The Full English – The Sam Vimes Boots Theory

What am I buggering on about this week?

I’m really enjoying my Starling bank accounts features, so it was good to read an article in The Verge this week about the touted move by Monzo into the US (1). Much of The Verge article is fawning which is unsurprising given the readership overlap between The Verge and the challenger banks. However the US market is ripe for the taking, struggling to even move to chip and pin payments or any sort of account switching service (2). A good time to be invested in one of them.

One of the features I’m really enjoying is the ‘goals’ or ‘spaces’ feature of my Starling account. After keeping my accounts last year I’ve been able to set accurate budgets, and the spaces allows me to put money aside without it ‘appearing’ in my balance. This has meant I can build up money for professional expenses, without having to dip into my credit card. I’m also, for the first time ever, putting money aside each month for clothes and holidays, meaning I don’t try to find the cash as and when I need it to replace holey shoes.

Putting money aside every month for predictable expenses, alongside having an emergency fund, is a cornerstone of good financial stability. The Boots Theory of Socioeconomic Unfairness is a great way of explaining why. If you’ve not heard of the theory, it’s taken from the late great Terry Pratchett’s Men at Arms (3, 4)Captain Samuel Vimes thought process goes that “the reason that the rich were so rich… was because they managed to spend less money”. An example:

“Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.”

A good theory is often one that is obvious once it’s pointed out. This is one of them. I’ve fallen into this trap so many times. I’ve continued to live like a student, buying cheap clothes when my current threads wear out. I’m now trying to buy better quality (when it’s on sale of course), with the intention things will last longer. The Barbour jacket and flat cap isn’t far away.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://www.theverge.com/2019/6/13/18663036/monzo-starling-mobile-banks-uk-report
  2. https://www.cnet.com/news/apple-card-beware-monzo-is-bringing-its-bank-of-the-future-to-the-us/
  3. https://en.wikipedia.org/wiki/Sam_Vimes
  4. https://moneywise.com/a/boots-theory-of-socioeconomic-unfairness
  5. https://citywire.co.uk/investment-trust-insider/news/what-is-board-of-flagship-woodford-patient-capital-doing/a1237314
  6. https://www.thisismoney.co.uk/money/markets/article-7121795/Backlash-hits-UKs-largest-investment-platform-Hargreaves-Lansdown-investors-flee.html
  7. https://www.thisismoney.co.uk/money/mortgageshome/article-7124605/Majority-UK-homeowners-expect-house-prices-grow-despite-property-market-slowdown.html
  8. https://www.timeout.com/london/news/this-new-website-will-help-you-find-your-nearest-zero-waste-shop-and-save-the-planet-060619
  9. https://www.theguardian.com/business/2019/jun/12/worlds-biggest-sovereign-wealth-fund-to-ditch-fossil-fuels
  10. https://www.bbc.co.uk/news/business-47643456
  11. https://www.theguardian.com/environment/2019/jun/13/mild-but-windy-winter-was-greenest-ever-for-uk-energy-use
  12. https://www.independent.co.uk/news/world/americas/climate-change-breakdown-arctic-frost-thawing-canada-environment-a8959056.html
  13. https://www.dailymail.co.uk/news/article-7139695/British-pensioners-run-money-10-YEARS-die-senior-economists-warn.html
  14. https://www.evidenceinvestor.com/neil-woodford-a-lesson-in-humility/
  15. http://aswathdamodaran.blogspot.com/2019/06/teslas-travails-curfew-for-corporate.html
  16. https://monevator.com/trust-life-assurance/
  17. https://theescapeartist.me/2019/06/12/whos-the-bitch-in-this-relationship/
  18. http://www.retirementinvestingtoday.com/2019/06/back-to-powerful-fi.html
  19. https://earlyretirementnow.com/2019/06/12/my-thoughts-on-small-cap-and-value-stocks/
  20. https://youngfiguy.com/mrs-yfg-what-i-wish-i-knew/
  21. https://cashflowcop.com/introvert-make-extra-money-working-from-home/
  22. http://quietlysaving.co.uk/2019/06/14/half-a-century/
  23. http://thefirestarter.co.uk/perfection-is-the-enemy-of-happiness/
  24. https://ditchthecave.com/unpopular-opinions/
  25. https://drfire.co.uk/unpopular-opinion/
  26. https://indeedably.com/against-the-tide/
  27. https://awaytoless.com/thought-experiment-6-miss-way/
  28. https://asimplelifewithsam.com/2019/06/14/saving-ninja-thought-experiment-6/
  29. https://thesavingninja.com/unpopular-opinion/
  30. https://www.msziyou.com/dating-and-fi/
  31. https://pursuefire.com/monthly-net-worth-report-12-may/
  32. https://www.iretiredyoung.net/single-post/2019/06/14/Early-Retirement—our-net-worth-investing-journey-1
  33. https://www.jackwallington.com/allotment-month-43-priorities-supports-and-progress/
  34. https://agentsoffield.com/2019/06/09/i-love-big-butts/
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The Full English – Student Loans Review

What am I buggering on about this week?

Lately I’ve been watching lots of finance videos/ podcasts. One of my guilty pleasures is The Dave Ramsey Show. If you haven’t seen it, it’s a highly successful call-in show based in the US, where Dave dishes out financial and often plain common-sense advice, which is syndicated and streamed on YouTube. It’s also sometimes akin to Jeremy Kyle, and I watch with morbid curiosity. Dave, being in the US, takes a fairly aggressive approach towards student loans as part of a drive to get rid of debt (1, 2):

But here across the pond we have a very different student loans structure. I did have to take a loan for my education, but luckily it was Plan 1. The current interest rate (1.75%) is less than the RPI. In practical terms my debt is reducing in value even if I don’t pay it off. I also had a maintenance grant with no expectation of repayment. These have since been scrapped. The student loans system in the UK functions more like a graduate tax. You only pay once you earn over a certain threshold (dependent on your plan), and then you pay a nine percent of those earnings. There’s lots of useful resources to guide you on this, including the government website (3, 4, 5). Another podcast I’m enjoying, Meaningful Money, explains it really well (6):

I’m very thankful I’m not on Plan 2, the current scheme. It’s significantly more painful than my scheme. The interest rates are significantly higher (3):

Student Loan rates

Six bloody percent! And because of the structure of it you only pay 9% of your earnings over the threshold, so your actual repayments are fractional. It just sits there, accruing until you reach the 30-year post-graduating threshold when it gets wiped. The only people who stand a chance of clearing it are the higher earners (>£50k), but if you’re just over that mark it will act as a continuous drain on your monthly takehome pay.

