So you may have noticed it has been a little quiet over here during November. The short answer is things have been, to put it mildly, very, very busy. You know you are starting to get tired when you put the silver foil in the fridge instead of the cupboard….
So what has this got to do with the subject? I am glad you asked… this post is more around how your emotional side can affect your spending patterns and habits. What follows is not meant as a cry for sympathy or anything naff like that, but to demonstrate when money takes a back seat when emotions come into it. And that’s coming from me who tracks and categorises every last penny of spend and income!
The Background
So first it is probably worth setting a bit of background context. Last year I received two phone calls of the variety you always dread but know will happen one day. The very short version of it… “Come home…. now.” from an immediate family member. Whilst in the office. Never a nice thing – I am fortunate that my company was super supportive at the time.
This November I had a very similar, but possibly worse, experience. Sitting in an open plan office, on a conference call (fortunately internal), I had a missed call from one of my immediate families neighbours. To put it mildly, this is unusual so I knew something was wrong. Not wanting / able to drop off the work call (I was chairing), I texted to ask if all was ok and of course got the inevitable “Erm.. not really” response.
Needless to say we then spoke, where I was kindly informed that an immediate member of the family had been taken off by ambulance. They didn’t know where, or what was wrong. Cue 30 minutes of calling around the various hospitals near the family member until I finally got through to the “Ambulance Assessment Centre” (who knew ambulances needed assessing, but I digress…). Due to patient confidentiality they couldn’t tell me anything other than confirm the person had been brought in. Their mobile telephone wasn’t responding so something was definitely not quite right.
A very quick chat with my boss resulted in the “Just go” response – once again something I am hugely grateful for, the support my boss and the company have given me.
Blowing the budget
As soon as I got the nod, I packed up my work kit and headed back to our home, threw some clothes into a bag and loaded up the car (I had kept my head with me and packed a cold box as well as there are some farms up there!). As I had no idea how long I would be away for, not knowing what was wrong, I grabbed my away wash kit (lasts up to a month – vital for travel) and shoved in enough clothes to last me 5 days.
Then followed a lovely 200 mile drive up the wonders of the UK Motorway network. Unexpected costs here were the diesel and the M6 toll fare – honestly I just didn’t care I just wanted to get to the A&E department as fast as I could (within the speed limit, but faster than my usual 60 mph cost effective driving!). They could have charged me double and I would have paid it.
Eventually we arrived at the A&E department and, of course, had to pay parking charges. Lovely. Fortunately I had the change but no idea how long I would need so I just chucked some money in. When we did eventually manage to find our loved one, the only way we recognised them was by their shoes, they didn’t look like themselves. Never pleasant,but highlights the importance of being able to drop everything and go.
We remained in A&E for sometime and spoke to the doctors and nurses around what had happened and what was going on. Eventually we did leave (this may sound really harsh…) as what else can we do? Sitting with someone who is unconscious through the night isn’t going to help them or us, but being there in the morning of the next day would.
By the time we left we were very hungry, and of course hadn’t eaten since a quick bite at lunchtime. Driving round “my old stomping ground” all the restaurants and bars were shut, even the tesco’s was closed. The end result is something I am not particularly proud of, but I will admit it. We ate in McDonalds. Definitely not high quality food but we really did not care – it was food.
For a week I followed pretty much the same pattern. Wake up early, try and squeeze a full day of work before heading to the hospital, getting home about 7 hours later, to then finish work, sort out food and, naturally, have a drink!
So, what impact did this have on my spending? Well, firstly I don’t really know exactly how much I spent. I have an idea, I kept receipts where possible, calculated rough parking charges etc. but my November figures are a bit random, but.. this is roughly what went down…
- Toll road costs, diesel and trains. This was quite random but knocked things up quite a lot as Mrs. FiL kept going back to London for work then back to me, bringing clean clothes wherever possible
- Parking Charges. I am really not sure how much I spent on charges as I was parking there every day but there you go – I took a guess
- Eating. I place this as largely open. We had a couple of takeaways, pub meals, hospital canteen meals and a lot of instant meals – basically anything that meant we could eat fast with minimal effort – so paying the price for convenience
- Extra “items” – ok I had to buy some random clothes to keep me going – nothing major but simply to give me clean clothes – whilst I washed what I could I wasnt able to do everything so had to buy some cheap and nasty stuff – but it covered me!
