Investing in myself

So, a little while ago, I mentioned that I wanted to position myself to get promoted by 2020.

I have continued to put my hand up for “extra curricular” activities at work, and making sure I do more than just the day job. In effect this means that as an absolute minimum I have worked 50 hours per week, the normal is probably close to 60 or 70 (not including checking emails on my phone) – plus some weekend working. In fact this bank holiday, for the third time, I am checking in on some of the stuff that is going on and did some more work this morning as well as various calls.

I say this not because I want your sympathy, but to demonstrate that to get ahead in work, life or anything, you need to put the effort in. I could easily have sat back, done my contractual hours, and waited, but that is not me either. I know had I taken that approach, then I wouldn’t progress.

I also think because of this, I have the opportunity that I have now taken. A little while ago my boss called me up, and we had a good chat about a potential opportunity for me. It requires me to put my head above the proverbial parapet, be seen and a lot of visibility. Would he have thought of me or called me had I not always put my hand up? No – I am sure of that.

Naturally, I jumped at it! I’ve been doing it now for a little while, and slowly more and more things are coming my way which I am having to learn fast. My aim is to do as good a job of it as I can and show what I can do and make it my own. It’s a steep learning curve as I go on, but fortunately I have a great boss who is also very supportive. There is limited handover it feels more a case of throw things at me and see how I cope and would I ask if required.

Will it guarantee me a promotion? Hell no. In fact, if I don’t do a good job, it will probably make it impossible for me to get a promotion. Basically, screw it up and I have had it. That said – if I make a good job of it then I will be really laying down the foundations to support promotion. If I can make it my own then hopefully I can keep the role ongoing and set myself up.

What was interesting was the reaction of some people outside of work. I am taking on a much bigger role, with much more scrutiny and visibility. A number of friends asked if I got the pay rise to go with it. Of course I didn’t. They then very helpfully shared their thoughts that it was a stupid idea to take it without the pay rise.

Thanks. Whilst I understand the view, I also live in the real world 🙂 For what I do, you don’t get the promotion, title or pay rise until you have shown you can do the job. If I had said I want a pay rise to go with it, then I have no doubt I would have been told to b*gger off and no doubt never give another opportunity.

I also think there was a large chunk of luck involved in this – being in the right place at the right time, and being able to take the opportunity. Having said that, even if all those happened again and I hadn’t worked hard and shown what I can do, then I may not have been thought of.

As always – I do believe hard work and a level of luck are important, hopefully this will go well and set me up nicely – I hope. Always put in your best and full effort regardless of what it is you are doing – it’s worth doing it to the best of your ability.

All the promotions over the years have added to my remuneration which in turn has helped to keep driving up my savings rate – so investing in myself has generated the biggest returns!

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Oh what a May…. May ’17 income and expenses

I think the title says it all. This month has been simply epic on many sides. Why am I doing this post slightly earlier than normal? Well my pay has gone in, and I restart my calculations on the 28th, and I am not going anywhere today nor spend any more money so I can be 100% confident in the numbers.

Firstly, I should clarify a little on how this months numbers have been reached. Back in March I paid up for all of the ski holiday costs, and took the hit on my savings rate – declaring the expense as “Holiday”. This month, some of the guys transferred the money back to me to pay for their share. Normally I would just shove this into savings or off the mortgage and not count it (I already took the “hit” back in March) however this month it all got spent. Ok not in the same category, but still spent. On entertainment. Ok, mostly alcohol!

I’ll be honest, it was GREAT fun! Yes folks that’s right – I spent money and I enjoyed it. I won’t be doing it again at that rate for a while that’s for sure. Would it have knocked maybe a month of my retirement date? Quite possibly, but it is the journey as much and I wouldn’t change the experiences I had this month.

I am sure some may say that this makes my numbers wrong as I have not counted this extra income, but for me that would be double counting – so it stays as it is, if you don’t like it, tough – go and pour yourself a drink and mellow out 🙂

So what was it I got up to this month that caused my spending to get out of control? I will make you read through and see before you get to the numbers (unless of course you quickly scroll through the next bit!).