Now cleverer bods than I have clocked the coming hole in government funds. Hence the recently commissioned government review. It reported last week, and the findings have prompted much discussion (7, 8). They include such progressive ideas as reducing the maximum from £9,250 to £7,500, and reintroducing means-tested grants. They counteract this by bringing the repayment threshold down, and extending out the cancellation deadline to 40 years. The net result is that the highest earners will still pay more than the rest but less than under the current system. Middle earners will pay more, and more will pay off in full. Lowest earners are better off (9, 10).

Lifetime student loan

The whole system seems ponderous, and designed to confuse. The treasury would be happier with the proposed scheme (one suspects), as more people will pay it off in full. Ultimately these are all by-products of the attempt to commercialise higher education under the guise of widening access and equal opportunities. Beware of greeks bearing gifts.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://www.daveramsey.com/blog/how-to-pay-off-student-loans-quickly
  2. https://youtu.be/CodCjMrYB1Y
  3. https://www.gov.uk/repaying-your-student-loan/what-you-pay
  4. https://www.moneyadviceservice.org.uk/en/articles/repaying-student-loans
  5. https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/
  6. https://youtu.be/08NVnDG7UlY
  7. https://www.bbc.co.uk/news/education-48451474
  8. https://inews.co.uk/news/education/slash-tuition-fees-and-student-loans-interest-government-review-to-recommend/
  9. https://www.bbc.co.uk/news/education-48459910
  10. https://www.thetimes.co.uk/article/cut-university-tuition-fees-to-7-500-and-slash-interest-on-student-loans-review-n8lbkhz3s
  11. https://www.thetimes.co.uk/article/newcomer-vanguard-knocks-hargreaves-off-the-top-spot-g08jx50w9
  12. https://www.telegraph.co.uk/investing/funds/blackrock-launches-rival-vanguard-lifestrategy-funds-should/
  13. https://www.bbc.co.uk/news/business-48433692
  14. https://www.theguardian.com/environment/2019/may/30/renewable-energy-jobs-in-uk-plunge-by-a-third
  15. https://www.theguardian.com/money/2019/may/31/uk-house-prices-slump-as-confidence-remains-subdued-says-survey
  16. https://www.thisismoney.co.uk/money/mortgageshome/article-7090137/UK-house-price-growth-falls-0-2-consumer-confidence-remains-subdued.html
  17. https://www.theguardian.com/money/2019/jun/03/neil-woodford-blocks-investors-from-pulling-cash-from-flagship-fund
  18. https://www.msn.com/en-gb/news/world/no-way-to-stop-it-millions-of-pigs-culled-across-asia-as-swine-fever-spreads/ar-AACtx3M?ocid=spartanntp
  19. https://www.bbc.co.uk/news/business-48553193
  20. https://www.thisismoney.co.uk/money/investing/article-7102797/Casual-investors-blocked-investing-10-P2P-firms.html
  21. https://www.wired.co.uk/article/uk-coal-power-energy-renewables-new-record
  22. https://www.independent.co.uk/news/uk/home-news/trump-uk-visit-penis-stansted-airport-protest-climate-change-real-essex-a8941271.html
  23. https://www.theguardian.com/business/nils-pratley-on-finance/2019/jun/06/nicky-morgan-must-ask-questions-of-regulator-after-neil-woodford-saga
  24. https://citywire.co.uk/funds-insider/news/david-stevenson-beware-the-risk-of-uk-stock-market-bias/a1232783
  25. https://monevator.com/life-expectancy-for-couples/
  26. https://monevator.com/blackrock-mymap-fund-of-funds/
  27. https://monevator.com/index-funds-versus-superstar-investors/
  28. https://www.ukvalueinvestor.com/2019/06/sainsburys-discounted-share-price.html/
  29. https://theescapeartist.me/2019/06/05/the-inestimable-advantages-of-paying-yourself-first/
  30. http://www.retirementinvestingtoday.com/2019/06/back-to-powerful-fi.html
  31. https://cashflowcop.com/should-i-charge-my-child-rent-the-pros-and-cons/
  32. https://cashflowcop.com/the-morning-brew-vs-finimize-financial-news-summarised-for-busy-people/
  33. http://earlyretirementextreme.com/the-danger-of-lifestyle-consumption.html
  34. http://diyinvestoruk.blogspot.com/2019/06/tr-property-final-results.html
  35. http://diyinvestoruk.blogspot.com/2019/05/capital-gearing-final-results.html
  36. http://quietlysaving.co.uk/2019/06/07/investing-mistakes/
  37. http://quietlysaving.co.uk/2019/06/01/may-2019-other-updates/
  38. http://thefirestarter.co.uk/caravan-psychology-and-economics-101/
  39. https://ditchthecave.com/break-the-routine/
  40. https://drfire.co.uk/may-2019-report/
  41. http://fiukmoney.co.uk/may-19-net-worth-and-monthly-update-10-504531-69688/
  42. https://thesavingninja.com/im-now-a-property-investor-savings-report-11/
  43. https://littlemissfire.com/the-importance-of-side-hustle-diversification/
  44. https://awaytoless.com/monthly-spending-may-2019/
  45. https://gentlemansfamilyfinances.wordpress.com/2019/05/31/month-end-accounts-may-2019/
  46. https://gentlemansfamilyfinances.wordpress.com/2019/06/06/whats-woodford-good-for/
  47. https://gentlemansfamilyfinances.wordpress.com/2019/06/05/waspi-hypocrisy/
  48. https://gentlemansfamilyfinances.wordpress.com/2019/06/07/green-money-greencoat-uk-wind-share-offer-update/
  49. https://financeyourfire.com/2019/06/04/portfolio-update-may-2019/
  50. https://pursuefire.com/monthly-each-way-betting-report-11-may/
  51. https://obviousinvestor.com/p2p-lending-portfolio-update-for-may-2019/
  52. https://www.iretiredyoung.net/single-post/2019/06/01/Early-Retirement-Couple—Part-2
  53. https://www.iretiredyoung.net/single-post/2019/06/07/Early-retirement-costs-targets—May-2019
  54. https://asimplelifewithsam.com/2019/06/07/may-spending/
  55. https://simplelivingsomerset.wordpress.com/2019/06/03/an-engineering-cameo-at-the-royal-bath-west-show/
  56. https://indeedably.com/gone-awry/
  57. https://indeedably.com/midlife-crisis/
  58. https://lovelygreens.com/when-to-harvest-potatoes/
  59. https://twothirstygardeners.co.uk/2019/05/wild-bees-natural-hive-attract-allotment-gardeners/
  60. https://twothirstygardeners.co.uk/2019/05/wormwood-making-vermouth-vermut-el-bandarra/
  61. https://agentsoffield.com/2019/05/26/first-harvest/

