The Financial Dashboard – April 2018

So where did that month go?

April 2018 Dash

My first monthly review is not pretty reading, but I expected that. My net worth has actually decreased. This is due to a few expensive payments for professional courses and subscriptions I have coming up. Some of these will be reimbursed by expenses. I’ve also been shelling out for wedding items and legal expenses for property conveyancing. This has swallowed up some money I had in my main bank account put ready after working some extra shifts last month.

Assets April 2018

My assets have decreased. I have been back through old bank accounts and working out a more accurate picture of the lay of the land. I’ve now factored in a bit of overdraft I paid off earlier in the month, and the cash float has been swallowed by legal fees. Next month I should be clear of my (interest free) overdraft for the first time in several years. I’ve managed to raise a bit of cash by starting to sell some spare car parts, but I continue to be a serial hoarder of bits which I picked up cheap and ‘may come in handy one day’. I’ve also managed a mini-goal in drastically reducing my £4/day canteen lunch habit to a £10/week shopping trip… Chipping away.

Liabilities April 2018

My liabilities have decreased a bit. Student loan is being paid off as per amortisation, as is the mortgage. My credit card has increased a bit with wedding expenses. Over the month I’ve set a clearer plan for my credit card, and I now plan to pay off a specific amount (~£250) monthly rather than ad hoc amounts.

I have also set a plan to decrease monthly spending. We currently pay mortgage on a house on the other side of the country, and rent on a house where we work. This is an eye watering £1950/ month, plus bills and council tax. We’re downsizing our rental on a short lease, and waiting on the sale of our property and purchase of a new place.

Plans for next month:

  • Set up a regular savings account to build an emergency fund. This may either be a regular saver or a high interest bank account.
  • Set up a Starling/ Monzo/ Atom/ Revolut account for day to day transactions.
  • Reduce mortgage and rent outgoings
  • Sell five items from my hoard
  • Set a monthly budget for hobbies

I also plan to continue reading about savings and investment strategies, and look into overpaying my mortgage once conveyancing and purchases are complete.

There’s a long way to go.

Yours,

The FIRE Shrink

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The Full English Accompaniment – High Street Horrorshow

What’s piqued my interest this week?

What is happening to the British High St? Does a FIRE advocate really care?
For years now I’ve been buying things through the internet. It’s significantly cheaper, and totting up my purchases I reckon at least 50% is via Amazon/ eBay or other online retailers. I only go into town to shop if I need SOMETHING NOW, which points to piss poor planning, or if I’m after inspiration. Massive distribution centres like the one below and same day delivery means that the failure of planning is less of an issue too:

https://www.theguardian.com/artanddesign/2018/apr/15/shed-the-size-of-town-what-britains-giant-distribution-centres-tell-us-about-modern-life

So what the hell is the High St for?

That seems to be a question plaguing retailers, with lots on the wane. Just in the last month we’ve had Poundworld shrinking (debate as to this being a bad thing), House of Fraser calling in KPMG, Debenhams and Mothercare issuing profit warnings, to add to the folding of Maplins and Toys ‘R’ Us:

Poundworld adds to retail gloom – http://www.bbc.co.uk/news/business-43908423

House of Fraser calls in KPMG to draw up turnaround plan -http://www.bbc.co.uk/news/business-43828629

https://www.thetimes.co.uk/article/retail-profit-warnings-on-high-street-reach-seven-year-high-fjhpnsdg2

The ONS is blaming this on the snow:

UK economy in weakest growth since 2012 – http://www.bbc.co.uk/news/business-43919094

Which I think makes about as much sense as blaming Stalin for the current Tory government. Tenuous.

