Investment Policy Statement – Part 2 – Goals

When I first started writing this blog I set out a very brief goal:

Financial independence for myself and MrsFireShrink.

But beyond that, the aim is to save a sufficient amount to create a self-sustaining portfolio. The dream goal being to create a portfolio sufficient to support my family in the future and continue to grow (1).

Which is all a bit wishy-washy. Over the course of the year I’ve realised that I need to firm up my yearly goals, and also articulate more clearly my long term dream. This was put into sharp focus by a few recent blog posts, including indeedably’s goals, strategy and tactics (2). Elsewhere in life I’m fairly SMART in my goals, with monthly and yearly targets.

“Sound tactics bring victory” – Shaxx

So here’s the current goals list with steps already taken and timescale for target/ dream (a-la indeedably) (3).

  • Complete medical degree. Achieve Royal College Membership.
  • Find a girl. Get married. Have kids (2028). Have good kids.
  • Publish a paper (2018). Get a fellowship (2020). Get a Phd. Get a lectureship. Get tenure.
  • Get a job. Get a job I enjoy. Get a job which doesn’t feel like work (2020). Be in a position to retire in 15 years (2033).
  • Have an emergency fund of three months income (2019). Save £1000/month (2020). Have a net worth of £100k.
  • Own a home. Have £100k in equity (2023). Own our dream home in 10 years (2028). Own a self-sustaining estate.
  • Learn to drive. Own a car. Own a six-cylinder car. Own an eight-cylinder car (2028).
  • Race in a motorsport. Win a race (no timescale).
  • Start a martial art. Start gradeing. Get to sho dan (no timescale).
  • Learn to ride a motor bike.
  • Learn to fly a plane.
  • Do 50 press-ups. Do a pull-up (again) (2019). Get back to 15 stone (2019). Do a hand-stand press-up (again). Do a ring muscle-up.

The numbers

Most of the maths in this section is rough and dirty. I’m not going to make complex predictions or models. Life itself is too unpredictable (even if the money isn’t), and some recent health concerns have demonstrated the fallacy of trying to predict the future. I’ll review my household expenses more formally in a couple of years, and may come back and model timescales then.

  • Be in a position to retire in 15 years (2033).

A review of the 10 months I’ve tracked so far shows my personal yearly expenditure (minus credit card payments and one-offs for this year) to be around £10k. To this I’ll add £2.5k to cover lifestyle inflation. Our joint account also goes through around £10k a year in running costs for the house, groceries, energy etc. I conservatively therefore need around £22.5k a year to maintain our current lifestyle if I didn’t work. This fits nicely with what the fun Standard Life calculator reckons for our current lifestyle (~£23,000) (4).

Plugging that into a simple interest calculator suggests I need to have around £650,000 saved to be able to withdraw £22,752/year at a reasonable 3.5% interest rate with no erosion of capital. This presumes the savings will be tax-sheltered. This seems pretty unachievable from a standing start, but I love a moonshot (5). I’ve selected 3.5% as a conservative blend of cash interest rates (currently 1.5%) and the average annual return of the FTSE All-Share over the last 100 years (+7.0%) (6). It’s also conveniently the mythical Perpetual Withdrawal Rate (7, 8).

You say: “Why are you not interested in drawdown? You’d get to retirement a lot quicker.”

This seems to be a fundamental schism in the investing/ FI community. I think it’s highly personal, and relates among other things to your optimism for your life expectancy, number of dependents and general approach to lifestyle. The figure above would replace my current salary (9). I have a pipe dream goal relating to my families history and future inheritance, and therefore I’ve no interest in drawdown.

  • Have an emergency fund of three months income (2019). Save £1000/month (2020). Have a net worth of £100k.

These are all stepping stones on the route to the previous bullet point. Plugging that £650,000 into Money Advice Service’s savings calculator suggests I need to be saving £2300/month at 6% interest to achieve retirement by 2033 (10, 11). Yikes. 110% of my current take home. Thankfully my income should ramp up in the next few years, and while I’m quite a way from £2300/month now, it’s probable that I will reach that in the next 10 years. Just in time to miss my target.

  • Have £100k in equity (2023). Own our dream home in 10 years (2028). Own a self-sustaining estate.

Currently our dream homes cost around £500k. Difficult to say what that will be in 10 years time. Historically the yearly trend has been c2.9% (12). More recently it’s closer to 2%, comparable to the OECD 2.0% long-range inflation forecasts (13, 14). Inflating the £500k at 2% brings us to £610k in 2028. Our feet are on the ladder, which mean we also benefit from that inflation to an extent.

We envisage another move in 5 years time, and I’m not averse to value-adding property renovation. I’m therefore aiming for some stepping stones to a solid deposit for the move to a dream home in 10 years.

Summary:

  • Have an emergency fund of three months income (2019)
  • Save £1000/month (2020)
  • Be worth £100k (2022)
  • Have £100k in equity (2023)
  • Be in a position to retire in 15 years (2033)

In the next post I’ll cover my asset allocation.