The Financial Dashboard – May 2019

The goals for May were:

  • Sell £100 worth of stuff
  • Finish my portfolio spreadsheet
  • Get two extra blog posts out
  • Re-mortgage
  • Set up new bank accounts

Checking the assets and liabilities:

May AssetsMay Liabilities

These are taken, as always, from my Beast Budget spreadsheet. This month my net worth fell by 1.41%. A number of reasons for this: we re-mortgaged which included a fee, I moved the date I pay into our joint account resulting in less actually in my accounts, the markets dipped a bit, and I had a number of work courses which all required payment at once.  We finally paid off our loan to our family member for the wedding, and I’ve started setting up new accounts to squirrel emergency savings into.

Goals:

Goal achieved: Sell £100 worth of stuff

Finally got rid of a big ticket item that’s been taking up garage space, along with some smaller stuff. Actually smashed this goal, making £250 into the joint account. For now this goal will be on hold while I send more stuff to charity shops.

Goal failed: Finish my portfolio spreadsheet

So I tried the Rebo app developed by Andy at Liberate Life, but found it too simplistic for what I wanted (1, 2). I’m working on another hybrid google sheet which I’ll probably start debuting for next months end of Quarter review.

Goal achieved: Get two extra blog posts out

This was to get me back into the swing of posting regularly. There’s some fairly long posts which have been taking me a while to draft, hopefully these will be out soon.

Goal achieved: Re-mortgage

We’re in a slightly difficult situation, in that we have a split pot mortgage as a result of our various house moves. The larger of the two mortgages came to the end of it’s 5-year 4.29% fix last month; a reminder of days when we only had a 10% deposit and where the economy and house prices were looking strong with all the talk of rising interest rates. Hindsight is 20-20. We umm-ed and ahh-ed about what to do. Given our intention is to sync up the two pots within the next five years here’s our thinking:

  1. A tracker rate appealed for similar reasons as set out by 3652days last year (3). Namely:
    • If we assume a no deal brexit there will likely be a recession. BoE unlikely to raise rates. Tracker wins.
    • If we continue to have delays to Article 50 then the knock on economic uncertainty is likely to keep a dampener on inflation/ economy. BoE unlikely to raise rates. Tracker wins.
    • If parliament passes Mrs Mays deal (unlikely) then whilst the pound and economy may rise from their current torpor, it’s unlikely this will be within the two year tracker period. It will take time for things to gear up again. Tracker – not much difference.
    • Depending on the new leader of the conservatives and de facto PM, we can theorise potential outcomes – either they’re a hardline no-deal leader, in which case they’d probably try to push a no-deal brexit by waiting the damn timer out (and therefore see bullet point one)… Or they try to unify the party with the promise of a new deal in compromise with labour. Such a deal will likely struggle to get through parliament, because it’s unlikely to resolve the Irish border or pacify the wings of either party. Both strategies will push towards a general election, which the bookies now reckon is more likely in 2019 than not (4).
    • If we assume no brexit, either through a further referendum or a complete “betrayal” by the conservatives or a new government, then the economy may bounce back.  Routes to this would be either a general election and coalition Lib/Lab/Green Gov, or (due to our first past the post system) a Conservative majority led by a moderate trying to appease the centre. This will again take time. The economy’s not going to be able to come straight out of the blocks flat out whilst still wading through the political fallout of such a decision. Tracker – not much difference to fix.
  2. The tracker rates available to us were ~4-5% within the same bank we currently use. Rates available at other banks were ~1.55%.
  3. Fixed rates available to us were ~1.6% for 2 years, up to around 2% for a five year. Fixed rate pros and cons:
    • If we go for a longer rate fix we might as well change bank for the lowest rate possible. A long fix nullifies the tracker arguments to an extent due to timescale. Pros – financial stability and predictability. Cons – lack of flexibility and difficulty consolidating mortgage pots resulting in logistical and cost  implications.
    • If we fix for a shorter rate we can stay with the current bank. Pros – consolidating mortgage pots next year, cheaper rate vs long fix, flexibility. Cons – risk of interest rate rises in the next two years.
  4. Inflation is currently 2.1%, close to the BoE target of 2.0%. Whilst this remains that way they’re unlikely to change the base rate. The current outlook is mixed and largely Brexit dependent, but the BoE is predicting a base rate of 1.25% by 2022, with the next move late this year or early in 2020 (5, 6).

Our decision was somewhat reactionary and behavioural. We were burnt by our lack of flexibility in the past. Our current home is not our dream home, and we intend to move in the next five years. We favoured the flexibility of a short fix or tracker. The tracker rates at our current bank were not competitive. If we moved banks we could split the pot across banks, but this would likely make consolidating the mortgage next year (when the smaller pot’s fixed rate ends) more challenging. The short fixed rate at our current bank was close enough to tracker rates as to make no odds. We’ve therefore fixed for two years, gambling that rates will only rise by ~1% in the interim, dependent on Brexit outcomes. Both pots average ~1.65%, meaning our mortgage rate is less than RPI inflation.