Rugby

So the month started out as it was clearly going to go on. Down to Twickenham for a rugby match – the 100th Army vs. Navy. I knew this was going to be a heavy one (it usually is!) and this proved to be the case. Trust the British to be in the pub before 10am and drinking. We got there a bit after 10am, and the queue to the bar was already about 3 deep and it felt like 10pm on a Friday night it was so busy. After a few drinks in the pub, we headed off to Twickenham to erm… drink more. We got to see the rugby whilst…. still drinking (I love the fact you can still take beer in!). At half time Prince Harry was there to talk abut the Invictus games (a great thing IMO) which was fun and I really do take my hat off to those guys. After the match… yup you guessed it, back to drinking! Heading back into town after the game and the beer serving stopped… to a pub of course.

Unfortunately we stayed in the pub a little too long which meant we missed the last train home which added to the expense with a taxi back.

Most definitely not an FI day but a great day. You could easily do it cheaper without drinking so much but it was fun, and I don’t regret a penny of it. This was all paid for out of the holiday funds that were transferred in.

Learning a new skill

So one of the additional unexpected costs this month was needing have a tuxedo. Wait – what?! Yup, I needed a tuxedo as we were invited to the World Premier of a film this month – red carpet, celebrities (apparently, I didn’t recognise any, but then I wouldn’t!) and all that gubbins. I actually ended up buying one rather than renting as the cost wasn’t that much more and means I now have one for other events (it’s not the first time I needed one). I bought both a self tie and a pre-tied bow tie, and decided at my age it was time I learnt how to tie my own bow tie – which I can happily say I can now do.

The film itself was great, in fact the whole experience was great. The after party was held in a club which of course meant drinks were expensive once the free bar finished.  Add in a taxi there and back (we were both dressed to the 9’s as it were) made it an expensive evening out but great fun. Again this was all funded out of the holiday money!

New recipes

I also tried out 8 new recipes this month – mexican dishes, chinese dishes, thai dishes a real variety. Some of them I really liked and will make again, some I won’t bother with – but that is part of the fun! The great side of this is that it wasn’t that expensive, and was actually fairly healthy with lots of veg as well.

Majestic had a special offer…

Ooops. I knew it was a bad idea to go to the local Majestic – a very dangerous place! I didn’t *need* to restock as I still have plenty of wine in, but…. well. Yes. 25% off Champagne and 10% off all wine. Now I was at least reasonably restrained on the Champagne but it is always good to have some in for emergency 🙂 The wine I admit I probably got a little carried away with, but the money from the ski trip helps make this look not quite as bad as it really was! Again, a large chunk of this came out of the holiday funds.

Other bits

There were also a few days and evenings out which added to the expense of May, which is why I find myself typing this (helped by a glass of wine) and feeling absolutely shattered – maybe the wine last night at the FI London meetup in the park slowed me down a little?

The extra cash from the holiday money also covered this quarters big shop, as well as a meal and other drinks out.

Income

So as always I had my steady salary drop into my bank account, always nice, and it’s stabalising at a higher amount now that I have finished paying a previous years tax back.  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! Having said that, her ISA threw out it’s highest ever amount, and a huge increase on last year  which is great, it’s starting to get close to being a significant benefit now. Needless to say this is going straight off the mortgage!

So, steady as she goes on income – very slowly creeping up but for the first time it feels like I am really making progress.

Expenses

Ok, so it was an expensive month. A very expensive month. With the exception of last November, probably the most expensive month I have had since starting this blog. The only reason I was able to keep the Go T’ Pub ISA at the full £1,100 was the fact that I got the holiday cash back, I raided my Cash Flow Fund, and I have even borrowed a little from June’s savings funds. I need to be very careful in June. I know Rory from UK Doctor On Fire (and I am sure others) was keen to know the actual numbers, however I am not willing to share them in public. For now, you will have to continue to put up with just the percentages but hopefully that will still help people!

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. 41%
Groceries All the food and other stuff needed for home 2%
Alcohol for home Home alcohol consumption only 9%
Bicycles / Car related Any costs related to either the bikes or the car 0%
Alcohol Out Generally, its the pub…. 2%
Eating Out I include purchased lunches in this as well as meals out etc. 4%
Other My catch all for anything I may have missed…. 2%
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) 40%

The “Stuff I do nothing about” category is down 1% due to my new income and slightly lower travel costs this month with a couple of bank holidays – lets see if it stays that way next month.

My savings rate is actually just under 40% – it is the rounding that makes it 40%, so I would declare me as meeting my goal, but not my stretch. Had I not received the cash for the holiday then this would have made life very interesting given the expenses – I would have had to raid my Rainy Day Fund.