- Other – I will just label this as everything – so books / papers / orange juice etc. – things that they felt like that would make things more bearable for both us and them
One thing I am eternally grateful for is that the last thing on my mind was money – yes I knew I was spending way more than I should, and whilst it hurt in the sense I ate into savings, it meant that I didn’t have to worry about anything financial – I could deal with things as they happened.
THIS is why you need the emergency fund – for emergencies. You never know what will happen in life – I am lucky that I was able to continue investing at the same rate, but I was in effect cash flow negative. I can’t imagine what that time would have been like had I also had finances to worry about. Bliss would have been being FI and not caring, but as it was I think I got the next best thing – a supportive work and not worrying about money.
Remember folks, make sure you keep that emergency fund intact (and not invest in the market…) – know how much you think you will need.
FIREin' London 
Really sorry to hear about all these happenings, as you put it correctly the emergency fund is needed when you don’t have time to think about finances because something more important is at stake. It’s one of those things that take away some worries (more mundane) when other things are happening. Hope all gets back to normality!
Ciao ciao
Stal
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Ciao ciao Stal,
Thanks for dropping by again! And yes not as good as your spectacular time, but these things are there as they are needed. I couldnt imagine having to worry about the financial side of it as well that would be too much!
Cheers,
FiL
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Yep this has been drilled into me since I learned how to budget. Similar thing with me my cousin died suddenly aged 50 4 weeks ago. A trip down to see his widow followed by another trip for the funeral. Food flowers card a round of drinks at the wake. None of it money I begrudged spending in the least or even thought about. I always keep a minimum of 3 months and usually more like a years mandatory spending in easy access to cover bills and spending I can’t do without. I couldn’t sleep without that. I remember a friend from works husband got made redundant and she was absolutely petrified after 2 weeks that he needed a job or they were going to start going in to debt and not being g able to afford their mortgage. I literally wouldn’t be able to sleep if I lived like that
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Hi FBAB,
Thanks for stopping by! Really sorry to hear about your cousin – never easy especially when it is sudden and at a young age. Sensible to keep a good cash buffer, when I get closer to my FI amount then I will be building up my cash buffer more, but for me now a year is too much not invested. That said, being worried after 2 weeks…. that really isn’t good! I am low on cash at the minute, but could still happily last a few months – and that is without cashing in the CTY that is my “cash equivalent” in the GTP ISA!
Cheers,
FiL
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Yep I keep about 10 to 15k cash. Would welcome your thoughts on how I do things as I’ve only been a high earner for about 5 years (was earning about 30k now 80k excluding retention bonuses ). I’m 37.
I have a pretty simple set up which I think looks OK.
I keep the cash in high interest current accounts and regular savers. Majority of retirement savings (and savings in general) go into my company pension for the tax break. I save about 14k a year into this including my not very generous 4% from my company and have about 125k in that which I’m Pretty pleased with given my earnings changed relatively recently .
I save 400 a month SAYE and SPP through work for another 60 a month tax saving which matures in 5 years and has a 25% gain atm.