It feels to be part of a wider consumerism shift towards online and digital usage and away from browsing shops in town. Banks are moving this way too, with Lloyds shutting a string of branches:

http://www.bbc.co.uk/news/business-43802021

Incidentally, I recommend going back and listening to a recent Radio 4 Moneybox where they interview an RBS executive about the closure of rural RBS banks. His summary is no matter how much people complain about wanting local banks, small branches being important etc, RBS are following people’s actions not words. People aren’t going into branch anymore. https://www.bbc.co.uk/programmes/b09x8qq5

This weeks news that Asda and Sainsbury are considering merging is also interesting.

http://www.bbc.co.uk/news/business-43933517

They talk of a shake up from what they call ‘the discounters’ Aldi and Lidl. I predominantly shop at the Aldidl, but this is made possible because of online purchasing of things not held in stock. Shopping there is going in, knowing what you want, getting it, paying as little as possible and leaving.

Is the business model for the High St changing? The following article from the BBC makes a lots of sense:

Why shopping needs to be more fun – http://www.bbc.co.uk/news/business-43813154

And the turnaround at Waterstone’s seems to mirror the picture that in order to survive, businesses on the High St have to change to provide something not available online. A personal touch to sales, or something more? Toys ‘R’ Us and Maplins were late to that party. Mothercare, House of Fraser and Debenhams seem to be waiting in invitations.

https://www.theguardian.com/books/2017/feb/03/balancing-the-books-how-waterstones-returned-to-profit

Big changes in the nature of the retail market matter to FIRE advocates, as like any market, diversification means you probably have a toe dipped in these investments. If you’re lucky it’s one of the clued up retailers. Either way, this is just the musing of one bored professional.

Happy weekend!

The FIRE Shrink

Side orders:

This week I’ve mainly been reading new blogs.

I’ve been learning about basic investing with the diy investor (uk) – http://diyinvestoruk.blogspot.co.uk/p/basics.html

And of course Monevator’s passive investing – http://monevator.com/category/investing/passive-investing-investing/

YoungFIGuy’s guide to Safe Withdrawal Rates – https://youngfiguy.com/safe-withdrawal-rate

And more domestically, cheap eats from Frugal Feeding – http://frugalfeeding.com/

Frugal Motoring – Diesel Curse

The adage goes that you should write about what you know. While I continue to learn about investing I’ll blog about frugal motoring.

In the last few months there’s been lots in the news about diesel cars. Since ‘diesel-gate’ (what will it take for lazy journalists to stop adding -gate to things? Door-gate? Gates-gate?) their social popularity stock has been in free fall. Suddenly they’re very out of fashion, and the Daily Mail warns us that many nuns and kittens will die if you buy a diesel. Should you be concerned?

Motoring fashion

The rise of diesel cars as a proportion of total sold really took off in the ’90s and early ’00s. Prior to this diesel engines were the preserve of commercial vehicles; loud, clattery, generally large displacement and utilised for their torque curve. In the late 1980s and early 90s manufacturers began to make smaller displacement, less tractor-ish, engines. This was largely possible due to a spread of direct injection and common rail technology, bringing more refined efficient running. These found their way into a wider variety of cars including corporate, higher end models. Engines like the Peugeot XUD, VAG 1z/ AHU/ AAZ/ PD and Mercedes OM60x series spread the word. Reps doing mega-mileage sang the praises of the fuel efficiencies and reliability of these donks.

Diesel had it’s golden age. Emissions concerns in the 00s pushed manufacturers to reduce harmful large particulate output (the old diesel smokers) while at the same time increasing efficiencies. Turbos, diesel particulate filters (DPF) and exhaust gas recirculation (EGR) were born. Diesel engines spread across consumer car ranges and people were seduced by their quoted MPG figures (leading to low tax brackets).

Emissions controls

The combination of emission controls and the spread across consumer car ranges lead to people using diesel cars who previously wouldn’t. Cars got heavier due to increased safety features all while tax incentives towards high efficiency vehicles continued this push. It was now people doing 5,000 miles/year as well as those doing 50,000, and so issues began. Engines were built for higher combustion pressure using tighter tolerances. Diesel engines are more efficient when up to temperature, and EGR/ DPF function best with long duration moderate RPM runs. The short distance, short duration journeys of those moving from little petrol cars to little diesel cars couldn’t produce the sustained RPMs required. Oil barely had time to warm up and lubricate the tight tolerances. People began to complain that their cars were not as efficient as expected, or not as reliable, or were doing DPF regen too frequently. Clouds gathered on the horizon.