It does give me a real hope that I can potentially get up to 45% savings rate on a quiet month (I think I do have those from time to time!), and fills me with confidence for the year(s) ahead.

How was your May? Have you been enjoying the weather and making the most of life?

* 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.

How much of an Emergency Fund should you have

So now you know how my Emergency Fund is structured, I thought I would do the customary post on how much you should have in it!

There is always a lot of talk about how you should have an Emergency Fund, and then how much should you have in there. The normal guidance is 3 – 6 months living expenses in case anything comes up. I tend to flip around quite a lot on this – at one point I have held virtually no emergency funds (as things came up), and slowly built back up. Right now, if I take just cash and cash equivalents, I have just over 3 months of income available to me (having put half of my cash ISA into CTY). I chose income rather than expenses, as I want to make sure I can still fire off my regular savings investments, and to date the only time I have needed to go into my true emergency fund is when I have taken time off between jobs (it has been up to 3 months) so I always question the validity of this. If I was FIRE then I would probably maintain some form of emergency fund to balance out downturns (likely a year or two’s worth), but right now too much cash seems a waste.

I am experimenting with the Go T’ Pub ISA to see how long I need to keep my emergency cash in the stock market before it becomes a no brainer. Given the returns on cash are so low, automatic reinvestment of dividends from an IT should allow it to grow faster, and I need to be prepared for an up to 50% drop in the price and still be able to sell it. Under no circumstances should you consider this without doing enough suitable research, planning etc. This is most definitely not a recommendation for you!

In essence it comes down to how you want to play it. If you earn £10,000 a month (I wish!) and only spend £2,000 a month you probably don’t need much of one, but if you earn £2,100 a month and spend the same £2,000 a month I would suggest you build one, fairly fast! I take the view that I can cope with “small” emergencies quite easily (e.g. an unexpected car repair bill or boiler repair etc.) on the day to day approach, although that means going into the Cash Flow Fund.

Recently I have found myself questioning what would I need the emergency fund for, exactly. Yes an emergency, but that is a rather flippant comment. What is an emergency that I can’t cover normally. Losing your job is the obvious one, so not living pay cheque to pay cheque will help, and you will need some cash, but how fast realistically can you start work in some form again, be it an Uber drive, shelf stacker or another company in the same career (or even freelance).

I am lucky in that I get paid in arrears (so for the work I do in say April, I get paid at the end of April), and that pays for the next month’s expenses (so May) so I am in a strong cash flow from that point of view, or a bad one that I still need to work! I have yet to lose a job, I have always quit on my terms, so I have been able to build up cash so it didn’t come as a surprise.

I’ve held several parts of my emergency cash for years, and never needed it (granted at one point I did use my overdraft for a month or two).

Why am I moving some of my emergency cash into stock? Well, I want my money to work hard for me. Each £10 a month the portfolio generates, that’s £60 less I need to save into the emergency fund. It’s going to be an interesting experiment, and will take a good 3 or 4 years before it bears any real fruit, and it certainly isn’t for most people, but I work on the principle that I can cover most emergencies as is. Even when we moved home, I only used on fraction of my emergency cash even then – my cash ISA didn’t get touched.

That said – the comfort of knowing I can last a few months, continuing to invest, without a thought is a comfort, although taking money out of premium bonds or a cash ISA would be hard for me… but each to their own!

I certainly wouldn’t be happy with less than 1 or 2 months cash readily available but I don’t feel the need for much more than 3 months whilst I am in accumulation phase – the more that I can get into investments, the better!

How much do you keep in your emergency fund?

Go T’ Pub ISA – The Numbers…

So, the moment you have (probably not!) been waiting for…. the numbers! I decided to split this out ahead of the month end reports when I will go into the details on performance and the tracking, but otherwise that first one would end up being a monumental update!

Regular Investment

So these are now setup, although I am a little disappointed with the timings, but you know what, I just need to get over myself on that.

So the money leaves my account on the 1st (unless its a non working day, in which case the next one). This is good as it takes the money out of my sight so I forget about it. It then sits in my Selftrade account until between about the 22nd and the 24th of the month, when the regular purchase will (apparently!) kick in.

Not ideal as it means there is almost a month behind me earning the money and it getting to work for me. Still, we are talking just under a month. With an investment horizon of at least 8 years – that’s nothing really.

