Jan ’18 Income and Expenses

So it feels like an age since my December pay cheque landed and January has felt very tight indeed – including finishing with 39p in my bank account! There was also some fallout from Christmas and before which hit, but I will go into more detail below.

Income

So my pay to cover January (and for the next 6 months) has taken a hit. My company has started a running of a Share scheme, which of course I have taken out as its pretty much a no brainer (although some currency risk). This means that I have taken a pay cut this month and through to May, reducing my income by approximately 8%. I have purposely not changed any of my direct debits to force my savings higher.

Whilst in theory this is great, it does make life very difficult in terms of cash to survive the month – my cash flow fund is getting hit and not going up which isn’t good.

Expenses

So this is going to be painful. The fallout from Christmas has now finished through the wash, and I have had to take a hit this month but it is now out in the balance.

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.	39%
Groceries	All the food and other stuff needed for home	4%
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….	1%
Eating Out	I include purchased lunches in this as well as meals out etc.	1%
Other	My catch all for anything I may have missed….	10%
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)	44%

So there we have it. Looking back and at just how low I managed to keep my standard spending which explains why I managed to keep the savings rate so high. I also doubled the funds going into my rainy day fund to help force the savings.

The reality is my Cash Flow Fund took a hit to keep my GTP ISA going up.

So, apart from keeping my alcohol and food bills to an absolute minimum (including making my own lunches, reducing my transport costs, the only thing that was a big hit was the Other category).

The Other category basically caught everything, and allowed me to balance out the residue from November / December. I’ve been back through all my receipts, visa bills and everything and I am still struggling to find out where this all came from. The whole 10% is basically stuff I am struggling to work out how I spent it as it seems that I have counted everything already. Visa bills match receipts, there are no errors or fraud on my account so there we go.

Oh well, a very tight start to the year and no savings benefit from it. The flip side is I made it, so hopefully February will mean that I can actually drive my savings up and have a little more of a life than I did in January, with only 1 day out!

How was your January?

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Contemplating Insurance

So one of the things that often gets discussed is the level of insurance that you do, or do not, need. This Christmas gave me some time to think about my insurance, and what to do about it (and on the back of a conversation with a work colleague). So a complete essay of mindless drivel follows!

So some of the insurance is a no brainer for me:

• Car Insurance. Well I can’t really drive without it so no choice there
• Buildings (& contents) insurance. Well a stipulation of my mortgage is that I have buildings insurance so I can’t not, and I have contents insurance as it would not be cheap to replace everything I have here (and I don’t just mean the food and wine :)) – add in clothes, tv, shoes, food, alcohol, white goods etc.
• Travel Insurance – as and when needed. In the past I had an annual one, but nowadays as I have cut back on travel I don’t need it as much. That said I would always have some for when I travel, it just isn’t worth the risk not to for me. I have once had the misfortune to need to call on it (that’s a down the pub discussion)

There are also two other insurances that I have at the minute, that I am contemplating if I really do need. Life / Critical Illness insurance, and Income Protection. I am actually over insured on these at the minute as I had an existing policy before I joined my new company. The new company has these, but not to the level I would have liked. And who knows how long I will be at my current company, and if I move, will the new company offer anything similar?

I ended up looking at both if I used my current company one and if not where that would land me.

First up – why do I have these insurances? Simple – as I may have mentioned once or twice before on this blog… we have quite a large mortgage, in fact larger than my other half could cope with if she had to pay the whole lot herself, never mind bills. I want to know that if anything were to happen to me she could remain comfortably in our home without money worries (and she is not yet the best on that side anyway!).

So, Life / Critical Illness insurance. This will pay out a lump sum if I either die or have one of a long list of illnesses, and is sufficient to completely pay off the mortgage.

The Income means if I am out of work for whatever reason (non critical illness) or something else happens, I can continue to pay the mortgage, bills and invest, enjoy life.

I am now in a position where my retirement funds are greater than the outstanding balance of our mortgage, however a large chunk of this is in my pension and so can’t be accessed for some time. So, working backwards…

When I can access my pension at the age of 55, I will be able to use drawdown and this should cover my monthly mortgage cost (and a little bit of bills, but not a lot). This means in reality, I need to look at the time period from now until I hit 55 (or maybe 57 given the governments never ending tinkering).

