April 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.

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 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! On the plus side I have finished paying off some tax so I got a bit of a pay rise after – although this wont show until next month’s savings rate as I will spend it next month!

So, steady as she goes on income – very slowly creeping 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  5%
Alcohol for home Home alcohol consumption only 0%
Bicycles / Car related Any costs related to either the bikes or the car  1%
Alcohol Out Generally, its the pub….  9%
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….  3%
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)  38%

* 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.

Ok whoops. So Alcohol out this month was a little on the erm… high side? A few big sessions really did hit the wallet this month, but I don’t in the slightest bit regret it! The fact that alcohol at home is still 0% I am quite happy with.

A lower transport costs helped offset the large grocery bill this month – but this has filled the freezer up so that should give a fair amount of meals for sometime!

So, how did I do on my Savings Rate goal? Just shy of my stretch target, but 38% savings rate, I am happy!

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The 2016/17 (Tax) Year Performance

The tax year ended this month, and I have now had a chance to update my performance. It has taken longer than normal as I threw every last penny of spare cash I had into my ISA before the year end, and I knew I would have to take some back out before the end of the month but I like to set myself the challenge.

Although I didn’t put anywhere near as much as I would have liked to in my ISA, overall it was still a very good year. So first of all, what did the various indices do, and how did they perform to give some idea of progress. This is the first year that I have also included VHYL and VWRL so I don’t have that much information in (I could easily go back but I am too lazy :)).

Remember, I calculate my returns based on the assumption that all contributions went in on day 1, so this really does hurt the performance of portfolio’s where the contribution is still significant compared to the size of the portfolio.

Note: I have updated the performance figures after discovering an error in my calculations which meant I was under reporting performance.

The Benchmarks

Index Performance
FTSE-100 20.4%
FTSE-250 14%
FTSE-All 19.3%
S&P500 17.5%
Dow Jones 15.3%
VWRL 30.4%
VHYL 28.2%

Well, that was certainly not what I was expecting. The VHYL and VWRL have really shot up, I am not sure if I got incorrect data historically for the end of last year, or if they really did shoot up that much. It will certainly be interesting to see how things pan out over the next few years.

So how did my various portfolios do over the last tax year?

Company Pension

I wasn’t expecting anything much from this over the year, as I only started paying into this at the start of the tax year, so my contributions each month are huge compared to the overall size of the portfolio. The funds are limited that I can select, but the website has a useful little view that shows what is contributions and what is growth.

Performance: 0.8%

Really? Well sadly yes based on the way I track my performance. Oh well – I expect this will continue to show bad returns (or good if there is a bear market!). Right now, this doesn’t bother me – the main thing is that I am throwing money into the market, regardless of what is going on. Every month before my pay even gets to my bank account, the pension has new funds added.

Personal Pension & ISA 1

So, how did my IFA do? I am sure this will be of interest to many people – was it worth it for him to take a cut of every single contribution I make? Well before I disclose the numbers, I did actually meet up with him back in March, and we reviewed the whole portfolios. That, and previous overall years performance, I think I will make another post on that to provide some of the insights.

Personal Pension: 18.6% 22.8%

ISA 1: 10.2%11.4%

So given the make up of the portfolio (I will update my portfolio page at some point this week!) I am happy with this. No, it is not as high as Vanguard but they are not bad performances.

ISA 2 (also IFA managed)

So the second ISA is the most complicated with 3 sub portfolio’s with different goals inside it. For simplicity here I am tracking only the overall performance, remembering that it also pays out income monthly. The contributions still form a significant amount of the total value of the portfolios as it goes in each month, so I continue to expect this to under perform based on my method for tracking for some years.

Performance: 4.3%4.5%

So total growth of the portfolio was not great, it did throw out a trailing 1% dividend (based on total paid over the year, and the year ending value, so again probably under representing). Given that the main aim of the largest sub portfolio is to pay our bills in retirement, this is making slow but steady progress towards that. Right now this needs to go up at least 10 fold – a huge ask over the next 8 years, but with tax refunds, any pay rises and so on going into it, I am hopeful. Its a big ask, and I honestly don’t know if it will make it or not, but you have to try!

My actively managed ISA

So last, and by no means least, how did my actively managed ISA do? I have been trying to move this to have less individual shares, and a combination of Investment Trusts and Trackers. This is still very much work in progress and will reduce the potential performance (or stop it from being so bad maybe?), but as the value of the portfolio has increased over the years I am getting less comfortable with quite such a large portfolio – I know I should have faith in my own ability but when you can read so much out there that shows passive is most likely to win, who am I to argue.