Take care,

The Shrink

References:

  1. https://thefireshrink.wordpress.com/about-me/
  2. https://indeedably.com/goals-strategy-and-tactics/
  3. https://indeedably.com/i-will/
  4. https://www.standardlife.co.uk/c1/guides-and-calculators/retirement-how-much-may-i-need.page
  5. https://singularityhub.com/2016/11/15/this-is-how-to-invent-radical-solutions-to-huge-problems/#sm.000003z7yn60ncsavol2a9f74o5he
  6. http://stockmarketalmanac.co.uk/2016/12/100-years-of-the-ftse-all-share-index-since-1917/
  7. https://youngfiguy.com/safe-withdrawal-rate/
  8. https://portfoliocharts.com/2016/12/09/perpetual-withdrawal-rates-are-the-runway-to-a-long-retirement/
  9. http://monevator.com/try-saving-enough-to-replace-your-salary/
  10. https://www.moneyadviceservice.org.uk/en/tools/savings-calculator/
  11. http://candidmoney.com/calculators/investment-target-calculator
  12. http://monevator.com/historical-uk-house-prices/
  13. https://www.bbc.co.uk/news/business-44736472
  14. https://knoema.com/rwbagv/uk-inflation-forecast-2018-2020-and-up-to-2060-data-and-charts

 

Advertisements

The Full English – Envirobubble

What’s piqued my interest this week?

I’m returning to a couple of last weeks news ‘events’, because they’re rant worthy. First, there was this piece from the Beeb, “Why you have (probably) already bought your last car(1). What a piece of London-centric horse tripe.

The author accepts our incredulity, but goes on to state (1):
“A growing number of tech analysts are predicting that in less than 20 years we’ll all have stopped owning cars, and, what’s more, the internal combustion engine will have been consigned to the dustbin of history.”
So a group of industry-focused early adopters, who likely live in major urban centres, are suggesting that we should all do away with our regular transport. There are some valid points in the article. Electric cars are being widely adopted, are more efficient, simpler mechanically and will change the way people travel. Autonomous self-driving cars are also a great move, they’re safer in theory (watch out insurance services) and the idea of being able to work (or sleep, read etc) while commuting is amazing. I look forward to writing blogpieces at 60/mph on the M5.
The article falls down because it demonstrates a spectacular lack of understanding of anyone who lives outside a place with regular public transport, or who doesn’t work in one place. If you drive for work are you going to use a taxi everywhere? What about couriers, farmers, electricians, plumbers, gas line workers, etc. All of whom are going to multiple sites every day and rely on a vehicle to get them to where they need to be.
The following line grates:
Don’t worry that rural areas will be left out. A vehicle could be parked in every village waiting for your order to come.
Oh, so in my village of 300 people we’re going to only be able to have three or four people travelling at a time? I grew up in a village that size. We had four bus services a day, a 20 minute ride to the nearest town of a few thousand people. How are autonomous taxi services going to be cost-effective in that scenario? If I need to get somewhere I don’t want to wait 20 minutes for the next available taxi to travel over from the nearest town before starting my journey. Uber and public transport may be ubiquitous in the urban centres, but for rural areas the community-minibus remains a lifeline where market forces run out.
The second article I’m returning to is also environmentally focused. Quite a few outlets picked up the story about meat’s huge climate impact (2). Undoubtedly climate change is the biggest global threat currently, outweighing even Trump’s ego. The effect of meat is something we’ve known about for a while, but is rarely brought to the surface or acknowledged by politicians (3). The scare numbers in this story are simple, western meat consumption needs to fall massively, 90% for beef, to prevent a ‘climate breakdown’ (2). The meat produced to fill western diets is resource intensive, wasteful, and with intensive farming is hugely damaging to the environment.
Most of the articles point people towards becoming vegetarian the majority of the time, with meat reserved for special occasions. This is much more the diet that has been eaten historically up to the C19th, when greater wealth and the growth of middle class along with cheap transported or imported meat meant that the treat could become everyday. Since then the ‘meat and two veg’ has become ingrained in western culture. A culture we are exporting worldwide. Just look at how John on GBBO struggled with vegan food to see how deep that culture runs. Practically therefore changing our culture so everyone only eats meat once a week is going to be bloody hard. Try being the politician selling that song to your community hall.
Thankfully, I think market forces will come into play. Meat is expensive to produce. We recently started getting monthly boxes from a butcher, where they track all of our meat from their farm to my fridge. They upload monthly video updates from the farms on the animals. I pay for this premium. I know I’m getting meat from well-cared for animals, produced in a sustainable(ish) manner. The meat going into your McNuggets is not going to be grown to that standard. As the demand for a western diet rich in meat spreads, and supply struggles to meet (groan) demand, prices will go up.
Companies working to exploit this rise in price are already positioning themselves. Lab-grown meat is coming. Many of the start-ups have big backers, and are positioning themselves for high end consumers (4). It is effective proof-of-concept to those who will set trends (5). Theoretically lab-grown meat should have lower overheads and be cheaper to produce. It will lack the subtlety of the 28-day hung Aberdeen Angus, but it’ll do for your 99p McNuggets. I look forward to my ChickieNobs and conversations with MaddAddam.
Have a great weekend,
The Shrink
N.B. I’m off grid and on holiday for the next three weeks, so no more updates until Mid-November. Happy Halloween all!
Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

