Thought Experiment #5 – The grid? What grid?

I’ve not participated in the Saving Ninja’s ‘Thought Experiment’ series to date, so this is #1 for me. The premise is a stream of consciousness amble through your response to a hypothetical question. For this one:

Life is good. You finally did it! You pulled the plug on your day job after reaching financial independence. You never have to work for money ever again. But, you’re bored. You need something to do… You need a project! You grab a piece of paper and a pen and start thinking. Now that you’re financially free, what projects do you want to complete? However ambitious, however small, you now have the time to pursue anything that you like, what will you accomplish?

The Expanse

Not the epic sci-fi show now on Amazon Prime. I’m talking about the sudden expanse of time available to me for long awaited projects. Like many other FIRE bloggers, a lot of the things I want to do, the projects, are already started or integral to my current path. I’m not actually sure I’d even retire. I wear many hats in my day job, and some of them I enjoy sufficiently that they don’t feel like work. Even if I didn’t have to work for money I’d probably try and continue a few days a week out of intellectual curiosity.

Beyond the sphere of my work, I have a list of semi-started projects which bring me happiness or satisfaction that I could dedicate more time to. I would:

  • Learn how to and then practise welding and sheet metal working. To spend some of my time buying rotten classic cars and restoring them from the ground up. Maybe racing them, maybe selling for a profit, maybe just to drive. Do some sculpture work in metal.
  • Continue learning languages. But be able to dedicate more time to it, maybe evening classes.
  • Build a suitable vehicle and then go overlanding. Probably some sort of Kamaz or Bedford 6×6. Spend some time, as long as it took, driving the Silk Road, the Panamerican Highway. Maybe Aus and trans-Africa. Detours on the Trans-Siberian Railway and travelling the US and Canada by rail. No rush, no goals, just the road to see. Sate my wanderlust.
  • Return to the UK and complete some more property renovation projects. Working through phases and styles. Maybe convert some industrial buildings. Build an eco house working with a friends company; off mains electric and water, incorporating space for family and guests.
  • Grow, cook, bake and brew. More time on each, growing more food, keeping more animals, experimenting brewing, funding a friends micro-brewery (which doesn’t really need funding as it’s going from strength to strength).

Kids would change the approach but not the direction of travel. There’s other targets in my goals list which don’t feature here, perhaps they’d feature too, there would be no rush. Living for joy and contentment would be my project. Soppy bugger.

Others thoughts:

  1. Indeedably
  2. Cashflow Cop
  3. The Caveman
  4. A Way To Less – a new blog to me
  5. Dr Fire
  6. Marc at Finance your fire
  7. GFF
  8. Sam at A Simple Life – also new to me
  9. Merely curious

References:

  1. https://thesavingninja.com/what-will-i-do-when-i-retire/
  2. https://en.wikipedia.org/wiki/Overlanding
  3. https://indeedably.com/whats-next/
  4. https://cashflowcop.com/beyond-financial-independence-tracing-my-roots/
  5. https://ditchthecave.com/when-i-grow-up/
  6. https://awaytoless.com/thought-experiment-5/
  7. https://drfire.co.uk/what-will-you-do-when-you-retire/
  8. https://financeyourfire.com/2019/04/15/thought-experiment-fire-now-what/
  9. https://gentlemansfamilyfinances.wordpress.com/2019/03/15/saving-ninja-thought-experient5-from-gff/
  10. https://asimplelifewithsam.com/2019/04/15/ninja-thought-experiment-5/
  11. https://merelycurious.me/post/thought-experiment-projects-when-fire
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The Full English Accompaniment – Watch the population slump, and then the economy

What’s piqued my interest this week?

In the allocations section of my Investment Strategy Statement I mentioned that I favour emerging markets (a generalisation) because of changing demographics. Events of the past few weeks have prompted me to flesh my thought process out. I have a hunch/ theory/ feeling in my waters that long term stock market movements correlate to changing demographics (so far so normal), particularly the ratio of 20-40 year olds to other demographics. This has long been muted, but is difficult to prove, partially (I think) because it depends on where and how you define the demographics and stock market changes, and how you look at dependants (1). It should be noted by the passive investor because if you invest in a national index now you want to be sure that that same index is going to keep going up.

The Japan Problem

Japan is the canary in the coalmine. People have been noting for some time the relationship between Japan’s relatively stagnant growth and its ageing population. This has improved somewhat under Shinzo Abe, averaging around 1% growth over the past decade despite the significant headwind of a falling population. With the highest life expectancy in the world and a fertility rate of 1.4, Japan’s population is getting older, with the expectation the proportion of those >65 will go from 3 in 10 to 4 in 10 in the next 40 years, with the population shrinking by 25% (2, 3). By 2025 it will have an aged dependant per worker ratio of 75% (3).