Performance: 30.9%44.7%

The dividend income was reinvested in the portfolio which helps to bolster the returns. The trailing yield was a shade under 4% which would match with the 4% SWR so if that keeps up it will put me in a good position.

I only started tracking the monthly performance of the portfolio back in June ’15 (around the time I found Mr Money Mustache) although I have tracked the annual returns for longer. I look back at where I was in 2012 and the portfolio then compared to now and I find it really hard to believe that less than 5 years later it has grown so far. I’ve evened out the growth over the years when I only tracked on the year basis, but I thought to share the progress to encourage people. It really is slow going to start with and took a long time to gain traction, and then my gamble on the Russian gold miner really turbo charged the returns along with some of my other AIM investments. I will reiterate, this is not an approach I recommend!

ISAPerformance

Going forwards there won’t be any more contributions to this portfolio for a number of years but the value should continue to go up as dividends keep getting reinvested.

Premium Bonds

So for a bit of fun I thought I would also look at the returns on my premium bonds holding. In total it returned a shade under 1.3% for the year. Whilst not huge, and I haven’t had a “win” for a while, I can live with that tax free rate of return.

Conclusion

Overall I am content with the performance over the last year, it feels like I have made huge strides towards FI. I still feel that June 2025, although a long way off, is going to be a challenge. This is not going to stop me from trying!

Setting up the Go T’ Pub ISA

So I thought it would be good to give a quick update on the progress of setting up the Go T’ Pub ISA. As I threw in all the spare cash I had into last years ISA allowance, I can’t afford to put any money in to Go T’ Pub in April, but I can get everything ready.

ISA Provider

So, as I said before, I was expecting to go with Selftrade for my ISA provider for this account. I did indeed go with them as the provider, and started to get things setup. I also really liked this sign outside one a pub I went to a little while ago, and as it’s the Go T’ Pub ISA, I thought this was quite fitting, and time to add the occasional pic in!

First Impressions.

I started setting up the account not long after the new tax year started. The application process was very simple and easy – it took me all of about 10 minutes to setup the account, which just goes to show anyone can have an ISA!

The screens to manage my account are, I will be blunt, rather basic, especially when compared to TD Direct. Does this really matter? For what I am using the account for, no. I don’t need any fancy analysis, I just need to be able to buy monthly, reinvest dividends and that is about it.

I had to validate my bank account details (latest paper statement, voided cheque or an electronic statement). Again very easy to do.

All told it has taken about two weeks to get it setup (although to be fair I wasn’t really pushing to do it quickly, I could have done it a lot faster).

Monthly Investment

I struggled to work out how to get my regular investment setup and ended up calling the helpline. It is there but it isn’t as obvious for a muppet like me. You can fund the account via a regular deposit (note not a regular investment) on the 1st, 15th or 22nd of each month. I have my direct debit set to come out on the 1st of each month so it is out of my bank account as fast as possible.

There is only a single day of the month where the regular investments are made, the 24th of each month and you can’t change this. As such, I can’t set this up until after the 24th of April, so something for next weekend. This means the first regular purchase will be the 24th May – later than I would like but hey ho, that’s just the way the timing goes.

Transfer of Cash ISA

The next part was to transfer 50% of my cash ISA over to Selftrade. I eventually found the form (it’s not obvious it was in the main site, not anywhere within your account as I had expected), downloaded and printed it out.

I then bought a new ink cartridge, replaced the one in the printer, and printed it out again. This did delay things a bit. Note to self, I need to make sure I have a spare printer cartridge at home. The form was very easy to fill in (although it asked about stocks), but filled it in I have, and I have sent it off to start the transfer process. Posted today (20th April), so lets see when the funds appear in the account. I have given the Selftrade part the bonus penny on rounding when I split the ISA 50/50 as it had an odd number of pence in.

Again, all very straightforward. I am super excited on this part (yes, maybe I am a little sad) – I have not only identified the Investment Trust I will be investing in, but also I did a quick calculation. The full whack in the Cash ISA was generating less than 10p a month in interest. I worked out that with the quarterly dividend, I should be getting a good £15 a month in the S&S ISA.

NOTE: This is not a recommended approach for your emergency fund. If this is your only emergency fund, and you are thinking of doing the same, don’t. If you want some sense of risk and adventure then go and live with a troop of baboons.

Where we are

So, where does that leave the Go T’ Pub ISA?

  • The Cash transfer is in progress, and will be deployed as soon as it hits my account
  • The direct debit to fund my ISA is setup and will kick in on the 1st of May
  • I still need to setup the monthly investment at the end of this month (post 24th April)

After that? Well, I guess I can sit back, forget about it and enjoy that rather nice bottle of wine I have my eye on.