The Book of Dust – Philip Pullman

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.bbc.co.uk/news/business-45786690
  2. https://www.theguardian.com/environment/2018/oct/10/huge-reduction-in-meat-eating-essential-to-avoid-climate-breakdown
  3. https://www.bbc.co.uk/news/science-environment-45838997
  4. https://www.wsj.com/articles/is-lab-grown-meat-ready-for-dinner-1539701100
  5. https://www.scientificamerican.com/article/lab-grown-meat/
  6. http://www.bbc.co.uk/news/business-45859722
  7. http://www.bbc.co.uk/news/business-45860769
  8. http://www.bbc.co.uk/news/business-45858107
  9. https://edition.cnn.com/2018/10/11/tech/facebook-stock-dip/index.html
  10. https://www.bbc.co.uk/news/business-45875599
  11. https://www.bbc.co.uk/news/business-45886791
  12. https://www.theguardian.com/technology/2018/oct/14/dont-believe-world-bank-robots-inequality-growth
  13. http://www.thefrugalcottage.com/dividend-income-september-2018/
  14. https://tuppennysfireplace.com/living-a-simple-life-inspiration/
  15. https://tuppennysfireplace.com/things-we-cut-food-shopping-list/
  16. https://simplelivingsomerset.wordpress.com/2018/10/16/what-colour-is-your-parachute/
  17. https://drfire.co.uk/million-pound-question/
  18. https://inspiringlifedesign.com/posts/what-would-you-do-if-you-were-given-1-million.html
  19. https://earlyretirementplanning.wordpress.com/2018/10/12/what-would-you-do-if-you-got-given-1-million/
  20. https://mydebtdiary.info/2018/10/17/my-goals-update-for-october-2018/
  21. http://www.msziyou.com/my-anti-monetisation-manifesto/
  22. http://www.msziyou.com/quietly-saving/
  23. http://quietlysaving.co.uk/2018/10/19/i-just-got-paid/
  24. https://indeedably.com/asset-allocation/
  25. https://indeedably.com/cashless-payments-disrupted-busking/
  26. https://indeedably.com/emergency/
  27. https://gentlemansfamilyfinances.wordpress.com/2018/10/11/pay-less-into-your-pension-to-retire-early/
  28. https://www.theguardian.com/business/nils-pratley-on-finance/2018/oct/18/the-fed-is-ignoring-trump-it-knows-this-is-a-fight-he-cannot-win
  29. https://youngfiguy.com/mr-yfgs-backstory/
  30. http://diyinvestoruk.blogspot.com/2018/10/inflation-and-state-pension-increase.html
  31. http://diyinvestoruk.blogspot.com/2018/10/impax-environmental-markets-new-purchase.html
  32. http://monevator.com/an-ethical-quandary/
  33. http://monevator.com/what-did-low-us-treasury-yields-ever-do-for-us-anyway/
  34. https://ofdollarsanddata.com/what-is-your-financial-tipping-point/
  35. https://www.ukvalueinvestor.com/2018/10/portfolio-review-2018-q3.html/
  36. https://agentsoffield.com/2018/10/14/jobs-to-do-this-month/
  37. https://twothirstygardeners.co.uk/2018/10/how-to-make-beetroot-chutney/

 

 

 

 

 

Quarterly Returns Q3 2018 – Goal-scoring accuracy

Quarterly return posts supplement my monthly Financial Dashboard, covering investments in detail and looking at my yearly targets. Here I track purchases and sales, document progress against my (in progress) investment strategy, and discuss re-balancing and changes over time.

Q3 Returns:

Net worth Q3

Getting married and moving house were fantastic experiences, the peak of our year in a summer that will be remembered for sun, but they would not please Mr Scrooge. Rough sums suggest we spent around £15,000 on our wedding, half the national average of £30,355 (1). The actual figures in my spreadsheet are less, but some things like the price of MrsShrink’s wedding dress I’m just not allowed to know! About a 1/3rd of the costs were paid for or made by family. Like Mr & Mrs YFG at some point I’ll probably relate how we kept our wedding cheap (2). Moving house cost another £~5k through stamp duty and solicitors fees though this didn’t come out of our bank accounts. We safely avoided a painful potential £8k early repayment charge on our mortgage. We saw the £~5k cost through loss in our net worth as it was paid out of the equity in our previous property.

We’ve spent another £4,240 to date renovating the house, with new fixtures, fittings and soft furnishings throughout. This was mainly materials (and bloody curtains) as I can turn my hand to most DIY, and MrsShrink is a dab hand with a paintbrush. We did spend £1400 on plumbing work, but I’ll detail all when I get round to writing a property renovation post. The majority of the work is now done, with just a chimney cap rebuild (Jan 2019), new bathroom (~Q3 2019) and new kitchen to go (2020ish). My net worth has gradually increased during these months, but at a slow old rate. Current investment assets stand at:

  • Cash Savings Accounts £1000 (+£600)
  • Investments £0
  • Cars £3000

I am starting to value my books and art. I’ve accumulated a number of first-editions over the years, and a few original pieces of artwork by famous illustrators. I may keep this ‘off the books’, but interesting to know as a fallback.

Yearly Targets:

Goal 1: Build an emergency fund.

As per the r/UKpersonalfinance flow chart, I’m working towards building an emergency fund (3).

We currently have a month’s outgoings in our joint account (some of this will be eroded by our honeymoon), and I’ve another months parked in my savings account. MrsShrink and I will aim to build six months worth of our combined household expenses held across multiple high-interest current accounts. We’ll maximise the returns on this using the bank account savings website (4).