The kicker here is that the drop in our interest rate actually meant that we could reduce our term whilst keeping repayments the same. It now sits at a nice 20 years, with the continued option of a 10% overpayment. We calculated either of us can pay the mortgage on our own independently, and we could tolerate up to a 15% interest rate (which would be seriously dire days) (7). It’ll be interesting looking back on this in the future, did we make the right gamble?

Goal achieved: Set up new bank accounts

Our 5% Santander regular saver matured this month, and Santander have reduced the interest rate to 3%. Santander have also changed the terms on their 1-2-3 account, which we’ve been using for our joint account. I’m therefore in the process of moving us over to First Direct for their £100 switching bonus and linked 5% regular saver (8). I’ve also opened a Nationwide Flex account to benefit from their 5% interest rate on balances up to £2500 for the first year (9). In the next few months I’ll add a Marcus account to this mix for my emergency fund over £2.5k.

Budgets

  • Groceries – Budget £300, spent £264.72, last month £184.25. We hosted a lot this month, so spent more than usual but well within budget. I’ll likely decrease my self-imposed budget limit soon.
  • Entertainment – Budget £150, spent £139.47, last month £99.38
  • Transport – Budget £460, spent £119.25, last month £851.53. Back on track.
  • Holiday – £150, spent £0, last month £0
  • Personal – £100/ £15/ £41.88
  • Loans/ Credit – £350/ £407.40/ £88.97
  • Misc – £50/ £59/ £121.92. Misc payments this month:
    • £25 on a sewing machine
    • £25 on a carpet cleaner
    • £9 on gardening gear

In the garden:

Things are getting wild, overgrown and many an evening is spent weeding. Our salad crops are providing plenty of dinners, and the first of the spring onions and early potatoes are nearly ready.

Goals for next month:

  • Finish my portfolio spreadsheet
  • Compare current insurance rates
  • Look into further financial planning: wills and income protection
  • Plan healthy weekly dinners
  • Exercise at least 3x a week

What’s in the pipeline: (Life continues to get in the way of blogging)

  • Stoicism and the finance world
  • Should I buy an electric car?
  • Q2 2019 – Green Credentials
  • Property Renovation Lessons Part III
  • Plus the usual Full English Accompaniments and other drivel…

Happy June everyone,

The Shrink

References:

  1. https://reboapp.co.uk/
  2. http://liberate.life/index.php/2019/05/01/track-portfolio-rebo/
  3. https://3652daysblog.wordpress.com/2019/01/11/its-a-tracker/
  4. https://www.theweek.co.uk/93763/will-there-be-a-general-election-in-2019
  5. https://www.which.co.uk/news/2019/05/what-will-brexit-mean-for-interest-rates/
  6. https://moneytothemasses.com/owning-a-home/interest-rate-forecasts/latest-interest-rate-predictions-when-will-rates-rise
  7. https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/
  8. https://www.bankaccountsavings.co.uk/
  9. https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/#bonus

The Full English – Evolving radicalism vs Thanatos

What am I buggering on about this week?

We, as a society, are crap about talking about death. We don’t like to talk about it. It’s not polite conversation. It’s morbid. It’s uncomfortable. Yet we should talk about it. Getting old is part of life. Dying is part of life. You start off in nappies, get taller, get smarter, achieve your potential, then get smaller, ending up back in nappies. That end nappy part may be an uncomfortable thought, but it needs to be considered. Firstly because, as I’ve said before, that sort of care is expensive. Secondly, as The Accumulator at Monevator pointed out this week, longevity risk is a significant sword of Damocles over your portfolio that we’re increasingly error-prone at calculating (1).

I’m a pretty morbid sort on this blog. I suspect it comes from spending most days discussing suicide. But why as a society are we so bad at it? Fear of death is innate and hard-wired after millions of years of predation. Our ancestors evolved senses to not only hunt, but not be hunted. After all, you can’t procreate if you’re someone’s dinner. The awareness of this fact is intrinsically to the concept of ego and self-awareness, and has therefore been around for as long (2, 3). The logical step from ‘I think therefore I am’. You become aware of your identity, a self. An argument states the pressure of death anxiety led to the formation of early religions, as a way of placating anxiety at the extinguishing of the self and the maintenance of ego.

Death is therefore something the classical psychoanalytical types spend a lot of time on. Freud’s Todestreib (death drive) was in opposition to Eros, the life instinct/ drive (4). It is sometimes referred to as Thanatos. It was the drive and deep-rooted instinct towards destruction in opposition to the life instinct, which pushes us towards creation and fertility. All life had an innate drive to not exist; to return to a non-conscious state. Melanie Klein took this further in her description and psychoanalytical approach. As part of object-relations theory, Klein would suggest that elements of anxiety and fear are deep-rooted at an early stage, as part of a fear of death (5). In general I find Freud and Klein too contrived, too derivative and too full of collective assumption, without practical observation.

I much prefer Erik Eriksons’ explanation – it’s easier to understand and relate to. As part of the Psychosocial Stages of Development a person reaches a stage in their life called ‘Ego Integrity vs Despair’ (6). Conventionally it could be understood as a point where a person is a wise elder. If we accept our life cycle is our one and only chance, and we feel we have been successful, we are inherently satisfied. If feel guilt, we felt we have been unproductive or we did not accomplish our life goals we become despairing. Erikson said this applied from age 65+, but I feel this is much more flexible, and people’s ego states can move in or out.

Why am I talking about this? Well I think a lot of articles base their word count on this very contrast. I’m not just talking about that Guardian article about millenials smashing avocado (7). I’m talking about a huge quantity of the opinion pieces that litter written media. I was prompted to write this by an article, “How the baby boomers sold out”, that was in last weeks New Statesman (8).