Of course, I will have to update all my tracking spreadsheets, and this blog, with the progress they are making, but that shouldn’t be too hard!

Discussions in the pub

Inevitably at work, you will find situations where you end up in the pub with a number of your work colleagues (if you are lucky, you may even get a tab or expense account in play which makes it an even greater pleasure!). Hopefully these are at least some form of fun and you have something in common with your colleagues. It normally ends up talking about work, but when its someone’s leaving drinks, then plans for the future often come up, and occasionally, very occasionally, the money or finance discussion starts up. This happened to me when we went out for drinks a little while ago, with a large variation of ages represented in the group, and there were a couple of key items that came up, from two different perspectives. It was the similarity in the view of money however is what struck me – since when did it become a big thing to be proud of the amount of debt you have?! [Note: You may need to subscribe for that link but it is talking about Kanye West’s $35 million debt]. Whilst people in the UK seem to have an aversion to talking about wealth and money (I hold my hands up of being guilty of this as well – only a very few know roughly what I earn, never mind the exact amount), let alone any form of wealth – should we be? Surely being able to say you have £X,000 in a pension account should be something to be proud of?  I’d certainly rather have an ISA producing me £1 a month than the latest Apple Watch, that’s for sure (especially watching people trying to use it to pay for a bus ride in London!).

Individual 1: They have fairly recently retired, and so enjoying their time out of the office – mostly doing things with friends “for free” – something that anyone can do even when working. Asked what the biggest transformation was going into retirement, the answer was the inevitable “cut in income”. What amazes me is that this doesn’t come as a surprise (before retirement they had mentioned the same), but that rather than try and do something about it, they just shrugged their shoulders and ignored it. It was just accepted that you have to take a pay cut in retirement, and so need to be prepared for it. Surely its better to try to not have a cut in income? If you knew this was coming why not try and scale back a little? Granted I don’t know if the individual still has a mortgage or not, or any more details of what they may get up to in their private life, but I for one don’t intend to take a cut in expenditure (i.e. my lifestyle) when I retire – if anything I want it to go up!

It never ceases to amaze me that people think that you don’t have an option but to take a pay cut when you stop working. If you know you will take a pay cut why not get used to it? Lets face it, when you retire you should have no need for a Starbucks (unless you need to rest those tired legs and put your walking stick somewhere, but there are plenty of free benches around the world…). It was a great reminder to me as to why I am tracking my spending and generated returns to make sure that the lifestyle I have in retirement will be, at worst, the same as I have now. Simple spreadsheets can give you all the predictions, and yet so many people seem to stick their head in the sand when it comes to money.

I really struggle to get my head around why people are happy to assume that they will have to take a massive drop in income when they retire – especially when they seem to know this is coming 40 years or so away! Maybe the human mind is not able to grasp that concept in general and it is us freaks in the FI community who can?

Individual 2: They were moving home – granted for a sensible reason (to be closer to work), but it was interesting to hear about the impact this would have – higher mortgage (although no idea the exact numbers, and didn’t ask, it could be £2 a month more or £500, I will never know!) and less outdoor space, and a smaller property. The interesting thing was the view that the bigger mortgage was required, “and you have to do it, don’t you”. Do you? Why? Who says so? I totally get the needing to be nearer work, but I honestly can’t see that there wasn’t somewhere cheaper that would have fulfilled what they were after. I think London can be seen as the exception as if you work in central London and want anything less than about an hours commute then its likely to be over £500k for something reasonable both in terms of a place to call home and a location – but that is my opinion 🙂 For me, I tried living outside of London and commuting it. Yes it saved me money – but 5 hours a day on the trains and tubes, no thank you. I lasted one month at that before I decided to move up to London.

Why is taking on a much bigger mortgage a badge of honour?  You hear a lot about people buying McMansions (ok, partly guilty) and having more space than they “need”, but its finding what you need – for us, technically we could downsize. We won’t, and we will work longer for it, but we have the space we want. We lived in a 2 bedroom flat for some time, and it was just too small for what we wanted. Now we have a much better place – it’s still not what I would want from the bottom of my heart, but in London for that sort of pad, that may well even be out of reach of FvL!

Individual 3: This was probably a more eye opening one. They are a successful person within the company. Over beers one evening (I can’t remember now how we got onto the topic!) we had got onto the topic of retirement (the others around were somewhat older than I am – at a guess at least a decade or more). They were talking about having a dream of retiring by 50 when they started out, but then work, home expenses, kids all prevented this, and here they are still working. I managed to keep my mouth shut and nod along, not revealing that actually they could still have retired at 50 despite everything else. It seemed that once the “M” word happened then things went off the rails. I have no idea why, and they didn’t elaborate, but they are still working now a long way the other side of 50!