Goal 2: Pay off debts

At the start of Q3 my short term debts were £1.25k to family and £4.1k on 0% interest credit cards. We’ve talked with the family member who lent us the money, who doesn’t want it back until next year. I’ve instead focused on my credit card debt, which now stands at £3.6k. Some expensive exams and unexpected work costs haven’t helped. In future this will be budgeted for, with the emergency fund just in case. I still need to close my two redundant accounts, which currently prop up my credit score (as % of total credit used is low). As TI says over on Monevator, I’ve been borrowing from my future self (5). Following the good advice, I’ve been selling unwanted items to try and clear this further. I’m also planning to increase my monthly credit card payments from £250/month to £350/month to clear it earlier

Goal 3: Reduce superfluous outgoings.

Some serious differences been made here. The major influence has been that we’re no longer paying rent in one city where we live and mortgage on another home we never see. This has seen our monthly outgoings drop by at least £600/month. I’ve also made progress on my own personal spending, cutting down to a monthly budget. We’ve got further to go on our household grocery expenses, and on my hobbies, but all progress.

Goal 4: Commence investing!

This was the target for Q3, but I now recognise this was a little naive. As mentioned in this week’s Full English I’ve been watching the market ‘turbulence’ with interest. The argument that the earlier you invest the better is strong, and I’m well aware of the benefits of dollar-cost averaging (6, 7). Then there’s AWOCS’ tale of Bob, the world’s worst market timer (8). I’m uncomfortable commencing investing whilst my short-term debts, particularly my credit cards, exceed my liquid cash. Therefore the aim is to complete my investment strategy statement this quarter.

I’ll check in again in three months and see how things are getting on.

References

  1. https://www.independent.co.uk/life-style/love-sex/wedding-cost-uk-average-how-much-marriage-ceremony-bridebook-a8460451.html
  2. https://youngfiguy.com/our-unconventional-and-cheap-wedding/
  3. https://www.reddit.com/r/UKPersonalFinance/
  4. https://www.bankaccountsavings.co.uk/
  5. http://monevator.com/why-you-must-get-out-and-stay-out-of-debt/
  6. http://uk.businessinsider.com/compound-interest-retirement-funds-2014-3
  7. https://www.investopedia.com/terms/d/dollarcostaveraging.asp
  8. https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

The Full English – Are we nearly there yet?

What’s piqued my interest this week?
Caution, monster link-fest ahead. 
Well this has been a busy old week in the markets, eh? The FTSE sunk off the back of US losses, due in part to rising Federal Reserve interest rates (fuelling a drop in bond returns, therefore loss in confidence, therefore sell-off), and losses on tech stocks, particularly the FANG lot (1).
Lots of our compatriots have seen a slide… Monevator  FirevLondon, RIT (2, 3). This is all excellent fodder for the press, who have called it everything from a correction, turbulence, to a “global market MELTDOWN, the beginning of the next CRASH” (4, 5). Hyperbole so ballistic SpaceX will be after the patents. And to be fair, lots of people have been voicing that we’re in the late stages of a bull market and we should be expecting a recession imminently. It only takes one person to yell fire to start a stampede.
Look past the press, noise and short-term numbers and see that actually, big down days aren’t that uncommon. The US blogs A Wealth of Common Sense and the Irrelevant Investor both had some excellent posts on this (6, 7, 8). Shamelessly stealing their graphs and tables, this was the 20th -3% day on the S&P 500 since the end of the 2008 bear, however 80% of 3+% down days were in a sell-off/ recession.
What does this tell us? You can’t predict the future, especially looking at just one measure, and if you’re well diversified and holding long term it shouldn’t matter. And will we even see a ‘great crash’? People are jumping on index investing in ever greater numbers, spurred on by pieces like this weekends NYT article (9).  This is supported by the Morningstar Barometer continuing to show passive beating active returns over the past 10 years (10, 11). Ten years of passive investors watching an incoming tide lifting all boats has had people warning of the end of active investing (12). Passive ETFs had grown to an estimated 35% market share by 2017 (13). I couldn’t unearth more recent figures, but it seems reasonable that this will have grown in the last year. Even the great Bogle was warning of danger. But if 35%+ of the market is in trackers which move with the market, what effect will this have on when the market moves? If all the trackers are holding, or at least slow in their re-balancing, theoretically it should create an undercurrent of stability within the market, mitigating investor psychological panic moves. Additionally, for us Brits, Brexit has introduced such a level of uncertainty into the UK economy that perhaps people have been holding off while across the pond they’ve continued to make hay. I bloody love YFG’s post this week on this very topic (14).
It’s also worth remembering many young investors (me, etc) have no experience of big down days and drops. I was doing my best to get horizontal at pound-a-pint student nights during the last recession. Woohoo, cheap beer! And as someone with a lifetime of saving ahead, I should be praying for a recession (15). I’m sitting tight at the moment. In my Q2 goals it was a target, but this was naive. Had I stuck all my money in Wolf Minerals as I planned when I was first starting out, I’d be buggered (16). Instead I’m going to continue building my emergency fund in cash, set a solid plan and keep a finger in the air to see which way the wind is blowing. To mix metaphors, I’m going to get myself fully shipshape before bracing any storm.
If there is a storm. Howdy Callum!
Have a great weekend,
The Shrink
Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

Smashed through The Windup Girl in a week, fantastic atmosphere but a bit of a damp squib in the end. On to… The Book of Dust – Philip Pullman