Every generation has a hill it dies upon in it’s youth. As the radical fire is burnt out it becomes indentured. It develops Stockholm Syndrome for the capitalist society that props it up and provides it’s creature comforts. Erikson defines this as “Identity vs Role Confusion”, as part of defining the self and one’s political/ social/ moral beliefs (6). If you extend that out across a generation you see how each successive group of teenagers seeks to define itself against it’s elders. Thus every generation, in the course of normal self-development, will be in conflict with those older than it and their expected societal margins. You can see it now in the school strikes. It has existed since the concept of self. The old have always complained about the young in turn. Aristotle said:

“They [Young People] have exalted notions, because they have not been humbled by life or learned its necessary limitations; moreover, their hopeful disposition makes them think themselves equal to great things — and that means having exalted notions. They would always rather do noble deeds than useful ones: Their lives are regulated more by moral feeling than by reasoning — all their mistakes are in the direction of doing things excessively and vehemently. They overdo everything — they love too much, hate too much, and the same with everything else.”  (9, 10)

So next time you read an article which complains about the young, or rails against the boomers, remember your own life course. This is the path we all tread. Reflect on what you were radical about, and enjoy this new generations radicalism.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://monevator.com/why-your-life-expectancy-is-much-longer-than-you-think/
  2. https://sites.ualberta.ca/~jennyy/PDFs/13713823.pdf
  3. https://en.wikipedia.org/wiki/Death_anxiety_(psychology)
  4. https://en.wikipedia.org/wiki/Death_drive
  5. http://www.melanie-klein-trust.org.uk/paranoid-schizoid-position
  6. https://www.simplypsychology.org/Erik-Erikson.html
  7. https://www.theguardian.com/lifeandstyle/2017/may/15/australian-millionaire-millennials-avocado-toast-house
  8. https://www.newstatesman.com/culture/2019/05/how-baby-boomers-sold-out
  9. https://proto-knowledge.blogspot.com/2010/11/what-is-wrong-with-young-people-today.html
  10. http://www.bbc.com/capital/story/20171003-proof-that-people-have-always-complained-about-young-adults
  11. https://www.thisismoney.co.uk/money/markets/article-7066265/Stagecoach-launches-second-legal-action-Government-block-rail-bids.html
  12. https://www.bbc.co.uk/news/business-48306172
  13. https://www.theguardian.com/technology/2019/may/19/google-huawei-trump-blacklist-report
  14. https://www.bbc.co.uk/news/business-48347711
  15. https://www.theguardian.com/cities/2019/may/23/zero-recycling-to-zero-waste-how-ljubljana-rethought-its-rubbish
  16. https://www.theguardian.com/world/2019/may/21/belgian-monks-grimbergen-abbey-old-beer
  17. https://www.numbeo.com/cost-of-living/
  18. https://seths.blog/2019/04/the-avocado-principles/
  19. https://www.vox.com/platform/the-goods/2019/5/14/18563375/zero-waste-products-straws-jars-tote-bags
  20. https://www.businessgreen.com/bg/opinion/3076069/renewable-energy-is-now-a-commercially-attractive-investment-opportunity
  21. https://monevator.com/will-the-passive-investing-revolution-eat-itself/
  22. https://www.ukvalueinvestor.com/2019/05/cranswicks-low-dividend-yield.html/
  23. https://theescapeartist.me/2019/05/22/dont-be-a-nice-guy-be-a-good-guy-part-2/
  24. https://gentlemansfamilyfinances.wordpress.com/2019/05/17/green-money-greencoat-uk-wind-share-offer-may-2019/
  25. https://earlyretirementnow.com/2019/05/22/how-to-lie-with-personal-finance/
  26. http://earlyretirementextreme.com/why-do-so-many-people-hoard-so-much.html
  27. http://diyinvestoruk.blogspot.com/2019/05/vanguard-lifestrategy-60-year-4-update.html
  28. https://firevlondon.com/2019/05/26/holding-up-the-mirror-to-my-own-trading-behaviour/
  29. http://www.frugalwoods.com/2019/05/24/drink-whisky-look-at-stars-make-maple-syrup/
  30. http://quietlysaving.co.uk/2019/05/26/serious-investing/
  31. http://thefirestarter.co.uk/home-comforts/
  32. https://ditchthecave.com/love-your-job/
  33. https://thesavingninja.com/thinking-about-the-future/
  34. https://littlemissfire.com/springmount-gin-has-launched/
  35. https://awaytoless.com/productivity-systems/
  36. https://pursuefire.com/monthly-net-worth-report-11-april/
  37. https://pursuefire.com/meet-the-bettors/
  38. https://www.iretiredyoung.net/single-post/2019/05/24/Early-retirement—life-as-a-247-couple%F0%9F%A4%B7%E2%80%8D%E2%99%80%EF%B8%8F%F0%9F%A4%A6%E2%80%8D%E2%99%82%EF%B8%8F%F0%9F%99%84
  39. https://asimplelifewithsam.com/2019/05/26/treat-yourself/
  40. https://indeedably.com/flying-money/
  41. https://indeedably.com/ennui/
  42. http://twothirstygardeners.co.uk/2019/05/an-interview-with-medwyn-williams-veg-growing-ace/
  43. https://sharpenyourspades.com/2019/05/10/allotment-jobs-for-may/

Our wedding price tag

Around this time last year MrsShrink and I tied the knot. In honour of this, I felt I should do the romantic thing and work out how much it cost. The first thing to say is, like our friends Mr and Mrs YFG, we looked at the costs of the average wedding aghast (1). It was actually at one of these £30k+ weddings that MrYFG and I realised we had known each other in real life long before we began commenting on each others blogs. The average wedding in the UK now costs ~£32k, and it’s rising (2). I suspect this is a positively skewed mean, as averages reported elsewhere range from £17.5-30k (3, 4, 5). Either way, no small potatoes. We weren’t willing to hoik ourselves to the eyeballs with credit card debt.

