don’t buy any more alcohol for another 3 or 4 months then on average that won’t be too bad, but who knows what the future holds! So where did the money go?

  • I met up with my favourite independent vintners. This is always high risk  as I do inevitably end up buying something (or more than 1 really..) but it is worth it, the wines are always great
  • There was an offer in one of the supermarkets for a really good value wine, so I couldn’t really pass that up. Having added a number of bottles of that, I also noticed they had a couple of rather reasonable priced bottles of whisky which didn’t help
  • One of the chain wine merchants near us also had an offer on a particular wine – good value and a corker, so I bought that as well
  • There was a new Congac that I was introduced to so I bought a bottle of that as well to see… as yet I have resisted opening it – if I can resist for another 6 months then I will be content
  • It’s the 6 nations – I needed beer for that after all I can’t be expected to watch the rugby without drinking beer surely?

Guess that means I need to make sure that I don’t drink too much over the next few months! I would say that despite all the purchases, I have not drunk all of them (yet!)

So how am I doing with my dry runs?

Dry run 1: Savings.

Each month I will aim to put into my current ISA the same amount that I plan to put into the Go T’ Pub ISA and see if it is realistic. With some holiday booked and a few other challenges I am already aware of this is going to be a real challenge, but its important to setup for success as best I can

Fail. Even without the HMRC bill, I would have still failed. Even if I had my regular slush fund part of my emergency fund, I would have failed. This was all due to the amount I spent on alcohol this month. It may be that this will balance out, but for this month not good

Dry run 2: Reduce my alcohol expenses.

This needs to average out over the months, as I tend to buy when the offers are on so it comes in peaks and troughs. I am going to aim to reduce my “Alcohol at home” budget by 25%. This really is going to be a challenge as the whisky collection has been hit hard over the Christmas break and so I do need to buy some more soon(ish) which will hurt.

Fail. Really quite a big fail this month, however I did purchase a lot. Provided I don’t buy any more alcohol until I think May then I will average out ok however I suspect this will be unlikely.

Dry run 3: Reduce my “Other” expenses.

This is going to be a lot tougher one as these really are other things (e.g. the Weekend FT, a taxi home from town etc.).

Conceded Fail. So if I were to ignore the HMRC bill then I would be very happy with such a low amount of “other” items in there, but given the HMRC bill takes its final bite out of me, I have to accept this was a fail. Without it, so far it would be good, so lets see.

* This covers a number of things that I would class as essential for me. Yes, I could move to somewhere cheaper to reduce the mortgage (which in turn would reduce the insurance I have to pay), yes I could reduce my bills by switching energy supplier etc. but it comes down to what I am happy with. There are a few other things in there that are classified as essential that others may object, and so I have just lumped it into there.

So how was your February? Did you manage to save hard or let your guard down after a hunkered down January?