That doesn’t leave a huge amount to save atm as I like to have a life (I’ve done my best to hedge against lifestyle inflation with the pension and Saye and SPP so I never see it) but I put 200 a month into my isa which goes into vanguard lifestrategy 100 (that has about 23k in it) and 700 a month into regular savers which slowly reduces my cash buffer as well (although it’s all still ready cash I suppose.) I top up all with interim lump sums as and when but these are the regular savers
I also have about 5k in p2p split between ratesetter and ablrate as what I deem my ‘high risk’ investment
I’m torn with my bonus which is about 20k (it’s a golden handcuff retention bonus and that’s after I’ve deferred half of it for two years for a 50%bonus which I figured was worth it!) between lumping the lot into my. Pension to save the tax and taking some or all to up my cash. I have a pathological hatred of tax now I’m in the 40%
Thinking about doing our kitchen though when I get my bonus in jan which is going to be alot but is the last thing I need to do to the house. My cash is low for me at about 10k so will top this up as because I’m 100% equity I need to be prepared to ride out volatility. I’ve also fixed my mortgage for 10 years to fix my debt costs so will be upping the savings now I’m not overpaying
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Hi FBAB,
Firstly, I am not a financial advisor, cant offer advise and everyone’s requirements / needs are different, do your own research etc. etc. etc.
Secondly, congratulations on the increased salary and the pension savings – a great start! What you want to do really comes down to your target etc. – do you know what you need to save up to cover your expenses? Do you want to be able to spend more when you retire? Then think about the forecast based on your savings and return rates, what age does that leave you? You have 18 years before you can get your pension (until they change the rules) will you be close?
Thirdly – where do you expect your income to go from here? Hit 100k a year and up you have an effective tax rate of around 65% as you lose your tax free allowance. Get over 150k a year and you not only get hit with 45% tax but also lose your pension allowance.
In addition, interest you earn on savings will start to count towards total income so you will get hit further. Your retention bonus will put you up to the 100k pretty much (so I believe you are required to submit a tax return) with any extra income so be careful. I would (and did) shove my entire bonus into my private pension – which meant I also got a tax rebate, which I put into my ISA.
As a higher rate tax payer, I would try to minimise my tax burden as much as possible (hence I use ISAs and Pensions so much).
Would also be interesting to know what rate you fixed your mortgage at? For me, I would follow what I do now. I keep my company pension contributions going, then work out the balance between ISA and Pension, depending on your personal circumstances.
One thing I would really recommend is that in future, any pay rise you get, put into your ISA – doesnt have to be the same fund, but use it to generate additional income, you can always use that to help you have a life 🙂
Depending on where you are based, you can always come along to the FI London meet ups, or happy to dig into more detail over email (if you contact me via the contact above!)
Cheers,
FiL
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Thanks and disclaimer is noted 😂
Yes I think I’m on track though will need to be more disciplined and save a bit more . I want to up my non pension savings to around 100k over the next few years just because I think that’s the level when your return really start to snowball and also allows me flexibility on when to stop work.
I’m paid as a % of my account so average anywhere between 5 and 15% increase. Lowest ive had is 2.5% last year as alot of clients were bought but pleased I still increased my account overall. So no it won’t take long to go over the 100k especially as I’m assuming (hoping) they will continue to give me new retention bonus. My next bonus will be the tricky one in 2 years as it’s 38k before tax but I can use previous years unused allowance to put this into my pension can’t I?
I hadn’t realised you have to fill tax return in at 100k. Virtually all my savings Income is in isas anyway so this won’t be an issue I earn less than 500 a year outside of isas
I also rent a room out for 350 a month tax free as well
I’m torn as I want to build up my non pension savings as I’ve been overpaying last few years following my divorce to get my ltv down to 65%. So haven’t saved as much as I’d like (plus I’ve been having some fun and doing the house up). I paid off nearly 40k (with a generous help from my dad who lent /gifted me the last 15k to get to the ltv I needed) in 2 years which was tough going but worth it
Re mortgage I used santander and fixed at 2.49%. Borrowed over 33 years at 1070 a month. I also get 10 quid a month back on my 123 account ! But I figured the 10 year horizon gives me a more flexibility. I can start to salt away more in isas and p2p and hopefully clear a good lump when I remortgage if rates have risen. Hence why I’m torn on paying the tax. I’m just conscious I don’t think the tax breaks on pensions are going to be around much longer the way things are going in this country
I’m going to up my pension contributions next year and also do another 250 SAYE to further hedge lifestyle inflation
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PS I’m based in Reading so not far.