Realistically this means I need to be able to cover the time through until I can access my pension. To cover this time then the mortgage and bill money needs to come from ISA and cash reserves. For now I will discount cash reserves as they are low at present, but I will gradually increase them. One day I will get to that elusive 6 months of income!

My ISA investments will now cover approximately 10 years of mortgage payments (excluding dividends), subject to volatility. With my current employer this would be sufficient to get me to my pension age, however should I move I will be short by a few years. For these things I always go on a worst case basis, so I am going on the assumption that I will change jobs, or my company will stop the benefit.

This means I am about 2 or 3 years short of mortgage payments. In reality I am adding at least 1 mortgage payment a month into investments and savings, so lets say its 18 months I am short.

If I were to stop my insurance payments, and invest them instead, then in 18 months that would buy 3 more months of mortgage payments, bringing me down to 15 months.

If I were to stop paying the insurance then I would invest the difference into an Investment Trust.

The big question for me is do I risk it? Technically, we could sell up, move to a small property somewhere out of London and be FI already – just not in a lifestyle we would want or be happy with!

If I can cover my side of the mortgage, then we could really tighten the purse strings and survive without moving. Now, if I change jobs (you never know with me!), then I may lose the companies cover which means I will have to cover the whole period.

Right now I am borderline. If I knew I was going to stay in my current company for at least another 3 years then I would just cancel the insurance and throw it into my GTP ISA. I will keep an eye over the next couple of months and then maybe make a decision.

What’s the worst that could happen?

So, flipping it the other way around – what would be the worst case? Suppose I did lose my job and there was no insurance payout – what would I do?

Well first up I would hammer back all expenses to the absolute minimum – no alcohol, tighter food budget (if I am at home I will have time to cook from scratch etc.), and I wouldn’t have to be paying my insurance premiums either. No eating out, no drinking out. I think I could make my cash reserves last probably 8 months when they are back where they should be (right now probably only 5 or 6 months. Sell out my GTP Investment Trust cash replacement would buy me a little longer.

So I could probably stretch to a year before I need to sell anything, in which time I should get dividends to cover another couple of months. Now I would hope by this stage that I would have found another job, or be back earning in some way.

Within this year I would know if I could or could not work again, so assuming I can’t work again then that means we would probably have to make some very tough decisions. In all likelihood we would move out of London, or at least downsize.

As part of the downsizing that would mean we would buy a smaller property with no mortgage and free up a reasonable chunk of cash to generate income. I suspect this would leave me with enough to pay the bills and survive. So from a numbers perspective yes we would be ok, but probably not happy.

So supposing we choose not to sell up? Then I am not quite there yet sadly. I am close I know that much, but still not quite. Cancelling the insurance and investing it would get me there faster, but would remove any peace of mind.

So for now, to help me sleep at night, I will continue to pay the insurance. This time next year however I expect that regardless of where I am working then I will be in a position to cancel it.

What would you do?

 

Looking forward to 2018

As regular readers may know, I don’t really do calendar year end as I have said before. I measure everything on the tax year simply because it makes my life much easier – my pension statements come through and validate what I have put in, my ISAs allowances go for that period as well so why make life harder for myself.

I’ve also never been one for celebrating New Year – it is an arbitrary date with no real significance to me – in fact this year I was in bed on New Years Eve by 10:30pm – I slept through all the fireworks. It was bliss – it meant I could go for a nice walk on New Years Day at 8am, it was lovely and quiet with only dog walkers and parents with small children out and about, and not many of them!

A lovely refreshing walk, unlike a lot of people I know who didn’t surface until midday with a rather large hangover, meaning they wrote off the entire day – the last day off before the day job kicks in.

Having said all that, it is quite interesting to see how 2016 went, and I do track my annual expenditure on both calendar and tax years, just to keep me busy.

Looking back at 2017

So firstly I guess, what changed from 2016? Well, from my essential categories, my bills, food and alcohol for home and holidays all came down from 2016. The flip side is I spent more in 2017 on alcohol and eating out. Ooops. I guess it all balances out!

Overall however I decreased my total expenditure by approximately 15% meaning that my savings rate (excluding pensions, bonus etc.) was a shade under 33%. With some really good months tucked in there my rolling 12 month savings rate is starting to move up towards 40%. Happy days!

If I include my pension and bonus (which went into pension) in my income, my overall savings rate was just under 54%. My total pension provisions went up by almost the same as my gross salary. I can’t even describe how ecstatic I am at that! Even though a large chunk of this is in pensions which I can’t access for at least another 13 years, it puts me in a really strong position.