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.theguardian.com/business/2018/oct/11/why-are-stock-markets-falling-and-how-far-will-they-go
  2. http://monevator.com/weekend-reading-looking-down-when-the-tide-goes-out/
  3. http://www.retirementinvestingtoday.com/2018/10/2018-quarter-3-review-readying-for-fire.html
  4. https://www.theguardian.com/business/2018/oct/12/ftse-100-falls-to-six-month-low-amid-fears-over-us-interest-rates
  5. https://www.express.co.uk/finance/city/1030145/global-markets-meltdown-equity-financial-crash-why-global-markets-are-down-today
  6. https://awealthofcommonsense.com/2018/10/big-down-days/
  7. https://theirrelevantinvestor.com/2018/10/10/u-g-l-y/
  8. https://theirrelevantinvestor.com/2018/10/09/a-bullish-washout/
  9. https://www.nytimes.com/2018/10/12/business/index-fund-investors-simpler-approach-may-enrich-returns.html
  10. https://www.fnlondon.com/articles/passive-beat-active-over-the-past-decade-finds-morningstar-20181001
  11. https://www.moneyobserver.com/news/active-funds-have-underperformed-passive-all-two-sectors
  12. https://bit.ly/2CJjgNY
  13. https://www.forbes.com/sites/greatspeculations/2018/09/19/are-we-headed-for-a-passive-index-meltdown/#137fbde4413e
  14. https://youngfiguy.com/brexit-and-finance/
  15. https://awealthofcommonsense.com/2018/10/who-benefits-from-a-market-correction/
  16. https://www.bbc.co.uk/news/uk-england-devon-45812974
  17. https://www.bbc.co.uk/news/business-45854817
  18. https://www.bbc.co.uk/news/uk-england-bristol-45770028
  19. https://www.theguardian.com/environment/2018/oct/10/huge-reduction-in-meat-eating-essential-to-avoid-climate-breakdown
  20. https://on.ft.com/2PrHbnT
  21. https://metro.co.uk/2018/10/11/wh-smith-to-start-closing-stores-as-it-struggles-on-the-high-street-8027099/
  22. https://www.bbc.co.uk/news/business-45822650
  23. https://www.independent.co.uk/news/business/news/rbs-savings-account-best-interest-rate-goldman-sachs-a8578996.html
  24. https://www.theguardian.com/business/2018/oct/11/brexit-uncertainty-taking-toll-property-market-rics-research
  25. https://www.theguardian.com/business/2018/oct/11/profits-slide-at-big-six-energy-firms-as-14m-customers-switch
  26. https://www.moneywise.co.uk/news/2018-10-08/chancellor-philip-hammond-planning-to-cut-pension-tax-relief-the-autumn-budget
  27. https://www.theguardian.com/money/2018/oct/13/uk-millennials-costs-eu-pay-rent-transport-grocery-revolut
  28. https://www.bbc.co.uk/news/health-45750384
  29. https://www.bbc.co.uk/news/business-45786690
  30. http://thefirestarter.co.uk/september-income-expenses-report-up-and-running/
  31. https://deliberatelivinguk.wordpress.com/2018/10/05/september-2018-review/
  32. http://www.mrmoneymustache.com/2018/10/05/the-fire-movement/
  33. http://monevator.com/preparing-to-take-a-retirement-income/
  34. http://monevator.com/ratesetter-high-interest-offer/
  35. https://youngfiguy.com/financial-independence-and-dieting/
  36. https://thesavingninja.com/what-would-you-do-if-you-got-given-1-million/
  37. http://www.msziyou.com/if-i-won-1m-tomorrow/
  38. http://thefirestarter.co.uk/the-million-pound-question/
  39. https://indeedably.com/million-pound-question/
  40. https://theirrelevantinvestor.com/2018/10/08/built-to-break/
  41. https://awealthofcommonsense.com/2018/10/the-case-for-bonds/
  42. http://diyinvestoruk.blogspot.com/2018/10/climate-changebe-change.html
  43. https://www.morningstar.com/blog/2018/10/01/low-carbon-economy.html
  44. https://indeedably.com/accountability-cant-be-outsourced/
  45. https://theescapeartist.me/2018/10/09/get-rich-with-hobbies/
  46. http://ukfipod.space/004/
  47. https://www.theguardian.com/money/2018/oct/13/because-of-my-upbringing-ive-always-been-careful-with-money
  48. https://www.ukvalueinvestor.com/2018/10/hargreaves-lansdown-dividend-yield.html/
  49. https://www.jackwallington.com/allotment-month-34-happy-herbal-apple-disaster-persistent-prairie/
  50. https://sharpenyourspades.com/2018/10/11/love-garlic-then-you-have-to-grow-your-own/
  51. https://lifeatno27.com/2018/10/01/spuds-gluts-and-deliciousness/

The Full English – The Decline of the Middle-Class Brand

I referenced a Nil’s Pratley opinion piece in the Guardian on Tesco’s new budget store, Jack’s, last weekend. I’m returning to it as the comments are worth a look on their own. In amongst them is this pearl of wisdom.

What Aldi/Lidl are doing well is taping into the change in incomes and what “middle class” means now and that, basically, people aren’t really middle class.