This is a huge challenge for a social security system, as more people rely on pensions and the healthcare system than the funds that are coming in (4, 5). Public debt increases or the numbers of workers increase, or both.

Europe

The problem I see is the EU isn’t that far behind. There’s a big post-boomer bubble coming, made up of those born 1955-75 (6). Shock! Millenial not slating the boomers.

We’re already starting to see one sign of the problem, as companies struggle under the weight of increasing pension debts. It’s one of the things that’s dragged down BHS, Debenhams, HoF, and look at the ongoing saga with private railway company operators. Stagecoach and Virgin don’t want to be on the hook for the Railways Pension Scheme deficit (7). As the working population reduces and the dependant population grows this chasm in the unfunded public sector pension schemes will yawn wider. Executives are looking down the barrel and running for the hills, to mix metaphors. This is across Europe. Germany and Italy have expanding dependant populations, Bulgaria has a birth rate of 1.5 and has seen its population fall by 2 million in 30 years, Poland is closing schools due to the lack of children (8, 9). Some countries though, like Sweden, are bucking the trend through immigration.

The Global Picture

Look wider and there are notes of caution but also reasons to be cheerful. Globally birthrates are falling, the low levels in the developed world balanced by high birthrates in India, the Philippines and Africa (8). Emerging market populations are growing faster than the developed markets are shrinking, so the population will keep growing, but at a slower rate (9). This is good news for the planet, which can’t sustain the current growth rates indefinitely, but bad news for those who dislike immigration, as migration will be required to maintain labour forces in the developed economies with shrinking populations. Or will it?

Before I move on it’s worth focusing on three more countries: India, the US and China (9, 10, 11).

Things are looking peachy for India, which has an expanding population likely to drive greater growth even as it modernises and develops (although this is not without its issues). The US is in better shape than most of the developed world, with forecasts for a relatively flat or increasing population before you even take migration into account (12). This is one of the reasons, combined with global corporate and technological monopolies, that I don’t believe the NYSE is about to undergo a crash when the boomers call time and cash their retirement cheques. But what happened to China? The single child policy. We’re past its peak, and now China is looking at a reduction in its working age population of 212 million by 2050 (10). 212 million less people working. That’s the current population of Brazil. That’s what state top-down planning gets you.

‘Abenomics’ and ways out

So how do we get out of our slump? Well we could open our borders to a motivated migrant workforce, but that would just be too sensible and easy. Some authors look back to Japan for the way out of this population pickle. Shinzo Abe has sustained growth in the face of a falling population primarily through recruiting more people into work who previously were not, alongside technological productivity developments (13). Japan in many ways is a deeply conservative country. The perceived social norm continues to be men go to work all day, women are home-makers. In 2013 Abe introduced ‘Womenomics’ (there’s a theme here), increasing female participation in the labour force through a number of methods (13, 14). I don’t feel this would necessarily translate to western European cultures, where women working is the norm. I think efforts in our economy to bring those out of the labour market for whatever reason into work, like zero-hours contracts, have been less successful. There’s more people in work, but productivity and earnings aren’t necessarily increasing.

Technology and automation, on the other hand, probably are solutions. Automation enables greater output with fewer workers, and can be applied to manufacturing, construction and some service industries, as it has in Japan (14). It’s not good news for the factory workers and low-skilled employees, which is all the more reason for Universal Basic Income – an argument for another time. There will continue to be some jobs robots will struggle with; caring roles or where intuition is required. As a shrink I’m probably safe. Robots are yet to understand human emotions.

Major caveats

Important flaws in this whole essay:

The stock market isn’t necessarily correlated with population demographics.

There’s lots of arguments and evidence of this. It can basically be boiled down to:

  1. You can’t correlate specific bear markets, like the dotcom bubble, to demographic/ population change points – this is often identification error
  2. External factors and drivers such as politics (e.g. the fall of the Berlin Wall/ communism etc) have unpredictable effects on a) markets and b) demographics
  3. The timescales and effect sizes are such that the end result on the stock market appears negligible (15, 16).

Add in the fact that we have an increasingly interconnected world, with global corporations taking earnings from multi-national operations, and it all gets murky. I don’t think any developed market is about to crash while companies listed on it’s market utilise cheap developing world labour (17). Just also don’t ignore a developing market with increasing capitalisation (18). Which is why I aim to hold more in certain developing markets. But you, as usual, should do your own research.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

The Right Way to Keep Chickens – Virginia Shirt – Another guide to our new pets.