Diesel-gate

It became difficult to develop engines that could meet the power/ weight/ efficiency/ emissions demands of the population and government with current technology. Some manufacturers built engines with tight tolerances that met standards at the expense of reliability (see Renault/ Nissan’s DCI). Others reduced displacement, upped boost pressure or used AdBlue (urea injected into the exhaust system, made from pig urine). VAG clocked that international emissions testing systems were always run a certain way, and therefore developed a programme in the cars ECU to detect when the car was being tested and tune for emissions at the detriment of performance. They were found out, and how the hysterical tabloids shrieked with indignation. Imagine that, a large corporation finding a way round government law and not telling the public!

At the same time scientists began to measure and report the elevated toxic levels of NOx and very fine particles that the new diesel engines chucked out. Those new diesels weren’t so clean after all, they had just changed from visible smoke to tiny invisible particles. A tipping point was reached.

Double standards

That brings us to now. The government, ever the one to follow the will of the people (shriek of The Sun/ Mail), has started to roll out new rules. Among these include that any Engine Management Light on, removal of Diesel Particulate Filter or Exhaust Gas Recirculation will be a fail come MOT time. This affects all car owners, but particularly diesel owners, where second hand owners replace or remove DPFs/ EGRs in pursuit of better reliability/ fuel economy.

https://www.theguardian.com/money/2018/apr/14/mot-changes-strict-tests-diesel-cars-fail

At the same time, the recognition of the other harmful exhaust gases has caused taxs and ultra low emissions zones to target diesel drivers.

https://www.bbc.co.uk/news/amp/business-43655703

I applaud the manufacturers who have managed to meet required standards. The technology (in it’s infancy 10 years ago) has matured and it is possible to have highly efficient diesels that haven’t bent the rules. Diesel is an excellent fuel for efficiency and torque.

Why does this matter to us?

Three points here. First the obvious. It will cost more to own a diesel car as tax classes change in the future. You may get stung with a hefty bill when you go for an MOT and find out that secondhand BMW 116d is missing it’s DPF. Manufacturers are also changing engines to make them meet new emissions standards, but in some cases this is worsening performance or MPG. Many new diesels aren’t meeting advertised MPGs in real world environments as the listed MPG figure is from a rosy scenario.

Additionally, you may have received a letter from the manufacturer asking you to bring your car in for a ‘fix’. VAG are the big name for this. I would think very carefully before getting the ‘fix’. Pistonheads (the car forum for powerfully built company directors driving shiny cars in shiny suits) is full of very interesting threads about documenting experiences with their ‘fixed’ cars.

https://www.pistonheads.com/gassing/topic.asp?h=0&f=86&t=1589780

Second, broader, point is about the knock on effect on the UK economy. We may no longer be the British Leyland industrial powerhouse nation, but many thousands of jobs across the UK rely upon the motor industry. The UK retains a reputation for high-tech manufacturing. Many of the manufacturers who have done well out of the rise of diesels produce the cars and engines in the UK.

https://amp.theguardian.com/business/2018/mar/05/diesel-uk-car-sales-fall-petrol-electric

The fall in demand has resulted in a fall in production volume, and jobs are being lost.

End doubts over diesel’s future, says Ford boss – http://www.bbc.co.uk/news/business-43885516

Nissan to cut hundreds of UK jobs – http://www.bbc.co.uk/news/business-43841922

Jaguar Land Rover to shed 1,000 contract staff – http://www.bbc.co.uk/news/business-43756202

It remains to be seen what will happen, but it’s unsettling to note the government not supporting manufacturers producing alternatives.