I am noting the difference in my mentality as well knowing that I have those funds in place, and is making me look at if I can drop some of my insurance now.

So what happened to my initial dry runs from last years thoughts?

Dry run 1 – savings. I managed to stick the GTP ISA income and not take anything out, and in addition later in the year I increased my rainy day fund monthly contributions, so forced myself to run things through. The downside is that my cash flow fund has not really gone up at all. I need to work harder on this.

Dry run 2 – alcohol expenses. Well… technically I did reduce the expenditure…. by just under 1% from 2016! I think I need to work harder on this!

Dry run 3 – other expenses. This was a bit more successful – I reduced them by approximately 10%. Not bad, but not enough as still a high expense, but then not a surprise given some work in the home.

The Christmas Break

So for me the Christmas break was in general good. I had a spell of being unwell leading me to not eat or drink for over 48 hours, and my other half considering calling an ambulance. I accept I wasn’t on great form but I don’t think it was quite that bad.

On Christmas Day, given that I was cooking and providing alcohol, I decided I wanted to see if I was well again or not. How could I tell how I would be after 48 hours with only 2 cups of mint tea?

Simple – a shot of beautifully chilled Zubrowka – a delicious vodka at 9am. The good news was that I held strong, which meant I could enjoy the majority of Christmas Day feast.

Needless to say then for the rest of the break I made up for the lost time. So much so I was actually rather embarrassed when I was putting the recycling out. This led me on to think about what do I want to do differently in 2018.

Firstly, I aim to reduce my alcohol consumption.

Secondly, I am aiming to lose weight. Taking myself from 15 stone down to 13 stone over the course of this year.

I won’t be tracking the first too closely, but for the second I will. In the first 3 weeks of this year I have so far done a very good run on this, with only drinking at the weekend (granted this is partly due to long working hours – 14/15 hour days and today is the first day since 2nd January I have done less than 5 hours work).

Have I noticed any difference? I really have, the mornings aren’t that different but are still different, slightly less lethargic (depending on exactly how much I have drunk) and a not quite falling asleep so early in the evenings.

The biggest difference I have seen however, is in my weight. Granted I have made some salads for lunch, however since the beginning of the year I have lost almost 3/4 stone. I am already the lightest now I have been in years and I am really happy. That’s the easier part though as that is simply from reducing empty calories from alcohol.

The next part is going to be harder, but let’s see. I look at it as I need to lose 1/2 stone each quarter so I am already well ahead.

In terms of savings it is going to be the same old same old. I want to push my net savings rate higher, I want it over 40%. If I am lucky enough to get a pay rise this year, I will add it into my GTP ISA monthly direct debit so that I build up even further.

To be honest, that is about it. Continue to track expenses and retirement funds. Grow them as much as possible, and continue to throw myself into my job that is helping to propel me to Financial Freedom. Oh and drink good coffee, wine and whisky!

Cheers!

Have you made any new years resolutions?

Dec ’17 Go T’ Pub Performance

So I have to say I really am enjoying this portfolio. I really don’t have to think about it, it just keeps on going (a bit like some batteries). I’ll be honest the main time I check it more than about once a month is the run up to the auto purchase (to see if I need to add extra funds to make sure I can buy at least 18 units), or when I am expecting a dividend payment – still no sign of Decembers VWRL payout as yet…

For the full details over all of the portfolios as a summary please refer to the full month end report – this is specifically looking at what has happened on the Go T’ Pub portfolio only.

So the key bullet points for this month:

• New Funds added. As always, the regular contribution of £1,100 has gone in however I added an addition £40 to this, taking it up to £1,140 so that I was certain to get 18 VWRL units
• This month the portfolio threw out nothing 😦
• No withdrawal was made
• Left over cash from the previous purchases was left in

So all in all a very quiet month, no drama, no real action (other than the little extra funds that came out of rainy day savings).

Overall performance: The starting value was £13,025.79, with £1,140 in new funds added, and £0 withdrawals, meaning total starting value was £14,165.79. We finished the month on £14,557.75 so the total performance across the whole portfolio was 2.77%. I can most definitely live with that! The challenge is that VWRL seems to be getting more and more expensive, and soon I fear I won’t be able to add enough to secure 18 units each month… unless we get a drop. Oh well, that is life I guess!