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://bit.ly/2UVX1x6
  2. https://www.indexmundi.com/japan/age_structure.html
  3. https://www.weforum.org/agenda/2018/12/japans-economic-outlook-in-five-charts/
  4. https://www.economist.com/the-economist-explains/2018/11/26/the-challenges-of-japans-demography
  5. https://www.project-syndicate.org/commentary/japan-demographic-lesson-european-growth-by-daniel-gros-2017-11?barrier=accesspaylog
  6. https://www.indexmundi.com/european_union/age_structure.html
  7. https://www.theguardian.com/business/nils-pratley-on-finance/2019/apr/10/unloved-stagecoach-may-have-a-point-on-rail-franchise-pension-risks
  8. https://www.theguardian.com/business/2019/mar/31/birthrate-crisis-require-new-mindset-growth-population-prediction
  9. https://www.businessinsider.com/2-charts-tell-the-global-demographic-story-2015-12?r=US&IR=T
  10. https://www.businessinsider.com/changes-to-working-age-population-around-the-globe-2016-12?r=US&IR=T
  11. https://www.indexmundi.com/united_states/age_structure.html
  12. https://fat-pitch.blogspot.com/2018/05/demographics-growing-prime-working-age.html
  13. https://www.wsj.com/articles/how-aging-japan-defied-demographics-and-turned-around-its-economy-11547222490
  14. https://www.cnbc.com/2018/02/09/what-is-japans-secret-women-and-technology.html
  15. https://medium.com/street-smart/the-demographics-of-stock-market-returns-part-ii-a41a46622198
  16. https://global.vanguard.com/portal/site/institutional/nl/en/articles/research-and-commentary/vanguard-voices/demographics-and-equity-returns-vv
  17. https://www.economist.com/finance-and-economics/2019/03/28/slower-growth-in-ageing-economies-is-not-inevitable
  18. https://www.forbes.com/sites/advisor/2018/08/01/should-long-term-investors-own-more-emerging-market-equities/#3fcebc6854ee
  19. https://www.bbc.co.uk/news/business-47609539
  20. https://www.theguardian.com/business/2019/apr/04/sales-new-cars-fall-uk-consumers-continue-shun-diesel-brexit
  21. https://www.theguardian.com/business/2019/apr/04/us-china-risk-house-price-slump-trigger-recession-imf-lending
  22. https://www.theguardian.com/business/2019/apr/01/was-the-us-stock-market-boom-predictable
  23. https://www.theguardian.com/business/nils-pratley-on-finance/2019/apr/01/fca-supervision-lcf-london-capital-finance-investigated
  24. https://monevator.com/the-slow-and-steady-passive-portfolio-update-q1-2019/
  25. https://monevator.com/what-is-a-sustainable-withdrawal-rate-for-a-world-portfolio/
  26. http://quietlysaving.co.uk/2019/04/01/march-2019-other-updates/
  27. http://quietlysaving.co.uk/2019/04/11/freetrade/
  28. http://www.mrmoneymustache.com/2019/04/01/how-i-sold-this-website-for-9-million/
  29. https://gentlemansfamilyfinances.wordpress.com/2019/04/01/month-end-accounts-march-2019/
  30. https://gentlemansfamilyfinances.wordpress.com/2019/04/03/fire-health-the-diabetes-epidemic/
  31. http://diyinvestoruk.blogspot.com/2019/04/trig-share-offer-completed-update.html
  32. https://youngfiguy.com/audit-reform/
  33. https://simplelivingsomerset.wordpress.com/2019/04/09/through-the-brexit-looking-glass/
  34. http://eaglesfeartoperch.blogspot.com/2019/04/financial-planning-2019-annual-review.html
  35. https://www.msziyou.com/net-worth-updates-march-2019/
  36. https://www.msziyou.com/dating-as-a-feminist/
  37. https://indeedably.com/random-acts-of-bastardry/
  38. https://indeedably.com/feels-like-home/
  39. https://indeedably.com/designed-to-fail/
  40. https://www.ukvalueinvestor.com/2019/04/rightmoves-share-good-value-dividends.html/
  41. https://www.ukvalueinvestor.com/2019/04/three-value-traps.html/
  42. https://www.ukvalueinvestor.com/2019/04/three-value-traps.html/
  43. https://tuppennysfireplace.com/how-to-stockpile-food-shortage/
  44. http://twothirstygardeners.co.uk/2019/04/building-a-raised-bed%EF%BB%BF/
  45. https://sharpenyourspades.com/2019/04/13/allotment-gardening-and-the-power-of-to-do-lists/

View story at Medium.com

Quarterly Returns – Q1 2019

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.

This post marks one year of my blog. One year of posting rants and general waffle. It marks a new year, and the end of the old tax year, so how did I get on in my Q1 of 2019?

Q1 Returns:

Net Worth Q1

  • Cash Savings Accounts £2800 (+£1000)
  • Investments £1000 (+£1000)
  • Cars £3000

My net worth now sits at £~33,200, an increase of £4.7k over the past three months, and up dramatically from the £~20,000 I first wrote about twelve months ago. I’m fairly sure I won’t be able to keep up a 60% increase in net worth, but I’ll keep a twelve month rolling calculation out of curiosity.