We have a much smaller genuine middle class (2 holidays a year, 1 skiing, then 2 weeks in the sun over seas, new cars that they own, large house with minimal debts…) than we used to have and now there’s really just a much larger upper working/lower middle class who like to think that they can live the life but know that they really cant so actually need shops like Aldi and Lidl so that they can buy wine (as they can’t afford to from Majestic or whomever where it’s bought by the case, as a real middle class person would) and meat that they can claim is fancy still (not from a proper butcher, like real middle class would) to pretend that they are living well, but at a cheap price. (1)

Spelling errors aside, this observation is interesting. Is the middle class ‘brand’ sliding down as a consequence of aspirational executive types? I’ve noticed this amongst car manufacturers in my little hobby. The old executive companies; Mercedes, Audi, BMW etc, now produce small bland euro-boxes starting at very reasonable prices on solid finance deals. One argument is that this is a consequence of EU directives dictating all manufacturers reach a certain efficiency target. Others would say it’s good business sense, as the aspirational lower middle classes want ‘the brand’ and therefore will pay slightly more for a comparative bland euroboxcar with a three-pointed star than one from a Korean microwave manufacturer. That’ll be the (demise of) Daewoo (2, 3)?

Extend this line of logic out to supermarkets, and Aldi/ Lidl allows people to feel they lead a middle-class lifestyle; the food is more affordable so a bottle of wine, halloumi, olives and smashed avocado on toast dahling is less of a luxury item. The treats associated with middle class life can be every day. And to be fair, I’ve seen Bentleys being filled up with the weekly shop at Aldi, because you don’t stay rich buying Waitrose essential vermicelli nests (4, 5).

So if the lower middle-class have decided that Lidl and Aldi’s budget kale smoothies are a taste of the good life, where are the upper middle-class off to? The trendy local deli and the Riverford food box, or the organic inner-city farming co-operative (I regret nothing)? The hotly anticipated pop-up keralan-fusion van? Some other half-cooked, over-spiced ‘superfood’ containing slop cooked by an unwashed fake-prison-tattoo-sporting manbun-topped ‘entrepreneur’?

It seems they’re actually off to buy something of quality. Because that’s what they’ve always done. That’s what brands used to mean. There’s an excellent anecdote about the demise of Rover from when they were owned by BMW in the 90s. When BMW built seriously well-engineered cars (the same ones that can now be found drifting round empty retail car parks at night). The story goes that engineers were discussing a part at a meeting in Germany, and the question around the table was “How can we make this better?”. Those same engineers came back to Rover in Birmingham and were asked “How can we make this cheaper?”.

And now everyone is asking, “How can we make this cheaper?”, to squeeze every inch of profit from the ‘Brand’. But that’s not sustainable, because cheaper quite often means poorer quality, and engineered obsolescence and throwaway white-goods don’t fit with the fashionable sustainable movement. See the rise in repair cafe’s as an example (6). Miele may not be in every home on the rabbit-hutch new estates with financed-Mercs on the drive and 0%-interest Samsung american fridge-freezer in the kitchen, but it maintains it’s market share because it sells solid products. And you can buy spare parts and have them repaired. And they last 10 years.

How the hell does this relate to Jack’s? Lidl and Aldi buck the trend. They’re not focused on brand, they’re focused on reasonable quality for a value price. Tesco bosses also have to learn that lesson, and not sell Jack’s as a budget brand. Brands are dead. Long-live quality without a badge.

Have a great weekend,

The Shrink

Side Orders
Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

The Windup Girl by Paolo Bacigalupi – Fantastic world building in this dystopian Hugo & Nebula award winner.

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.theguardian.com/business/nils-pratley-on-finance/2018/sep/19/aldi-and-lidl-wont-be-scared-by-tescos-new-discount-jacks#comment-120594908
  2. https://worldview.stratfor.com/article/daewoo-motors-demise
  3. https://www.economist.com/business/1999/08/19/the-death-of-daewoo
  4. https://www.buzzfeed.com/floperry/sesame-and-poppy-seed-thins
  5. https://thetab.com/uk/2017/08/10/a-definitive-list-of-the-most-un-essential-items-from-the-waitrose-essential-range-45294
  6. https://www.theguardian.com/world/2018/mar/15/can-we-fix-it-the-repair-cafes-waging-war-on-throwaway-culture
  7. https://www.bbc.co.uk/news/business-45714224
  8. https://www.theguardian.com/technology/2018/oct/04/elon-musk-sec-twitter
  9. https://www.bbc.co.uk/news/business-45744552
  10. https://www.bbc.co.uk/news/business-45757437
  11. https://www.theguardian.com/business/2018/oct/05/uk-house-prices-fell-sharply-in-september-amid-brexit-wariness
  12. https://www.theguardian.com/business/2018/oct/05/man-who-got-swagger-back-for-aston-martin-is-ready-for-long-game-stock-market
  13. https://www.theguardian.com/business/2018/oct/05/unilever-scraps-plan-move-london-rotterdam-uk-netherlands
  14. https://www.youtube.com/watch?v=GxLw_wHOMGY
  15. http://quietlysaving.co.uk/2018/09/30/september-2018-plus-other-update/
  16. https://simplelivingsomerset.wordpress.com/2018/09/27/fire-in-the-news-liar-liar-pants-on-fire/
  17. https://theescapeartist.me/2018/10/02/wired-for-financial-independence-an-immigrants-story/
  18. http://monevator.com/weekend-reading-financial-independence-against-the-odds/
  19. http://monevator.com/the-slow-and-steady-passive-portfolio-update-q3-2018/
  20. https://www.ukvalueinvestor.com/2018/09/are-investors-overpaying-for-diageo.html/
  21. https://awealthofcommonsense.com/2018/09/what-if-stocks-dont-crash/
  22. https://www.morningstar.com/articles/883860/so-much-for-the-bond-bubble.html
  23. https://youngfiguy.com/mrs-yfg-anxiety-and-working-in-law/
  24. https://youngfiguy.com/unknowable/
  25. https://youngfiguy.com/mrs-yfg-7-things-ive-stopped-caring-about/
  26. http://www.msziyou.com/budgeting-by-values/
  27. http://www.msziyou.com/why-i-give-a-fck-about-the-news/
  28. http://www.msziyou.com/net-worth-updates-september-2018/
  29. http://www.realmensow.co.uk/?p=4707