The wants list

Although I’m a bit of a traditionalist at heart, MrsShrink and I could never be called religious. MrsShrink would describe herself as a devout atheist. As such a church wedding was off the cards as to her it would be dishonest. So we sat down and tried to decide:

  • What is the point of a wedding?
  • What makes a good wedding?
  • What makes a wedding memorable and what leaves a sour memory?

The point

We reasoned that the point of a wedding was to celebrate our relationship and commitment to each other. How do you celebrate something in most cultures around the world? Throw a F-off party. The ceremony has symbolic importance to family members and friends, so we planned to include those we love in events as much as we could without being too ceremonial. If we were going to celebrate it was going to be with those we wanted to celebrate with, our closest friends. We both come from large extended families which introduced massive stress and financial implications in deciding who came. How do we tell Uncle S we’re not inviting him because we saw Aunty T more recently? Where do you draw the line? We said brothers, sisters, parents and that was it. No cousin B, who you only see semi-annually when someone who shares partial DNA cops it.

What makes a good wedding? The same ingredients as a good party; good food, free-flowing booze, good music, good people. What leaves a sour memory? An absence of any of the above, and interpersonal grief. Supply the first. Only invite good friends and avoid familial beef for the latter.

What did we do and what did it cost?

We planned a three day long party with our closest family in friends in a remote pile in the country. Free-flowing booze, ample food and pumping basslines. Sandwiched in the middle was a wedding ceremony. We kept a running budget as we went along, and a rough target figure, so now the dust has settled down here’s the numbers it came out at.

Wedding Venue

The average venue hire is apparently £4-5k, with another £500 for a church on top (2, 5) . We set some criteria for what we wanted which reduced our range. Due to our background we have friends all over the country, and if we were inviting them down we figured most would need to stay; therefore onsite or nearby accommodation. A church was off the cards and we wanted something good for all weathers; a stately home or castle set-up. We’ve been to weddings where members of the public are traipsing about gawping; sole use of the venue. None of that comes cheap. Most established venues have set ‘menus’ of wedding options, or slick brochures advertising the ‘packages’ and offers. We wanted to do our own thing; slick wedding packages aren’t particularly individual (to our mind), and you’re paying for the convenience of not planning or thinking. After spending hours of googling the SEO optimised wedding material I had a brainwave. Venues have to be licensed for a wedding…

Check the licensing list.

I pulled up all of the local counties’ government websites and downloaded their lists of registered wedding venues. Among them I found a gem. Minimal online presence, set up to run corporate away-day events in a country house in the middle of nowhere, they had a wedding license and accommodated a few weddings a year. Entire run of the stately home, like a giant self-catering hotel. Sauna, pool, games rooms, en-suite bedrooms for 40+ people. Total cost: £6600 for four days. Blew the budget a bit, but got to love Wales as I think elsewhere in the UK it would have been double that.

Food & Booze

So we’ve got a smallish number of people (~50) for a chilled out, non-stuffy wedding. We opted for a local company using local ingredients, served in an unfussy buffet way. We deliberately over-catered so there would be leftovers. The caterers cost us £1,600, plus a further £250 for waiting staff for the whole day. Significantly less that the £4.5k average (2). We called in favours as chef friends cooked breakfasts and big communal meals on the non-wedding days (2, 6). A family friend made a spectacular cake. Another family friend who runs a brewery supplied beer at cost. We went to Majestic and made the most of their free glass hire and wine delivery service. Alcohol was ultimately paid for by a family member, at a total of around £1000, less than the £1500 average.

Entertainment

The average cost of a four piece band is £1000-1500 for a wedding, plus another £200-800 for a DJ (5). We could have tapped up friends who play in a wedding band, but felt then they couldn’t enjoy the event. We hired a musician to play during the ‘reception’ for a couple of hours for £250, and then a commercial PA/ light system for the evening for £200. I spent a few days putting a Spotify playlist together (14 hour runtime), then cross-fading and mixing transitions. Significant saving, and the music didn’t stop until 4am.

Rings

I had put aside £2,500 for an engagement ring (slightly less than the UK average) (2). There was never an intention to buy new, and MrsShrink likes art deco. After a year spent looking for the right ring, I bought an antique stopgap for 1/10th of the price. She fell in love with it. It’s personal, perfect to her taste, and she doesn’t worry about getting mugged for a massive stone. The wedding rings themselves came from a local jeweller and cost £1100.

Wedding Dress/ Outfit

MrsShrink frankly hated the idea of spending £1,000 on a dress to wear once (2). Many national charities run specialist bridal stores where they collect together donated dresses. MrsShrink won’t tell me what she spent, but she ultimately bought two dresses (she couldn’t decide) for (I think) 1/4 of the average above. I decided that my own suit and that of the groomsmen should be something we could wear again. Why spend £100 each hiring a morning-suit when you can buy something decent from M&S for £150? I spent £400 buying suits, ties and accessories for the chaps, and £550 on a tailor-made suit for myself. One of my groomsmen uses his suit for work. I’ve since worn my suit as best for several events and to interviews, and it fits like a glove.

Photography, flowers and decorations

We spent £1000 on this. The average is apparently £1100-1400 (2, 5). We opted out of engagement/ honeymoon shoots. We were happy with some of the photos but not all, and I do wonder if we shouldn’t have scrimped here. Ultimately we have enough lovely photos for an album, and how many do you need/ how often do you look at them? MrsShrink initially made the save the dates, but when we number-crunched it turned out to be just as cost effective to have the actual invites printed (~£100). Standard wedding flowers apparently start at £250 (5). MrsShrink has an aversion to cut flowers – ‘Why would you think something that’s dying is pretty?’ – instead we ordered dried seasonal flowers. Not only did this come in at £220 for bouquets, corsages, button holes and table decorations, but one year on they’re still looking just as pretty on our mantelpiece. Bunting was sown by family members and dried petal confetti was collected by friends.