Yearly Targets:

Goal 1: Build an emergency fund

My first 2019 goal was to build an emergency fund, as per the r/UKpersonalfinance flow chart (1).

I’ve continued to add to my Santander 5% regular saver, which will reach maturity this month. It currently stands at £2200, which is a month of total household expenses at our current spending, or two months of my half. I’m now looking to set up another regular saver. I’ve parked some extra cash to pay for upcoming car and work related expenses. In the past three months I’ve decided I’m going to define my goal emergency fund as three months total household expenses (£6k) in my name, plus a further three months (£6k) held jointly. This seems a fairly realistic target for the next year.

Goal 2: Pay off short-term debts

Q1 Short Term Debt

At the start of 2019 my short terms debts stood at £1.25k to family and £2.6k on 0% interest credit cards. In the past three months I’ve paid £1k off our loan to family, but some significant work expenses had to go on my credit card, so that figure has only come down by £600. I’m going to have to work hard to achieve my goal of clearing my credit card by the end of Q2.

Goal 3: Save 25% of my earnings

Q1 Net Worth

In the past three months my savings rate has gradually increased, but it’s a bit early to take averages, particularly with the March outlier. I calculate my savings rate using this formula:

Savings rate as % = ((Income – spend) + Cash savings + Investments + Pension contributions) / (Income + Pension contributions)

Where income minus spend equals the money left from my income in my accounts at the end of the month. It’s important to note I don’t include any mortgage payments in this (i.e. increased equity), nor do I include reductions in debt. This is purely the amount I have been able to save out of my earnings. I see some arguing that imputed rent or equity increases should be included in savings, but for me this figure is a literal savings percentage. Equity/ debt changes show up in my net worth, which accounts for the rapid increase in net worth concurrent with a piddly savings percentage.

Goal 4: Live more sustainably

Some success here. We’ve reduced our plastic usage, we’re eating more locally and sustainably sourced food, and I’ve finished setting up our mini-market garden with new raised beds for veggies and some pet chickens. As things start to crop I’ll add them up and work out cost savings from homegrown produce.

Goal 5: Commence investing!

Q1 Tax Efficiency

I’ve taken the plunge. March’s tax rebate has been quickly squirrelled into a Vanguard S&S ISA. I opted for the FTSE Developed World ex-U.K. Accumulation Fund, buying at £352.62/unit. I learnt a quick lesson in a) market timing and b) not checking investments too frequently, as literally the day after the price fell to £341/unit. I’m not in it for short term gains, I told myself.

Since then I’m trying to avoid impulsively checking the NAV every hour (bloody idiotic), busying myself building a spreadsheet to track returns and allocations. Like many others my intention is to unitise my portfolio (1, 2, 3, 4). I’ve been reading about this methodology through (as usual) Monevator, and also Bogleheads which has a fantastic portfolio spreadsheet (5, 6). Hopefully by the end of Q2 it should be ready to be unveiled.

Until next time.

The Shrink

 

References

  1. https://firevlondon.com/2017/01/17/my-investment-tracking-spreadsheet/
  2. https://www.ukvalueinvestor.com/2018/08/how-to-manage-a-portfolio-of-shares.html/
  3. https://simplelivingsomerset.wordpress.com/2019/01/11/unitising-my-portfolio-shows-i-sucked-last-year/
  4. https://en.wikipedia.org/wiki/Unit_valuation_system
  5. https://monevator.com/how-to-unitize-your-portfolio/
  6. https://www.bogleheads.org/wiki/Calculating_personal_returns#GoogleDocs

 

 

 

 

 

 

 

 

The Financial Dashboard – March 2019

The goals for March were:

  • Sell £100 worth of stuff
  • Finish the raised beds
  • Calculate and set a budget for Personal spending
  • Look at other ways to reduce environmental footprint
  • Purchase first stock investment

Checking the assets and liabilities:

Assets March 2019

Liabilities March 2019

These are taken, as always, from my Beast Budget spreadsheet. This month my net worth grew by £2,871, 9.46%! This was due to an unexpected but welcome tax rebate due to overpaying at some point earlier in the year- my tax codes bounce about a bit. Another momentous month too, as this was the first time my liquid cash (emergency fund and savings pot) was greater than my unsecured debts (credit cards and family loans). I put another £200 on my 5% Santander saver, paid down our wedding loan to a family member and paid off £1000 of my credit card. The remaining tax boon went in a S&S ISA – more on that below.

Goals:

Goal failed: Sell £100 worth of stuff

Failed this. I managed to sell another £50 worth of car parts, but I’ve been royally dicked about trying to sell some furniture and other spare household stuff. Interest has been strong, but lots of “best price m8?”, “would you take [1/2 list price]?”, topped off by some people coming to view an item desperate for it but refusing to pay and demanding delivery. Choosing beggars.