The Financial Dashboard – September 2018

The goals for September were:

  • Do a piece of automotive DIY – Success
  • Establish weekly and monthly joint account grocery expenses – Success
  • Sell five items from my hoard – Success
  • Repair or purchase a new bike – Failure
  • Finish reading Tim Hale’s Smarter Investing – Failure

Checking the assets and liabilities:

September 2018 Assets

September 2018 Liabilities

These are taken from my Beast Budget spreadsheet. My net worth grew by £1152 (5.58%), my best increase this year. This matches my best savings rate – 22.39% (not including my DB pension). I saved £200 in my 5% interest Santander saver and paid off £1025 of my credit card (although I put a fair bit on due to organising a friends stag do, which will be paid off with the other Stags). We’re still spending heavily from our joint account, this month on our honeymoon (once in a lifetime!). I’m going to have another look at how I calculate my savings rate in the near future, as moving most of our house DDs to the joint account has made the spreadsheet fairly confusing.

Goals:

Goal achieved: Do a piece of automotive DIY

As mentioned last month I have decided to reduce my automotive spend. This month I gave in my notice on my £120pcm storage unit. Goal number one for next month is therefore: Clear out and sell/ dump items from the storage unit. Minimalism it is not.

I also began work on the red car. It’s had a number of issues which have kept me using it regularly, so I spent a couple of hours one Sunday troubleshooting. Upshot is they’re not simple problems (a couple where I’m way out of my depth), and I’m going to need to spend some cash to fix them. For the time being my new goal is to Service the red car.

Goal achieved: Establish weekly and monthly joint account grocery expenses

Bugger me, the big black hole of my gob doesn’t just radiate crap, it also vacuums it up. I think what has been most surprising here is our shopping pattern. Ensuring all shopping purchases go through our joint account has produced an accurate picture of how much is going out. There is skew as we had two parties this month and spent big to host, but even so our food spending is far more than expected! We appear to have a tendency to do an Aldi/Lidl shop 2-4 times/week, spending between £10 and £30 each time, and then do one big Tesco/ Sainsbury’s shop for toiletries at £100. We also get a veg bag (middle class yo!) for £10.50 a week and a butcher’s box (oo-er missus) for £60 a month. I’m going to continue this to for another couple of weeks to get better data, and then set a budget when we get back from the honeymoon.

Goal achieved: Sell five items from my hoard

A big success here as setting myself a public goal motivated me to offload some tat. I’ve sold £50 worth of teenage toys through eBay, with another six listings still running. I’ve also started taking photos of spare furniture to sell through Gumtree to free up further space. The cash will go into my Starling account as an emergency fund. I want to keep this up, so I’ll continue the goal.

Goal failed: Repair or purchase a new bike

I’m going to park this one (pun intended) and come back to it in a few months, as the shop I want to get one from is only open on for two hours on a Saturday morning (council charity affair) and I’m not going to get a chance to visit it until mid-November.

Goal failed: Finish reading Tim Hale’s Smarter Investing

Started it, was really enjoying it, left it at the in-laws on the bedside table. Bugger. Off to the library.

Budgets:

  • Daily living and entertainment – see above
  • Transport – budget £300, spent £166.80, last month £279. Much better here
  • Holiday – £100/ /£~800/ £35.22. Lots to come
  • Personal – £50/ £0/ £93.32
  • Loans/ Credit – £200/ £1025/ £500
  • Misc – £50/ £0/ £90

In the garden:

We had the first crops off our new garden this month, and I’ll be keeping a track here so I can come back next year and see how we got on by comparison. I’m quite motivated to do a cost comparison like Jono at Real Men Sow (1). This month we’ve had: radishes, mizuna (a big fat nope from MrsShrink), romaine lettuce and red lettuce. The radishes are slowing down, but the salad leaves continue to thrive in the greenhouse (which needs repairs). The lawn has been resown and is coming through well, and I’ve been earthing up winter potatoes.

Goals for next month:

  • Clear out and sell/ dump items from the storage unit
  • Sell five more items
  • Service the red car
  • Establish weekly and monthly joint grocery account expenses
  • Finish reading Tim Hale’s Smarter Investing

What’s in the pipeline:

  • Frugal Motoring – Should I buy a petrol car?
  • Learning from our property renovation
  • Investment Strategy Statement – Part 2 – Goals
  • Quarterly Returns Q3 2018 – Setting targets
  • Plus the usual Full English Accompaniments and other drivel…

Happy October everyone,

The Shrink

Referenced:

  1. http://www.realmensow.co.uk/?page_id=175

The Full English – Saving Money vs Saving Misery

What’s piqued my interest this week?
Hey look, FIRE made the mainstream last week as TEA got interviewed in the The Times (as screengrabbed by Firevlondon), prompting The Guardian to fire some shots and a Daily Mail banshee wail (1, 2, 3). A flurry of activity followed from Monevator Inc and TEA, and wonderment that worst kept best secret was out (4, 5). There was particular derision from the Daily Mail readers…
But collectively we shrugged it off. We were in the know, right? In TEA’s words:

Over the years, I’ve noticed that in life there are 2 types of people: the talkers and the doers.  Talkers talk and doers do.