Do you use p2p atm? If not have you considered it? Or too busy buying bitcoin 😂
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Pps by my calculations assuming 5% return and increasing 2% every year I should have 1.1m saved which should be enough to at least Consider firing. Although I’ll have to clear my mortgage which will reduce this to about 1m. That should give me 40 to 50k a year without touching capital. For me that’s enough I think
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Hi FBAB,
Glad the disclaimer is noted lol!
Yup, Reading not that far away! To answer the easy question, I dont use P2P and nor have I bought bitcoin (toyed at $200 but too high risk for me… ah hindsight..). Why not? I go for tax efficiency to start with, so filling up my pension, my ISA and my other half’s ISA. The aim being to be as tax efficient as possible…
I would definitely encourage you to up your savings rate as much as possible of course! Yes the first 100k is always the hardest, but then you see the dividends coming in (and increasing) every time and it gives a real boost and determination…
Yes you can use the last 3 years pull back (depending on personal circumstances), but you need to know what that comes in at. You have to use your current years allowance first. So for example say with bonus you hit 155k, that means your pension allowance is in fact 37.5k (I think!) rather than 40, so you really do need to have a careful think about exactly where that lands. This also assumes that the government doesn’t change the pension rules again…
This year my bonus will all go into Pension again as soon as it hits (assuming of course I get one…)
Good that as much as possible is in ISA, best way to keep the taxman at bay, however you would need to check when you lose the tax free savings allowance (I can’t remember if its 100k, or 150k) – so it soon adds up, highly irritating!
With a mortgage locked in for 10 years you are in a solid place, like you I am concerned on the tax breaks and so now focusing on using the allowance as much as possible – especially if you expect your income to keep going up. At that interest rate it doesnt sound like much point overpaying too much (sounds like you have borrowed around 200 – 250k?) given a low mortgage amount. My personal take would be to put every spare bit into ISA and Pension for tax reasons first. When you get to the stage of having cash left over after that then you can worry about what to do with the extra cash 🙂
One thing I need to do more research on is something that will let me use my capital gains allowance outside of the ISAs (other than gold). I could use my IFA and some funds to do it, but found out (thanks to Monevator) that Acc units I will still have to declare as income. For now *if* I get to the stage that I have left over cash I will likely through it at our mortgage.
Sounds like you should have a good whack in there for retirement, the other thing to think about is more into pension now, growing, then if the lump sum option is still available, you can use that to clear the mortgage.
Cheers,
FiL
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Thanks. My p2p investment (at least the ablrate one) is in an intelligent finance isa for 12% to 14% return tax free. I’m aiming to keep this about 10% of my investment amount. I’ll shift ratesetter over to it when i get the 100 bonus in March.
Yes definitely maximising my tax breaks while they last. I doubt I’ll hit 155k so won’t lose my interest allowance.
The problem I have is now is stuff I really want to do (change girlfriends car finish housework) is going to be a big hit on savings. Maybe I can get bank of dad to give me the money again lol. but on a serious note this was the first money I have ever taken off my parents I hate not standing on my own two feet and with his final salary pension he’s assured me he can afford it 😁
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Hi FBAB,
Glad to hear it is all tax efficient. To be clear its the 150k when you start getting the new tax band, and lose pension contributions – never say never. At 37 you have a good few years ahead to continue growing your career / hustles – I wouldn’t have dreamt I earn what I do now even 10 years ago…
I love the “wanting to change girlfriend” comment – really made me laugh 🙂 If you have all those to do I would really recommend a cash flow fund approach, so that your investments never falter, but your spending can flex up and down a bit (it’s been a life saver for me)
On a serious note as well – although it isn’t easy to talk about these things, depending on your dads estate, have you talked about IHT? The money he gets from final salary will stop when the worst happens, and if he ends up with it all in savings assuming he has a house, then there is a chance you will get hit with IHT, so better to try and discuss ways around it.
It’s a difficult conversation I have been having with my father, and depending on age, knowing where all the accounts etc. are. But thats a topic for another day!