Goal achieved: Finish the raised beds

Now complete and planting has commenced. I got fed up of trawling gumtree for a few bags of soil here and there, so ended up paying £60 for two tons of topsoil to be delivered. It’s otherwise been a free project made of scavenged pallets, so not complaining too hard.

Goal achieved: Calculate and set a budget for personal spending

My old budget for personal spending was plucked out of thin air. In an effort to continue to properly track my budget I’ve moved some more categories under this heading. It now includes my clothing budget, gifts for people, trips to the barber, books, CDs, DVDs, computer games and any music. Looking over the past 12 months my spending is a bit all over the place, varying from £5.50 to ~£300, which makes sense when you include clothes. My plan from now on is to put aside £100 a month to pay for these items and then see how it looks in a years time.

Goal failed: Look at other ways to reduce environmental footprint

Started looking at changing cars, electric bikes… all sorts. Haven’t had time this month to actually summarise the relevant thoughts. Will return.

Goal achieved: Purchase first stock investment

The tax rebate went straight into a S&S ISA with Vanguard to the tune of £1,000. Showing impressive skill, I purchased at a six month high for my chosen fund (Dev World Ex-UK). An immediate lesson in market timing and not checking too frequently. More details in my Q1 review.

Budgets:

  • Groceries – Budget £300, spent £158.58, last month £207.01. Looking good for my Q1 goals.
  • Entertainment – Budget £150, spent £76.50, last month £92.
  • Transport – Budget £460, spent £329.90, last month £405.44. Spending a lot more on petrol with my new commute.
  • Holiday – £150, spent £0, last month £0.
  • Personal – £100/ £47.57/ £5.50.
  • Loans/ Credit – £350/ £748.44/ £288.99.
  • Misc – £50/ £81.77/ £186.45. Misc payments this month:
    • £60 cash on soil
    • £21.77 in Wickes on house stuff.

In the garden:

Raised beds are done. Cabbages, three types of raddish, four types of lettuce, two types of potato, two types of onion and various other odd bits are in the ground. Peas, peppers, sweet peas, cucumbers and tomatoes are on the go in the greenhouse.

Goals for next month:

  • Sell £100 worth of stuff
  • Set up pots for holiday and personal money
  • Look at other ways to reduce environmental footprint
  • Set up regular stock investment
  • Finish my portfolio spreadsheet

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

  • Quarterly Returns Q1 2019
  • How I calculate my net worth
  • Stoicism and the finance world
  • Green Credentials
  • Property Renovation Lessons Part III
  • Plus the usual Full English Accompaniments and other drivel…

Happy April everyone,

The Shrink

The Full English Accompaniment – Doctors are rubbish at pensions

What’s piqued my interest this week?

There’s been lots in the news over the past few weeks about how high-earning professionals are being stung by the Tapered Annual Allowance, particularly doctors (1, 2, 3). The estimates are that around a million UK workers will have an unexpected tax bill (4, 5). I wrote a long-winded draft post trying to explain the reasons why doctors were disproportionately affected, but then YFG did a much better one, so I’ll direct you there for an explanation (6). Instead I’ll try and provide some context from a doctoring point of view.

Doctors make a good wage. As someone climbing the ladder, it takes a long time to get there (10 years and counting), but the end result is solid. You don’t go into medicine to make money. GP and consultant starting salaries are £~70k, with most on about £80-90k. If I had wanted to get filthy stinking rich I would have gone into banking, law or finance. The grades to get into medicine are the same as those for degrees which feed into the big financial firms. You go into medicine to see people, ‘make a difference’ (bleurgh), do science-y things. You know you’ll be remunerated well enough for your services. You’re happy to pay taxes as you live in a developed society, and the whole point of a society is to support it’s members.

Many doctors in my experience are crap at personal finance, but they know that the NHS pension will sort them out at the end. And the NHS pension has long been a trade-off for a national monopolised employer running pay rates lower than international averages. That £70k starting wage? In the private sector of the UK, double it. That’s not private practice, that’s private companies sub-contracted by the NHS to provide NHS services. In the antipodes, double it. In the US and Canada, triple it and then some. Break out the tiny violins.

Why is the Tapered Annual Allowance such a stinger? Well drawing in some of YFG’s subheadings, doctors have high, variable, unpredictable incomes, with a defined benefit scheme that is inflexible. They are unable to predict if they will fall foul of the TAA, are unlikely to know from the PAYE payslips, and unable to opt out if they do.

The NHS pension is a DB Career-Average Revalued Earnings (CARE) system with a 1/54th ratio. It has been consistently raided and watered down over the past few years, and with the 2015 changes any option to transfer out removed. It’s an unfunded scheme so there’s no money to transfer out. It has high contributions of 20.6%, split at different levels between individual and employer based on pensionable pay (7). The 2015 changes are already subject to legal action for age discrimination (8, 9). Payroll services do not offer options for pensions, so either you have your NHS pension scheme, or you have no pension at all. Even if you knew you were going to breach the TAA and wanted to reduce your contributions and keep working, you couldn’t. Increasingly people are choosing to opt out altogether (10). A cynical person would say this was the intention all along, to precipitate the pension scheme collapsing.