The final bill

All told we came in around £14,000, of which £3,000 came from family as gifts. Roughly half the ‘average’. If I’m honest MrsShrink was the main source of budgeting success. I struggle to control my spending in the name of a party. The biggest frugal tips we have:

  • Make a list of what will make your day special to you
  • Use the council wedding licence list to find hidden venues
  • Truly think about who you want there. Does it need to be every cousin and their step-mother-in-law?
  • Posh, class and tradition does not have to mean stuffy or expensive
  • Call on friends talents
  • Second hand items and charity shops are your friend
  • Dried flowers are cheaper and last longer than fresh
  • You’re getting married to the most important person in your life. Who are you trying to impress?

I’m sure we could have been more frugal, but we had a great time, so did our mates, and it’s remembered by everyone as a proper knees-up.

Cheers for reading,

The Shrink

 

References:

  1. https://youngfiguy.com/our-unconventional-and-cheap-wedding/
  2. https://www.hitched.co.uk/wedding-planning/organising-and-planning/the-average-wedding-cost-in-the-uk-revealed/
  3. https://www.independent.co.uk/life-style/love-sex/wedding-cost-uk-average-how-much-marriage-ceremony-bridebook-a8460451.html
  4. https://www.hellomagazine.com/brides/2019021969949/how-much-does-wedding-cost-uk-2019/
  5. https://www.moneyadviceservice.org.uk/blog/how-much-does-an-average-wedding-cost
  6. https://www.moneysavingexpert.com/family/cheaper-weddings/

How I calculate my net worth

Prompted by some comments, I’ve decided to lay out the sums I use to calculate my net worth each month along with a copy of my Beast Budget spreadsheet. Some bloggers will notice elements stolen from their own spreadsheets – it’s very much a mutant offspring!

My spreadsheet actually calculates two different net worth values; a current net worth and a month end value. The month end value is the sum I report. It’s a pretty theoretical figure really, a sort of “if I had to liquidate everything now back to the banks where would I stand”.

Example dash

The first page of my spreadsheet is the Dashboard. The net worth figure shown here is the sum of all assets and liabilities on the day viewed (using the TODAY function of excel plus lookup tables). The buttons on this page hyperlink to the net worth tracking page and the summary assets and liabilities pages.

Net Worth Example

The net worth tracking page (‘NW Track’) gives a heads-up of every account and it’s change over the year. Beige boxes need to be filled by hand, whilst grey boxes autopopulate. The first table tracks the month to-date value in each account using a mixture of links and lookup functions. It will then calculate your net worth as:

Net worth = (property value – outstanding mortgage) + (all savings accounts) + (all investments) + (all bank accounts) + (pension cashout value) – (student loan) – (all credit cards) – (all other loans/ debts)

For my own net worth I halve my property value and outstanding mortgage, as it’s jointly owned between us. The table will also calculate your net worth without your equity or student loan.

Savings rate example

Table two tracks absolute net worth increases, percentage increases and savings rate (derived from table three). Enter your previous net worth in the equation for January to show the increase.

Savings percentage example

Table three calculates your savings percentage. It will calculate your take home income vs expenses amount using the figures for your primary bank account. The savings percentage calculation is (total saved) divided by (your take home income + your pension contributions). Table four is a countdown to FI calculator which I pinched from another FIRE blogger. TFS I think? It’s adapted to work with the rest of my spreadsheet.

Countdown example

The third page/ sheet is the Assets dashboard. This summarises the state of all your accounts on that day. Where pages exist for the accounts they’ll autopopulate, otherwise have a play about. The Liabilities dashboard does the same thing for accounts holding debts later on.

Assets example

Liabilities example

The following two pages are sample bank accounts. Your primary bank account should be the one your wages go into (although the NW calculator will pull income data from all of them). I think this was originally an excel template which I’ve modified. Enter your expenses and income as they come in.

Bank account example

The savings account page and credit card pages are very simple running totals that you manually input information to. Remember to make all credit card purchases negative. I added a graph to the credit card page because I like pretty pictures. Following the savings account is the investment page, which at the moment is really simple. I’m working on a separate investment workbook that includes live pricing, which I use to update this.

Credit card example

Mortgage example

The last few pages are very similar. Both the student loan and mortgage calculator consist of a summary page and an amortisation page. Enter the values in the first five grey boxes of the inputs section on the summary page and it will do the rest, producing monthly figures and an amortisation table. I’m most proud of the mortgage amortisation (as an excel novice). If you overpay one month, enter the new figure for the appropriate months payment in the amortisation schedule page and it will automatically recalculate all future payments and duration. You can get the student loans calculator to work out how much you pay monthly based on the sum below for Plan 1, or alter it for Plan 2. I tend to just put the payment values in by hand on the amortisation for my student loan, because they change so much and don’t fit a standard loan pattern.

Student loan monthly payment = ((yearly salary /12) – (Plan threshold)) * 0.09

Where (Plan threshold) is for Plan 1 £1,577 and for Plan 2 is £2,143. The percentage increases to 15% (0.15) if you also had a Postgraduate loan.

The link to the google sheets version is here:

Make a copy and save if you want. It’s pretty fugly in Google Sheets as I run it in Excel.
So there you have it, I look forward to constructive criticism.

Cheers for reading,

The Shrink

The Full English -HM Rev & Customs MVP

What’s am I buggering on about this week?

IMO the current government are utterly inept. That doesn’t stop the civil servants in the Palace of Westminster though, oh no. And some clever dick in HM Rev & Customs has been playing in a blinder over the last few years. Act 1) Letting inheritance tax quietly roll in. TI covered this in the Monevator weekend reading a few weeks back, but I wanted to look in further detail (1). The increasing CGT returns has partly come from increasing inheritance tax. This is the wealth of the baby boomers, coming home to the treasuries roost. To quote the i article, in the past 20 years the total value of people’s estates has more than doubled, so that as a percentage of income it’s reaching 1930s levels (2). It will continue to rise as the wealthiest generation die off.