I have to say from my side, I love having the GTP ISA and my other half’s ISA purely automated makes life a doddle, and I forget about my company pension (as its pre tax), and my personal pension so right now its pure autopilot, its fantastic!
Cheers,
FiL
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Thanks fire yes he’s got that all sorted he’s not uk based and everything is in a trust (he’s a Panamanian resident and qropsed his pension out of UK) not one of the Panama papers lot I hasten to add!
I will have to look into how I access it as and when the Time comes but it’s fully protected.
Just looking at changing the girls friends car not the girlfriend!
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Sounds like it is all very well planned out – and to be honest, there is all the cry over the rich avoiding taxes like this, but if they simplified the tax code it could be a lot easier – who doesnt try and reduce their tax bill… there is a reason the wealthiest get the best tax breaks… they pay the most tax!
Ah, thanks for clarifying, I thought you meant change girlfriend, change car etc… oops 🙂
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Yep it’s a tricky one. Dad’s not been in the country for 10 years anyway so he’s not avoiding anything as far a the UK are concerned. He was working in the USA before he retired so the way I see it and certainly his view he’s paid way more into both systems that he’s ever had out. The US aren’t as generous to retirees as the UK are so it’s surprisingly common for us and Canadian nationals to retire to Central and South America (a bit like us and Spain at least at the moment) . Health care alone was going to cost 15000 usd for him and his wife.
. Everything’s been declared to both the UK and US tax authorities (the irs actually have teeth where it comes to this kind of thing so my dad said he did not want to be looking over his shoulder the rest of his life) and is all above board. I fully expect hell have spent it all anyway so I’m certainly not banking on receiving anything.
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Don’t get me started on the tax side – I can sympathise with your father! I look at just how much I pay in tax each year and it is really rather horrific and that’s with my tax reduction techniques!
And the right way to do it – I would prefer my dad spent the money he has saved and earned over the years and enjoy himself! I am assuming no inheritance and no public pension… not ideal but if anything does happen with either it will add more to the comfort blanket!
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Hi FiL
Sorry to hear about your relative and hope all’s ok.
When I had to go over to HK at a moment’s notice in March due to a poorly relative, I used my redundancy money for the flight and didn’t think of the cost at all (that flight cost twice as much as my recent flight!). If not my redundancy money, I would have used my emergency fund, which I’m so glad that I have. Before I had such a fund, I used 0% credit cards, which I managed well but which I no longer wish to do – far easier to just have the cash.
My emergency fund has taken another battering recently so I’ll be topping it up.
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I know the feeling I’ve been splurging too much recently. I’ve not eaten too much into my fund just a few k but not saving enough. I’m not a stuff person but I like experience specifically holidays and live Music. I seem to have booked alot for next year already. Steel panther in January imagine dragons Feb. Lady gaga Feb (Girlfriends choice lol) skiing march. Michael Mcintyre April. Ed sheeran June.
Peter kay in September. I really need to turn off ticketmaster notifications lol
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In the years before I decided to sort out my finances, I went to a load of gigs/concerts so have cut down on those now – these days, I just go to a festival (one day), either Leeds or V.
I saw Michael McIntyre on tour recently in Hong Kong! 🙂
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Hi Weenie,
As long as you still enjoy them thats the main thing – didn’t realise Michael McIntrye was on in HK – I have to say I think I would enjoy seeing him live!
Cheers,
FiL
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Hi FBAB,
Its a tricky slope – you start and it soon becomes habit – as you say with experience it is slightly different and often worth it – main thing is do you enjoy it, and if so then not an issue as long as you are saving as well.
You may have all that booked in but doesn’t sound like you will need to pay for much come 2018!
Cheers,
FiL
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Hi Weenie,
Thanks for stopping by again, and appreciate the thoughts. As you say – short notice you can pretty much guarantee it will be expensive, this is what the emergency fund is for – and at least you are remembering to top it up after using it 🙂
Cheers,
FiL
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