To break down the income side for context, year-on-year it is unlikely a doctor can predict their income. Mine changes monthly. My salary changes every six months due to the complex contracting system. The NHS is chronically short of doctors and routinely asks staff to step in to fill the breaches at minimal notice. They are paid, but this overtime to keep services going is unpredictable. I’ve one colleague who has a £20k tax bill for overtime he was forced to do to make sure there was a doctor on the ward. Due to the Tapered Annual Allowance doctors are refusing to fill the gaps, as the extra work can kick them into the Tapered Annual Allowance tax bracket.

This all comes on the back of continuing pressures and erosion of morale. A dossier of experiences collated this week gives an idea of what it’s like to work under NHS management (11). Can’t come into work as you have pneumonia and just found out you have lung cancer? Obviously not a team player. Got appendicitis? Finish your shift before taking yourself to A&E. It goes on. So forgive me the rant, but the NHS is in a pretty dire situation already, without complex taxation laws penalising staff for working.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

The Right Way to Keep Chickens – Virginia Shirt – Another guide to our new pets.

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.ftadviser.com/pensions/2019/03/26/union-urges-action-on-doctors-pensions/
  2. https://www.ft.com/content/225fb300-4c8e-11e9-bbc9-6917dce3dc62
  3. https://www.telegraph.co.uk/pensions-retirement/tax-retirement/doctors-give-nhs-bosses-days-fix-pension-crisis/
  4. https://www.internationalinvestment.net/news/4001515/million-uk-workers-unexpected-pensions-tax
  5. https://www.telegraph.co.uk/pensions-retirement/tax-retirement/million-professionals-face-100k-pension-tax-bills-completely/
  6. https://youngfiguy.com/nhs-pension-scheme-and-doctors/
  7. https://www.nhsemployers.org/your-workforce/pay-and-reward/pensions/pension-contribution-tax-relief
  8. https://www.gponline.com/bma-sue-government-nhs-pension-scheme-age-discrimination/article/1578690
  9. https://www.bmj.com/content/364/bmj.l1145
  10. https://www.investorschronicle.co.uk/portfolio-clinic/2019/02/28/think-long-and-hard-before-opting-out-of-your-nhs-pension/
  11. https://www.theguardian.com/society/2019/mar/28/nhs-trainee-doctors-denied-leave-dossier-hospitals
  12. https://www.bbc.co.uk/news/business-47691078
  13. https://www.bbc.co.uk/news/business-47679192
  14. https://www.theguardian.com/money/2019/mar/29/house-prices-in-england-fall-for-first-time-since-2012
  15. https://www.bbc.co.uk/news/business-47741984
  16. https://www.telegraph.co.uk/business/2019/03/30/china-planting-flag-europe-bad-news-italy-france/
  17. https://www.theguardian.com/uk-news/2019/mar/30/peasant-revolt-earl-percy-flats-allotments-london
  18. https://monevator.com/fintech-and-money-habits/
  19. http://thefirestarter.co.uk/to-lift-yourself-higher-walk-your-own-fire/
  20. https://theescapeartist.me/2019/03/27/get-rich-fast-part-2/
  21. http://www.frugalwoods.com/2019/03/27/an-electric-blanket-and-other-february-2019-expenditures/
  22. https://drfire.co.uk/phd/
  23. https://firevlondon.com/2019/03/31/march-19-q1-review/
  24. https://youngfiguy.com/state-pension-age-increases/
  25. https://ditchthecave.com/m-shaped-life/
  26. https://gentlemansfamilyfinances.wordpress.com/2019/03/29/stories-from-london-conspicuous-consumption/
  27. https://www.foxymonkey.com/each-way-matched-betting/
  28. https://thesavingninja.com/the-account-sharing-revolution/
  29. https://www.ukvalueinvestor.com/2019/03/what-went-wrong-at-interserve.html/
  30. https://cashflowcop.com/the-ultimate-directory-of-fire-calculators/
  31. https://indeedably.com/choose-your-poison/
  32. https://simplelivingsomerset.wordpress.com/2019/03/29/o-tempora-o-mores/
  33. https://www.jackwallington.com/roundup-of-glyphosate-weed-killer-research/

The Full English Accompaniment – Playing fair when maximising your ISA allowance

What’s piqued my interest this week?

It’s that time of the year, and for the first time in a long time I’m looking at dipping my toe in the ISA waters, that generous government tax-sweetener (1). Sensible investors of course maximise their ISA allowance at the start of the tax year (for time in the market), but I’m only just reaching a point where I can start thinking about it.