You don’t get into FI club by talking about FI club.  Nor by arguing on the internet. You get into FI club by working hard, saving hard and investing wisely.   Its a marathon not a sprint and so getting to financial independence is temperamentally suited to people who get their head down and grind out the reps. Talk is cheap and actions speak louder than words. (4)

But amidst the derision in the comments there is a note, a chord, of caution. People wasting their “peak energy years” twiddling their thumbs. As the prize-winning laureate Nickw862003 says in the Mail comments:
“And who the hell, unless you are on a fair bit can save half a salary a year? I mean i done it while saving for a mortgage, but i was living like a hermit to cater for this!” (3)
Do we consider our appearance from the outside? Switch back to /r/UKPersonalFinance or /r/Financialindependence and see people with savings rates of 50-60%, countdown to FI of 4 years, lamenting boredom as they live their frugal lives. They’ve given up the consumerist forms of pleasure, but have not replaced them. At times the Financial Independence community has echoes of the Ancient Greek asceticism, austere minimalism, giving consumerist culture the cynical evil eye (6). In those halcyon days pleasure was derived from the act of abstinence and self-disciple. But we can’t all be Diogenes, living in our ceramic jars, pissing on those that irritate and telling Alexander the Great to bugger off (7).
What’s the point here? Eating basics beans on basics bread in the dark is not a recipe for a happy or healthy life (increasingly found to be interlinked). Ascetism died out in western culture because people are social creatures who seek fulfillment and enjoyment. The FI community helps with the former. The latter requires either moving the goalposts and finding enjoyment in sitting in the dark, or finding cheap interests compatible with the lifestyle. Light a candle, don’t shout in the dark.
Have a great weekend,
The Shrink
N.B. In keeping with the growth of my own gardening hobby, I’ll be adding a little section below once a month keeping an eye on gardening blogs.
Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

Smarter Investing by Tim Hale – essential reading

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

 

References:

  1. https://www.thetimes.co.uk/article/modest-earners-find-formula-to-retire-in-their-40s-fbk3p63bk
  2. https://www.theguardian.com/money/shortcuts/2018/sep/17/retire-early-fire-movement-never-work-again
  3. https://www.dailymail.co.uk/news/article-6175445/How-retire-FORTIES-without-earning-fortune.html
  4. https://theescapeartist.me/2018/09/24/hold-everything-someone-is-wrong-on-the-internet/
  5. http://monevator.com/weekend-reading-fire-and-forget/
  6. https://en.wikipedia.org/wiki/Asceticism
  7. https://en.wikipedia.org/wiki/Diogenes
  8. https://www.moneysavingexpert.com/news/2018/09/economy-energy–to-honour–fixed-tariff-after-price-hike-blunder/
  9. https://www.thisismoney.co.uk/money/investing/article-6142957/How-check-performance-robo-adviser.html
  10. https://www.theguardian.com/lifeandstyle/2018/sep/18/your-fathers-not-your-father-when-dna-tests-reveal-more-than-you-bargained-for
  11. https://www.telegraph.co.uk/money/consumer-affairs/new-blow-landlords-177000-homes-face-new-test/#
  12. https://www.bbc.co.uk/news/business-45561908
  13. https://www.bbc.co.uk/news/uk-45520517
  14. https://www.bbc.co.uk/news/business-45634362
  15. https://www.thisismoney.co.uk/money/mortgageshome/article-6185301/The-20-fastest-growing-areas-new-housing-UK-past-7-years-counted-down.html
  16. https://www.thisismoney.co.uk/money/saving/article-6207595/How-Goldman-Sachs-banker-American-giant-launches-UK-account-paying-1-5.html
  17. https://theescapeartist.me/2018/09/19/eliminating-fear-with-bio-hacking/
  18. https://www.theguardian.com/business/nils-pratley-on-finance/2018/sep/19/aldi-and-lidl-wont-be-scared-by-tescos-new-discount-jacks
  19. http://thefirestarter.co.uk/liquid-superfood-huel-challenge-its-like-soylent-the-throwdown/
  20. http://thefirestarter.co.uk/august-income-expenses-report-a-bit-of-an-odd-one/
  21. http://monevator.com/its-an-emergency-fund/
  22. https://firevlondon.com/2018/09/24/complexity-costs/
  23. https://firethe9to5.com/2018/09/18/finding-the-fun-in-fire/
  24. https://firethe9to5.com/2018/09/22/the-do-i-have-enough-toolkit/
  25. http://www.msziyou.com/comfortable-being-the-product/
  26. http://diyinvestoruk.blogspot.com/2018/09/turn-back-clock.html
  27. http://diyinvestoruk.blogspot.com/2018/09/city-of-london-final-results.html
  28. http://diyinvestoruk.blogspot.com/2018/09/woodford-patient-capital-new-purchase.html
  29. http://www.realmensow.co.uk/?p=4702
  30. http://twothirstygardeners.co.uk/2018/09/how-do-i-tell-know-when-my-hops-are-ready-to-pick/
  31. https://clairesallotment.com/2018/09/06/harvesting-the-first-of-the-brassicas/
  32. https://urbanvegpatch.blogspot.com/2018/09/in-septembers-sweet-spot.html