I don’t particularly like inheritance tax. Beyond personal reasons I see it as an inefficient method of redistributing wealth stinging the middle class rather than the truly rich (who can circumvent it), and essentially double-taxation. YFG said it better on Monevator than I ever can (3, 4). Inheritance tax is currently at a relative effective low, but there are many calls for change. Some of this is driven by the way inheritance tax is stinging younger generations, who due to house price change have not been able to afford property and so have been waiting for inheritance to give them a step on the ladder (2). A survey published this week by Charles Stanley suggested that for many this expectation was unrealistic (5). Millennials were expecting 10x the median inheritance amount. The expectation was that this would act as their housing deposit, whereas in actuality the people they were inheriting from are living longer and more likely to use their house equity for nursing homes and then inheritance tax bills. Silly millennials.

What about Act 2? The BTL taxation noose. I’ve talked before about how I believe BTL is HMRC’s low-hanging fruit of choice. Now landlords are looking to sell-up as the new rules come into force (6). I think this is a really clever piece of rule-making. In the changes to Section 21, the government have made it harder to evict no-fault tenants, appeasing a big voting base (7). In the increase in stamp duty and removal of income tax relief they’ve stung profits, but harmonised with other income sources (8). Offsetting mortgage interest payments against income tax makes some sense from a business world point of view; like using stock write-downs and depreciation to reduce income assessments. It doesn’t make sense when you compare it to other private property scenarios, where you can’t offset your income tax bill with your domestic mortgage interest. Here it levels the playing field. The changes to the minimum EPC rating required for rental (now E), and tightening of BTL lending controls are just the kicker (9).

Practical upshot of tightening the rules on the BTL free-for-all, hobby landlords are driven out and professional landlords remain. Landlords come in all shapes and sizes, but those just about making the sums work are now going to struggle. The sale of these previously rented properties provides a nice CGT boost to the treasury, and also brings new property onto the market at a time when there is a housing stock shortage: double win! Just a shame these properties are generally only fair to middling quality, being ex-rental.

No longer interested in a BTL? Well you could go for a REIT, but I learnt this week about REAPs; Real Estate Annuity Plans (10). A sort of real estate investment bond, which funds affordable housing developments. Return is only 3%, but you get a nice warm glow inside without having to trigger your poverty allergy.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://monevator.com/weekend-reading-capital-gains-tax-receipts-are-soaring-a-good-bad-problem/
  2. https://inews.co.uk/news/business/britain-entering-golden-age-inheritance-baby-boomers-leave-assets/
  3. https://youngfiguy.com/inheritance/
  4. https://monevator.com/inheritance-tax/
  5. https://www.bbc.co.uk/news/business-48213333
  6. https://www.which.co.uk/news/2019/05/landlords-should-you-sell-your-buy-to-let-properties/
  7. https://landlords.org.uk/support-advice/april-2019-changes-to-section-21
  8. https://www.moneyadviceservice.org.uk/en/articles/buy-to-let-property-investments
  9. https://www.gov.uk/government/publications/the-private-rented-property-minimum-standard-landlord-guidance-documents
  10. https://www.theguardian.com/money/2019/may/04/ethical-housing-reaping-the-benefit-while-helping-out
  11. https://www.which.co.uk/news/2019/05/almost-700000-fewer-savers-open-cash-isas-are-isas-still-worthwhile/
  12. https://www.bbc.co.uk/news/business-48185806
  13. https://www.theguardian.com/commentisfree/2019/may/06/universal-basic-income-public-realm-poverty-inequality
  14. https://www.bbc.co.uk/news/business-48174797
  15. https://www.cnbc.com/2019/05/05/traders-brace-for-sharp-sell-off-on-trumps-tariff-threat.html
  16. https://www.theguardian.com/business/2019/may/06/zombie-firms-a-major-drag-on-uk-economy-analysis-shows
  17. https://www.independent.co.uk/environment/uk-coal-renewables-record-climate-change-fossil-fuels-a8901436.html
  18. https://www.bbc.co.uk/news/business-48215896
  19. https://www.autocar.co.uk/car-news/industry/analysis-just-how-green-are-electric-vehicles
  20. https://news.sky.com/video/i-owe-it-to-patients-to-work-extra-hours-but-im-being-penalised-11714585?fbclid=IwAR2cS3aGhMMhk0wyWBpo4K0q3H-fr7adUyEzSDaZB9eKoYA2bsNoSFN3QA0
  21. https://www.theguardian.com/technology/2019/may/05/airbnb-homelessness-renting-housing-accommodation-social-policy-cities-travel-leisure
  22. https://monevator.com/personal-financial-disaster/
  23. https://www.mrmoneymustache.com/2019/05/08/tesla-procrastination/
  24. https://www.ukvalueinvestor.com/2019/05/reckitt-benckiser-share-price-decline-good-value.html/
  25. https://www.ukvalueinvestor.com/2019/05/selling-compass-group-after-share-price-gains.html/
  26. https://3652daysblog.wordpress.com/2019/05/06/stocktake-q1-2019/
  27. https://cashflowcop.com/multi-millionaires-and-still-have-to-make-choices-johns-story/
  28. http://earlyretirementextreme.com/what-permaculture-and-ere-have-in-common.html
  29. http://diyinvestoruk.blogspot.com/2019/05/im-getting-up-to-speed-on-climate.html
  30. https://firevlondon.com/2019/05/11/april-2019-were-back-on-top-of-the-world/
  31. https://ditchthecave.com/love-to-lose-my-job/
  32. http://fiukmoney.co.uk/april-19-net-worth-and-monthly-update-9-434843-561/
  33. https://thesavingninja.com/dont-borrow-worry-from-tomorrow/
  34. https://awaytoless.com/why-we-keep-our-finances-separate/
  35. https://awaytoless.com/monthly-spending-april-2019/
  36. http://eaglesfeartoperch.blogspot.com/2019/05/two-islands.html
  37. https://www.iretiredyoung.net/single-post/2019/05/10/Some-early-retirement-confusion
  38. https://indeedably.com/challenge-the-premise/
  39. https://indeedably.com/history-repeats/
  40. https://www.jackwallington.com/long-term-planting-on-the-allotment/
  41. https://sharpenyourspades.com/2019/05/10/allotment-jobs-for-may/
  42. https://paulnelson90.wordpress.com/2019/05/10/what-to-do-with-radish/