So, lets get into the detail…..

VWRL ETF

So the standard units were purchased – a further 18 units purchased at £63.28 per unit, making the average cost per unit of £61.27 So it just keeps ticking along and increasing the number of units which all helps!

So – how does this now look as the graph data slowly builds up?

A clear gap is starting to open up already between contributions and stock value – although to clarify this is only the VWRL numbers. That is still ticking up nicely and showing a gap already, however as soon as the next dip comes that will quickly get reversed, but will at least allow me to buy more units – a mixed blessing.

Cash vs. Investment Trust

So for me this was the more interesting part of the overall approach – I transferred 50% of my last remaining cash ISA over to an IT and will be tracking the two together to see how things perform. Remember – you really, REALLY shouldn’t do this. Keep cash on hand, be able to sleep knowing your bills would be covered etc.

So, how is it looking?

Cash	Now stands at £5,127.18
S&S ISA IT	Now stands at £5,377.75

Another whole 4p from cash. I can’t believe how well that is doing ;-). Seems CTY had a major push, and with last months dividend reinvested that also helps the gap push further ahead. If it remains like this, it means I could cope with an almost 5% drop in the value of CTY and still have the same value as the cash ISA. I won’t be truly happy until I can cope with at least a 30% drop but that feels like it is some way off.

How does the rollercoaster look now? Well, very much like this:

Wowser – someone really did get into the party move over Christmas!

Conclusion

It wasn’t just me who had a rather good Christmas, seems the GTP ISA also did! In a relatively short period of time the ISA is almost at the £15k mark, definitely not something to be sniffed at!

I am also tempted, when I have the spare cash, to chuck some money in to a “active investment” pot. Basically shove in say £3,000 and then buy chosen stocks, reinvest dividends in them, and see if I can boost my performance and see where I end – but that is for another day!

Dec ’17 Performance

So the month has ended and the festivities have finished, the grim reality of the workplace is back in full swing again (and more), and so its time to take stock of the performance across my portfolio see how soon I will be able to escape, 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 🙂

So, performance wise in December, I failed to keep tracking each week so it is a bit of a surprise towards the end of the month, so let us have a look at what has happened….

Portfolio	Performance	Notes
Company Pension	1.55%	No income generated as all funds are in growth or reinvested
Personal Pension	0.93%	No income generated as all funds are in growth or reinvested
ISA 1	0.92%	No income generated as all funds are in growth or reinvested
ISA 2	0.53%	The performance does not include the income that was paid out into my account, and was another very good month of payouts!
ISA 3	2.49%	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.
ISA 4	2.77%	Go T’ Pub ISA
FTSE-100	2.68%	This excludes any dividends
FTSE-250	1.07%	This excludes any dividends
FTSE-All	4.66%	This excludes any dividends
S&P500	0.98%	This excludes any dividends
Dow Jones	1.84%	This excludes any dividends
VWRL	1.81%
VHYL	1.67%
GBP/USD	-0.03%	This was taken on the spot rate on the close of the last day of the month. Going forwards I will pick up the exchange rate from www.xe.com for consistency and real life 🙂

So overall not too bad a month – ISA2 continues to be the laggard here, but then I am taking an income from this so it’s not surprising that it didn’t have such a good performance.

All in I can’t really grumble at those numbers, but it always helps to take a view of the bigger picture, so once again a pretty graph time!

So a nominal £10,000 invested in all the vehicles above (I have ignored indexes as I would need to track these individually via a tracker rather than just where they are, the above is things you could technically buy).

So in first place, by a reasonable amount, is my actively managed ISA. That is satisfying, although I expect performance to start to lag as I move more into trackers and Investment Trusts to balance the size. And who knows, have I just been lucky?

Second, by a whisker (although maybe by a whisky would be better, but I digress), is my personal pension, managed by my IFA. Yup, even when you take in all the charges associated, my IFA still isn’t doing too bad – although maybe I won’t tell them that….

In third place, VWRL. Looks like maybe a good choice for the Go T’ Pub ISA after all!

So I am sure some may ask is my IFA just a closet tracker for VWRL? Well I can happily say no as I know what is in it. VWRL has approximately 50% in North America, my pension has about 20% – the differences go on.

All in all my total retirement pot grew by close to 2% for the month, including additional funds, so not too bad.

How was your final month of 2017?