So, the magic number I went for? Slightly higher than I have failed to save every month of last year! I am putting in £1,100 per calendar month.

I appreciate that this is a fair chunk for most people (it is to me too!), but this is to start providing me with my social budget, so I am deferring my socialising a bit *cough*.

What will happen to those funds? Well, if I were to continue this rate for the next 8 years (to my target date), at a 4% rate of return, this would give me just under £125,000.

At 7% that would be £141,000. Now these assume dividend reinvestment (which I may or may not do) and that then entire 100% will be invested (which it won’t as it will be rounded). So either way I expect it to hit over £100,000 – and that assumes I don’t try and increase it. I would like to get it up to £1,200 simply as at that point I can mentally tell myself that I am buying £3 income per month, every month.

It will be interesting to see where I end up in another 8 years. Given it appears that selftrade will allow me to do dividend reinvestment with VWRL, I intend to fire that off as soon as I can.

As I say above, appreciate that is more than a lot of people may be able to do, all I will say is firstly you may well get to that point, and for clarity – that is more than I ever earned in a month in my first 2 years of working! Secondly, hopefully if nothing else it will demonstrate how things grow.

The Cash ISA vs. Stock Experiment part

So, firstly the disclaimer. DON’T DO THIS. You need your emergency fund in cash that won’t have such a volatile time, and if you do need it you won’t have to sell at a loss. I am doing this as I haven’t touched this emergency cash in YEARS – even when I could claim it was close I haven’t needed it. I am comfortable in effect reducing my emergency funds.

The question was, what to invest in? I wanted to utilise an Investment Trust (mainly as my TD Direct doesn’t allow me to reinvest dividends in ETFs – I didn’t know Selftrade would let me, and I haven’t seen it yet actually happen). So, what were my criteria?

  • Well recognised, long established IT
  • Good solid record of regular dividend payments, ideally increasing
  • Quarterly dividend payments (when I stop contributing to this ISA this will help me avoid charges, and also allows me to push compounding a little faster)

So, not a lot! With this in my mind, I selected the City of London Investment Trust (CTY). A massively impressive dividend record, long established and quarterly payments.

I would have considered Scottish Mortgage if a) I didn’t already hold it in my other ISA and b) had it paid dividends quarterly.

So, my cash transfer completed, and 50% of the reserve went into my Selftrade ISA. This means I had £5,126.84 in both the cash ISA and the Go T’ Pub ISA.

With my identified Investment Trust, I eventually purchased 1,203 shares in CTY (after the fun of screwing up).  Sadly I just missed the ex-dividend date (the date when it becomes too late to get the dividend in laymans terms). A bit of a bugger but such is life – the next dividend I will get from it will be approximately August, and for about 4.3p per share – or about £50.

The dividend reinvestment is set so I can now forget about it. What will it look like in 8 years time? Well, at the current approximate 3.7% return, it will be about £6,889. At 4% it would be just over £7k and at 7% just under £9k. So it looks like I will never double the money to make me feel secure enough to put the rest of the cash in during the time frame I am looking at, but certainly interesting. Depending on how I do with other cash positions I may end up moving this, but let’s see.

So there you go – the details on the Go T’ Pub ISA – keep posted for the update on how the first month goes!

 

 

April & May 2017 Stock Purchases

So it has been a busy 6 weeks in my actively managed ISA as I continue to build up my portfolio to my target allocation – I find it a little frustrating as I am forced to not buy individual shares yet, but this isn’t a bad thing as it holds me true.

ETF Purchase – VHYL

So I further topped up by holdings in VHYL on the grounds of not trying to time the market just buying the damn stuff! VHYL is now about right for my target (it is overweight at present, but as I add more to the portfolio then it will come down to around on target, possibly even below).

This brings the average price paid for the stock now to £36.52

Investment Trust Purchase – SMT

I am a big fan of the SMT IT for a long term buy and hold approach. Dividends are automatically reinvested so it will continue to grow. It’s not as cheap as I would like right now but the main thing is getting that money to work as soon as possible. Including the dividend reinvestments, the average price paid for SMT now is £2.74 – so it has fared very well over the last couple of years!