So I have my £20,000 allowance ahead of me. How do I use it? Well according to some denizens of the internet I should max out all of my lines of credit and fill up my ISA pots. This would potentially maximise my allowance, and ensure I don’t regret losing it in the future. I could do this by stoozing, taking out a new 0% interest credit card and bunging it all in an ISA (2). I’m loath to do this for three reasons. The best cash ISAs are currently providing 1.77% interest (or 1.95% if two year fixed), which on £10k borrowed is a measly £177 (3). I lack the kahunas to leverage £10k on credit cards into a S&S ISA in the current market. We’re also due to remortgage soon and I’m trying to minimise my credit utilisation.

If not stoozing then perhaps using a flexible ISA to at least fill my allowance before paying it all back next month (4). This would be a pretty weird use of the flexibility, and I’m not sure how well it sits with me. The main premise of a flexible ISA is that you can take money out and as long as you replace it within the tax year it doesn’t effect your allowance; i.e. Put in £5k, leaving £15k allowance, withdraw £2.5k and you go down to £17.5k allowance (5, 6). So far so simple, but it gets a bit more complicated when you start adding in previous tax year allowances. Money withdrawn comes first from the current years allowance, and then previous years. Money replaced first replenishes previous years and then the current year’s allowance (7). Also worth noting Innovative Finance ISAs and cash within a S&S ISA can be flexible, but not any element in a S&S ISA that is not cash. MSE’s guidance on this is pretty excellent (7).

In my situation I could therefore use £20k of credit to fill up this years allowance on the 5th of April, before paying back my creditors on the 6th of April and leaving myself with £40k to fill for the next tax year. I’m not going to do it because I don’t think I’ll fill my £20k allowance next year, never mind £40k. It also feels a bit morally like bed and breakfasting, the act of selling and repurchasing shares on the same-day to play CGT, which is a naughty tax no-no (8). My suspicion is that the actual number of people in this position is so low that nobody at HMRC really cares. Bed & ISA-ing is a separate proper thing which is recommended, because the repurchase into the ISA counts as being in a different capacity and therefore it’s not B&Bing (9, 10, 11).

Other sources point to portfolio cash ISAs, with a bit in S&S and a bit in cash in separate pots under once umbrella, just to make the waters more muddy (12). There’s also recommendations to use a flexible ISA as a sort of tax store, where you take it out of your 1% instant access ISA account at the start of the tax year, bung it somewhere it can earn more interest, and then put it back in at the end of the tax year to keep the allowance (13). This makes it ‘work harder’, but seems absolutely bonkers to me as surely any interest is taxable and therefore negates the point of having a bloody ISA. It’s all a bit of a minefield of suggestions, and you’ll have to wait until the end of the month to find out what I actually did. Hint: it’s very boring.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Tombland – C.J. Sansom – I love the Shardlake series, detective novels set in the Tudor period with a crippled lead character. Beautifully written.

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.gov.uk/individual-savings-accounts/
  2. https://www.moneysavingexpert.com/credit-cards/stooze-cash-credit-cards/
  3. https://www.moneysavingexpert.com/savings/best-cash-isa/
  4. https://www.gov.uk/individual-savings-accounts/withdrawing-your-money
  5. https://www.thisismoney.co.uk/money/saving/article-5572897/What-flexible-Isa-advantage-it.html
  6. https://www.gov.uk/individual-savings-accounts/withdrawing-your-money
  7. https://www.moneysavingexpert.com/savings/flexible-ISAs/
  8. https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg13370
  9. https://forums.moneysavingexpert.com/showthread.php?t=5850109
  10. https://www.moneyobserver.com/how-to-invest/isa-rules-everything-you-need-to-k
  11. https://www.which.co.uk/news/2019/03/revealed-how-to-play-the-tax-free-isa-rules-to-your-advantage/
  12. https://www.which.co.uk/news/2019/03/revealed-how-to-play-the-tax-free-isa-rules-to-your-advantage/
  13. https://www.thisismoney.co.uk/money/saving/article-5572897/What-flexible-Isa-advantage-it.html
  14. https://www.bbc.co.uk/news/business-47636056
  15. https://www.theguardian.com/business/2019/mar/21/bank-of-england-holds-interest-rates-amid-brexit-chaos
  16. https://www.bbc.co.uk/news/business-47554026
  17. https://www.bbc.co.uk/news/business-47617206
  18. https://www.bbc.co.uk/news/business-47666249
  19. https://www.telegraph.co.uk/news/2019/03/21/three-drunk-russian-sailors-rescued-island-welsh-coast-getting/
  20. https://www.bbc.co.uk/news/uk-47652870
  21. http://eaglesfeartoperch.blogspot.com/2019/03/cost-of-car-ownership-over-9-years.html
  22. https://theescapeartist.me/2019/03/19/get-rich-with-recycling/
  23. https://ofdollarsanddata.com/we-all-make-mistakes/
  24. http://quietlysaving.co.uk/2019/03/22/5-years/
  25. https://monevator.com/weekend-reading-oops-bonds-did-it-again/
  26. https://monevator.com/why-the-4-rule-doesnt-work/
  27. http://diyinvestoruk.blogspot.com/2019/03/ishares-global-clean-energy-new-addition.html
  28. https://simplelivingsomerset.wordpress.com/2019/03/20/red-and-white-dragons-fight-under-the-edifice-of-brexit-as-the-end-of-the-isa-year-approaches/
  29. https://gentlemansfamilyfinances.wordpress.com/2019/03/21/fire-proofing-the-portfolio/
  30. https://theenglishinvestor.com/a-life-update-from-the-english-investor-q1-2019-edition/
  31. https://ditchthecave.com/child-millionaire-saving-kids/
  32. https://thesavingninja.com/how-to-be-successful/
  33. https://indeedably.com/uncharitable/
  34. https://indeedably.com/a-professional-not-an-expert/
  35. https://firevlondon.com/2019/03/17/february-2019-skinny-update/
  36. https://lifeatno27.com/2019/03/23/sweet-cherry-tomatoes-plot-to-plate/