Since I first drafted this post, I was lucky enough to meet up with a group of friends we often go pub crawling with. To be clear – this isn’t a run as fast as you can and throw a pint down your throat type of pub crawl, but usually some really good ales, and some historic and interesting pubs or walks. With the amount of time we spend on the crawls (usually a good 12 hours), we tend to eat in the pubs as well, so it isn’t a cheap day but it is huge fun. Last time I had a long chat with the youngest member of the group who was having some challenges and we had a long chat about life in general. When we met up this time, it was clear that this message had sunk in and he has acted on it – he has really turned things around, thinking about setting up his own business and was generally much more “with it” and focused. I don’t know if this would have happened anyway, or if it was because we chatted and I wasn’t a family member or close family friend, I have no idea but it was a huge buzz to see their change. This time I dropped in the idea of savings 50% of every pay rise they get. Will they take that on board? I have no idea, they really are just at the start of their journey (still under 21, so some pubs are a bit of a struggle), but I will find out next time – I really hope they do!

Its always interesting to see what conversations come up when you are down the pub, and its interesting how fast you can clock who is clued up on their money, and who is the one blowing it. What about you – what do you ever cover off in discussions in the pub around money, if any? Or is it limited to who is getting the next round in?

Looking back at 2016/2017 (tax) year

So the tax year has ended and it is time to look back and see how it went. It took me a bit longer to get this written up – partly work related, but mostly because of my ISA. On the last day of the last tax year I threw all my spare cash into the ISA, knowing full well I would need to take some of it back out to pay the visa bill. Why? Well if I can get even a few extra pennies in, it all helps, and I have a psychological barrier about taking money out from that ISA so I know I will do everything I can to avoid it.

How did it go?

So, the all important question. Looking at the financial position I am in now – I honestly don’t think I could really have asked for it to have gone any better – other than winning the big one on the Premium Bonds or lottery of course! My savings rate was poor (remembering that it doesn’t include my 10% salary sacrifice into my company pension, or my basic rate tax relief in my personal pension) for what I want, but hey, I had some great holidays, an rather large unexpected tax bill, and bought some stuff 🙂

Expenses

So, most importantly, where did all that money I spent go last year? In most expensive first order….

Housing.

So this won’t be a surprise to most UK based people, and even less so to any other Londoners out there! The mortgage (and related insurance) was my biggest expense over the year. More than double any other expense of the year, this really is the killer. Ouch. Yes, we could move somewhere smaller, further out etc. and half that – in fact if we hadn’t moved here I would be mortgage free. I wouldn’t have been happy though. There is enough space for us now to not only live as we want, but also to put up our friends and guests when they come to stay, which is very important to us. The next target will be to not need the insurance (open to a question on need but…) – however I want to feel secure knowing that if anything happened to me my other half would be ok. Once my liquid savings (i.e. ISA) are greater than my mortgage balance, or close to, then I can stop and invest that extra. I am not sure I am brave enough to just cancel it and self insure.

I really do need to think about how best to try and reduce this whilst keeping the ISA savings going – a real trick. The mortgage isn’t up for renewal for over a year, and depending on the rates it’s likely we will go for another 5 year fix, in which case the more I can do now to reduce this then the better.

Holidays.

Yes – you read that right. My second biggest spend last year was holidays – money that probably should have gone into my ISA, but I spent it on a number of holidays. Do I regret it? Absolutely not! I have some fantastic memories that will be with me for as long as my memory lasts. This isn’t something I do every year (and don’t plan to), although it is about the journey as much as the destination! Could we have done the same travelling cheaper? Without a doubt we could – we didn’t need to spend as much as we did, but heck – you only live once!

Other.

Maybe a shock for some people, but the catch all pot was the third largest. Now this includes my tax bill, as well as a one off purchase I made. I don’t expect either of these two to happen this coming year so I am hopeful that this can be a lot lower this year, but the category will remain.

The rest….

As I look through the remainder of my tracker there is no other one individual item that really springs out – with one possible exception. Alcohol. If I add up all the money I have spent on Alcohol it is rather a large number. Oh well, I enjoy it! I will try and reduce it a bit, but not sure how successful I will be!

Savings

So… then what does that do to my savings overall? Well, I’ll get the number out of the way first. My overall savings rate for the tax year was…..

16%.