Investment Trust Purchase – DSM

What?! Another IPO IT? Didn’t I learn after WCPT?! Well… no! I took the punt on Downing Strategic Microcap for several reasons. Their track record with other ITs is good (although this doesn’t mean this will be!), but also their investment target. This will help (hopefully!) to reduce my desire to dabble into smaller companies. They are focusing on between 12 & 18 holdings with a maximum cap of £150M at the time of purchase. They are targeting a 15% growth per year, which I think is pretty darn punchy but then it is high risk. For me this will be like WCPT in that I will need to hold it for many years so a buy and forget. As it was at IPO it was free of charges so I paid £1 per share. Since it started trading it has already gone up, but that is just noise!

Overall my Investment Trusts are now slightly underweight on my target allocations, however with the dividend reinvestment this should gradually build up over time to get to the right balance. The following on purchases now for the next year or so (at a guess) are all going to be on trackers. I really do think this will degrade the performance, however it will reduce the volatility which as the portfolio has grown in size will mean I can sleep better at night!

Is this the worst way to start an ISA?

So this started out as a bit of a shorter post for today, although it hasn’t ended up that short. As I was staring out of the train window this morning, I was reflecting on the Go T’ Pub ISA setup and if I could have got things any more wrong!

Smiling to myself as I reflected back on the last few days and my mind wandered, I was glad I was looking out of the window rather than round the train itself, so that people didn’t give me a lovely new jacket that allowed me to give myself free hugs all the time.

For those who have been following know that I have setup the rules, selected a provider and have kicked off the preparation (although I should probably reduce the size of the image there… note to self).

This was the first time I have started to look in anger at it, and my cash ISA transfer has been completed.

So the first thought I had was more around timing the market. Right now the markets are very high, so is it really sensible to be investing now? Well, there were a few scenarios I thought of – the main thing to remember is that I see this is a long term investment – i.e. I will be keeping this going for 5 years as a minimum (it will depend on growth of various portfolios as to what I do).

Scenario 1: A major stock market crash at the beginning

So, in the first year suppose there is a major crash and all my money put in halves in value. So, I will have lost money on the investments I have made so far, but the joy of regular investment means I will just be buying more stocks for the same money. The likelihood is that then the market will go back up so the overall portfolio would nicely grow. So for me, no real risk provided I keep the drip feed of money going in.

Scenario 2: A major stock market crash just before I need the funds

So, the worst possible scenario for almost anyone – all those years of building up a nice diversified portfolio, only to see it halved by circumstances outside of your control. Take it to the extreme and assume that the market remained static during the years of investments you lose half the investment. Well not quite – don’t forget all those dividends reinvested.. The minor fluctuations, the dividend reinvestments means that the portfolio will still have grown. And if it crashes on the last day? That is a paper value – hopefully the dividends will continue, but even if there is a year without any, I would have a couple of years cash for a safety blanket so really, it shouldn’t matter in the slightest as then things would have gone back up (just look at the changes from the financial crisis – I haven’t looked at dividend payments during the great depression as yet).

Scenario 3: Some random combination of the first two

So otherwise it would be some random combination of the above. Well… who cares! Either way the money will be flowing in steadily, so a crash or drop at some point is bound to happen given how long this bull market has been going. That just means more shares  when it’s down, and less when it is higher.

One thing I believe is that I am mentally prepared this time for the investment. I know it sounds odd, but I am mentally just forgetting about the money – it goes out of my account just after payday and the purchase is automated so I don’t even need to log into the account to check on cash availability. The only time I am really expecting to check it will be on the month end update. Whilst I will update my DigitalLook portfolio page to show both portfolios, for some reason our work connection is blocking the login so I can’t check even if I want to!

The Cash ISA #%&* up….

So I thought to share this for peoples amusement. As I am mentally set that the GTP ISA to take VWRL ETF I don’t really think properly, least of all on a Friday. This was demonstrated very well when I purchased my stock with my Cash ISA transfer.

I logged into my account, very much on autopilot, and saw the funds. Great! So this was my first opportunity to try out the Selftrade purchase method. The stock portion of the Go T’ Pub ISA was ready to start! So I went ahead, as excited as a little kid (or even a big kid) with some new Lego (make it Star Wars related Lego and even more excitement!). I promptly bought up some VWRL.

I then slammed my head against my desk, called myself some very rude words, and went to get a fresh mug of coffee.

I then came back, promptly sold the VWRL (yes, taking a double hit on trading costs). If you want a “How to lose money trading” I don’t think I could have demonstrated this any better.