 

 

The Full English Accompaniment – Making your day more environmentally friendly

What’s piqued my interest this week?

As part of our goals for this year MrsShrink and I are trying to live more sustainably. Recently we’ve got a bit stuck for ideas, and a friend recommended we go through our daily routine to look for places where we couple replace things. Here’s part of MrsShrink’s day as an example:

  • Morning shower:
    • shower gel – swap for soap bar
    • plastic loofah – swap to natural loofa
    • venus razor – ceramic or wood with replaceable blades?
    • face wash – home made
    • face exfoliator – home made
  • Brush teeth:
    • electric toothbrush heads – bamboo heads?
    • toothpaste – tabs?
  • Creams/ lotions/ make-up:
    • moisturiser cream
    • lip balm – metal tins
    • deodorant – bars or powders
    • make-up – plastic free
  • Clothes:
    • buy from charity shops
    • natural fibres only
  • Tea & coffee:
    • teabags (contain plastic) – loose leaf instead
    • coffee – buy beans from sustainable source and grind

This method has helped us recognise areas where we can change. Some of the ideas we came up with are probably more expensive, but we’re going to try and implement the cheaper ones. So why not give it a go as another way of budgeting and accounting in your life.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Tombland – C.J. Sansom – I love the Shardlake series, detective novels set in the Tudor period with a crippled lead character. Beautifully written.

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.thisismoney.co.uk/money/bills/article-6799495/Are-solar-panels-good-investment-feed-tariffs-slashed.html
  2. https://www.thisismoney.co.uk/money/news/article-6804455/Official-outlook-finances-five-graphs-Spring-Statement.html
  3. http://www.morningstar.co.uk/uk/news/182247/fca-to-clamp-down-on-exit-fees.aspx
  4. https://www.dailymail.co.uk/money/mortgageshome/article-6781531/House-prices-grow-highest-record-February-fall-January.html
  5. https://www.bmj.com/content/364/bmj.l998
  6. https://nypost.com/2019/03/01/archaeologists-uncover-ancient-graffiti-penis/
  7. https://www.mrtakoescapes.com/low-beta-investing-the-anomaly-of-lower-risk-and-greater-returns/
  8. https://www.morningstar.com/articles/919059/understanding-and-navigating-etfs-premiums-and-dis.html
  9. http://diyinvestoruk.blogspot.com/2019/03/foresight-solar-it-new-addition.html
  10. https://www.ukvalueinvestor.com/2019/03/why-centrica-no-longer-meets-my-investment-criteria.html/
  11. https://youngfiguy.com/mrs-yfg-my-top-tips-for-getting-your-partner-on-side/
  12. https://cashflowcop.com/fi-score-test-fist-where-are-you-on-the-journey/
  13. https://gentlemansfamilyfinances.wordpress.com/2019/03/15/saving-ninja-thought-experient5-from-gff/
  14. https://thesavingninja.com/a-close-up-look-at-death/
  15. https://firethe9to5.com/2019/03/15/early-retirement-early-days-what-ive-learned-from-the-first-3-months/
  16. http://quietlysaving.co.uk/2019/03/15/gin-and-win/
  17. https://monevator.com/tax-efficient-saving-for-children-and-grandchildren-with-jisas-and-sipps/
  18. https://www.foxymonkey.com/best-passive-income-investments/
  19. https://indeedably.com/incurable-optimism/
  20. https://ditchthecave.com/shame-poor/
  21. https://www.msziyou.com/tale-of-two-coffee-shops/
  22. http://twothirstygardeners.co.uk/2019/03/how-to-season-wood/
  23. https://sharpenyourspades.com/2019/03/12/peat-free-coco-coir-compost/