Not great (add in my 10% salary sacrifice, tax credit in pension and it would go up a bit), but this was hit hard by Novembers -111% savings rate and the tax bill in December. Take those out and it would add more than 10%. But I can’t so it is what it is.

Update: After great supportive comments from both Rory and HoSimpson on this savings rate, I decided to see what would happen if I included all my bonus, company pension and tax rebate on my private pension. I don’t usually include this as to me it isn’t “real” money. The pension contributions and rebate I don’t “see” as they don’t go through my current account. My bonus this year was in my bank account for less than 8 hours before it had been transferred to my pension! So what did that do to my savings rate? It took it to a shade over 41%. Wow. That has made my day!

Across the board, all of my savings vehicles have done pretty well (a more detailed post to follow), and by a freak of timing, my bonus that went into my pension got in the pension before the tax year end, but didn’t show online when I took the snapshot. Why is that so good? It means that in effect I just lump it at the start of the year and we see how we go – I may have just invested a huge lump of cash near the peak of the market, but as I can’t get at it for over a decade, that really is kind of irrelevant).

I am disappointed in myself in terms of how little I put into my ISA last year but then that is partly down to the tax bill, the purchase and several personal circumstances that threw some curve balls (all the more reason for having the emergency fund!).

Despite the low savings rate (compared to the FI community anyway!), the markets were very good to me – more so than I ever expect to see again, but who knows.

Non Financial “stuff”

So what about the non financial stuff then? Well I didn’t set any specific goals here, so this is a bit haphazard!

Health: I am pleased that I had managed to lose a small amount of weight (I suspect I may have put it back on but haven’t braved the scales yet!) but not as much as I would like, but then I don’t put the effort in, so only myself to blame on that. Every few months I swear that I will do more exercise, but somehow I just don’t.

I’ve also been cooking even more healthily using some of the dieting cook books I have, although I still sometimes suffer from a lack of energy (consistent long working days can take their toll). Hopefully I can fix this during the course of this year

Work: So work hasn’t been going too badly – the usual ongoing challenges and work, I got a “met” on my appraisal – pretty much the best I could have hoped for to be honest as it was my first year in the new company. Sadly this meant no pay rise, but that won’t deter me. I am looking forward to the new year and throwing myself into it with gusto to try and build on my career goal of a promotion by 2020 (it is getting harder the higher up the ladder you go!). Steady as she goes. The hours are starting to ramp up again which isn’t great, and hence my posts are coming at the weekends, but it pays the bills, and that is why I get paid what I do, and the bonus I do. No overtime but they compensate for it that way I guess.

Friends and Family: So the family side has been a huge focus over the last year for various reasons, and sadly to the detriment of my friends. Fortunately I have a great bunch of friends who understand the circumstances and, so far, haven’t held it against me! I am hoping to be able to get a more level playing field this year, but who knows what may happen.

As I seem to be one of the few who only does a tax year review, I wont ask how your year was!

March ’17 Performance

Firstly, my apologies for the delay in posting – I was trying to avoid only ever posting on Fridays and Sundays and try to make sure I kept up a good number of posts, but the last 10 days have been intense and have left me rather sleep deprived. Anyway – onwards and upwards!

So the month has ended, and it’s time to take stock of the performance across my portfolio, and compare it to the usual index of choice. This enables me to see how I am doing. As I covered in my “How I measure performance” – basically I take the value of the portfolio at the end of last month, add on any contributions for the month, and that was my starting value. End value is the value at the end of the reporting period. Simples 🙂

Portfolio Performance Notes
Company Pension  2.1% No income generated as all funds are in growth or reinvested
Personal Pension  1.48% No income generated as all funds are in growth or reinvested
ISA 1  1.24% No income generated as all funds are in growth or reinvested
ISA 2  1.15% 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  1.06% 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 – not yet set up
FTSE-100  0.82% This excludes any dividends
FTSE-250  1.07% This excludes any dividends
FTSE-All  0.93% This excludes any dividends
S&P500  0.14% This excludes any dividends
Dow Jones  -0.51% This excludes any dividends
VWRL  0.21%
VHYL  0.12%

Overall not too bad a month. My actively managed ISA produced my highest ever dividend income – something I am happy with given I am sitting on a fair whack of cash which I could have put into VHYL, although VHYL also missed paying out in March, so really rather happy!

Onwards and upwards…. hopefully!

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. As I am still making contributions that are a significant amounts compared to the total still, I take this performance with a pinch of salt.

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). Although I transferred my additional funds in, they didn’t hit the account before month end.

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. As with my company pension – the contributions are still significant so I am taking the performance with a pinch of salt

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

I am probably a bit late, but how was your March?