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?
- 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
- 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
- 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
- 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
- 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!
- 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:
- 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!
- 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
- 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?