So having thrown away some money I then bought the Investment Trust I was planning to with that money (to be revealed in the month end update for this ISA) – taking yet another hit on trading cost, as well as the usual stamp duty. This means that the Stock comparison of my Cash ISA has taken a massive up front hit. Well, I guess that will show people in a few years what the difference may be.

There is a silver lining – it would appear that, unlike TD Direct, Selftrade allows you to reinvest dividends in an ETF, so of course I will look to automatically reinvest even though I was looking to hold the cash. I won’t complain at that!

I hope that at least put a smile on your face on a Monday!

How my Emergency Fund works

So one thing you will hear throughout the PF community is making sure you have your emergency fund setup and funded. The amount you need varies and only you really know what that is, but of course less than 3 months of expenses can be considered risky and require further work.

The bigger question is – where do you tuck it away? Put it in a fixed bond or account and you get penalised if you pull it out early. You could have multiple fixed accounts and roll them over each year. You could leave it all in one account and forget about it except in emergency. You could stuff it under the mattress for all I know, although possibly a little risky if there is a fire or burglary!

So I thought I would share how I have structured mine, and the purpose of each part of it. All the funds that go in on a regular basis are via standing order almost as soon as I have been paid – pay yourself first remember. This is not a recommendation or approach for how you should save yours, but to help provide ideas for people to tailor to their fund and approach, or just for you to laugh at me, take your pick!

Part 1: Cash Flow Fund (CFF)

So this is my relatively easy cash at hand part of the fund, the first line of defense. The account is linked to my current account so that I can transfer money instantly via mobile app or internet or telephone. I don’t consider this particularly “protected” – it is there to help smooth out the ride. In my monthly updates on expenses you will see some months (e.g. November, December) I had a declared savings rate of 0% or -111%. Whilst this is true, I dipped into (aka emptied) my CFF – this meant the direct debits to my pension and my other half’s ISA (and from this year the Go T’ Pub ISA) all went out as usual – in effect meaning I am transferring my emergency fund into long term funds.

I like this approach as it means I am always adding to my investments no matter what happens and gives me some flexibility.

Part 2: The Rainy Day Fund (RDF)

So I guess this is what you would class as the main emergency fund. It is setup with a building society that I require a separate login to view, can’t access on my phone and have no card for. Generally, I forget about this fund wherever possible – money goes in every month to it (I am thinking of upping the amount slightly) and it ticks up slowly but steadily. I have ducked in and out of it, and I am guilty of saying that I would also dip into for holidays or other big purchases. Please remember folks, holidays are NOT emergencies (although I could put up a damn good argument for it I am sure!). If this were all I had in cash or cash equivalent then I wouldn’t use it for that. This was used to balance out the huge negative savings rate I had in November and towards my tax bill – so now it needs to be repaired. I am too lazy to tart around for better rates, I go for simple, single place and not worry about it. If I had a larger amount of cash then maybe I would (for example when I get close to FIRE and want a year or two in cash, then I will start to think about it!

Part 3: Serious Trouble Fund (STF)

This part of the emergency cash is held in Premium Bonds and is there in case of dire emergency. Not used for holidays, some random home improvement (e.g. carpets or whatever), but out and out emergency. Why Premium Bonds? Any winnings are tax free (and get reinvested in more PBs) – given my tax rate this makes them worth a lot more than regular savings as the equivalent taxed rate would need to be a lot higher to offset the tax. So far I have never had to dip into these savings for over a decade, but it is comforting to know that I have it there “in case”. Should the worst happen and I need it, it is there for me.

Part 4: Last Chance Saloon (LCS)

The LCS is my last Cash Isa. Over the years as the STF grew I transferred more of my cash ISAs into stocks and shares ISAs. As it stands now I have one more cash ISA left which, as part of the Go T’ Pub approach, I will be transferring 50% of it into an Investment Trust. I’ve had these funds in a cash ISA for about 15 years and have never touched it hence I am splitting it between cash and stocks to avoid the money losing its value. Over time, and depending on performance, I may end up transferring the remainder into the Investment Trust as well, but who knows. If I have never needed it for 15 years despite some serious challenges, am I holding too much cash? Who know’s. For now I am happy to be a little different and start reducing this.

So there you have it – a reasonable assortment of places where I keep my funds and how I utilise them. How do you manage your emergency fund?