Third and final point and the one I see less writing about; diesel residuals. For the past 5-10 years people have been buying diesels, lots on PCP or finance deals, expecting when they come to sell or hand back the car will be worth a certain amount. That amount may no longer be what was expected. For the owner it’s a painful lump to swallow. For finance companies with hundreds of diesel cars on file, it’s a much bigger financial black hole. More on this another day.

I have a diesel, what should I do?

You’ve just bought your Vauxhall Insignia CDTI using a bank loan. You do 20k a year chugging around motorways, and find the car comfortable.

Probably nothing.

Check where you stand for MOT changes then drive your nice car.

Diesels remain an excellent engine choice if you’re doing high mileage where the torque and MPG show. Soporific sensationalist journalism doesn’t change it’s utility.

I continue to drive a 25 year old diesel. It’s loud, smelly, noisy and chucks out clouds of clag. It costs very little to service, very little to tax and can theoretically run on vegetable oils for maximum environmental offset.

Car purchases will be the biggest lump sum spend after a property, so always analyse engine choices pre-purchase. Don’t be swayed by government incentives which may change with the government’s mood.

Next time on Frugal Motoring: The PCP Black Hole

Yours,

The FIRE Shrink

The Full English Accompaniment – The London and BTL Bubble?

What’s piqued my interest this week?

Being an absolute N00B at investment, Monevator’s blog post this week on global prime property investment was fascinating (http://monevator.com/could-global-prime-property-be-the-canary-in-the-goldmine/). Property investment through trusts or funds have offered solid returns over the past few years, but is something not generally considered by Joe Bloggs on the high street. Nor is dropping a casual million on a prime property in Chelsea (or more likely Brixton these days). A much more common statement in the provinces is the goal to own a couple of properties to let for a bit of income in old age/ on the side. Surrounded by professionals in work I hear this at least once a week, but the landscape is changing.

http://www.thisismoney.co.uk/money/buytolet/article-5633935/Government-plan-professionalise-buy-let-working.html

For the past couple of years tax laws commenced in April 2016 have gradually put the squeeze on the buy-to-let portfolios. This has included removing the ‘wear and tear’ allowance, and from this month mortgage interest can no longer be deducted from capital gains for BTL, reducing potential profits:

https://www.simplybusiness.co.uk/knowledge/articles/2017/09/octobers-new-buy-to-let-regulations-what-you-need-to-know/

https://www.which.co.uk/news/2017/06/12-things-buy-to-let-landlords-need-to-know-in-2017/

Tougher lending rules from the Bank of England also mean that those buying a BTL with a mortgage will need to provide more stringent evidence that they can afford it:

https://www.telegraph.co.uk/property/landlord-guide/new-requirements-for-portfolio-landlords/

Energy efficiency rules have also changed, requiring landlords to ensure their properties meet E rate EPC standards (a challenge for many a draughty converted Victorian pile):

https://www.rla.org.uk/landlord/guides/minimum-energy-efficiency-standards.shtml

https://www.gov.uk/government/publications/the-private-rented-property-minimum-standard-landlord-guidance-documents

Why does this matter to the wider market? Many of the analyses I’ve read suggest that most landlords with just one or two houses, those with an extra property as a bit of side income or ‘accidental’ landlords, are moving out of the market. Gone are the days of easy cash for a BTL using flipped equity from your main home. This hasn’t deterred the professional landlords, indeed most are planning to increase rather than decrease their portfolios.

https://www.telegraph.co.uk/tax/news/second-home-buyers-landlords-paid-almost-half-britains-stamp/

MrsFIREShrink and I have recently been looking to sell our previous home, and purchase in the new area we have moved to for work. The market here is buoyant, with more buyers than properties, but it seems to buck the trend. Elsewhere property prices are stagnating (https://www.telegraph.co.uk/property/uk/sellers-forced-cut-asking-prices-25k-housing-market-cools/) or at the very least holding their own (https://www.telegraph.co.uk/business/2018/04/09/uk-house-prices-gain-ground-market-still-soft/). A good friend who works in property in NW London informs me things there are very bad… very bad indeed.

A trend we have noticed locally whilst viewing properties has been a rise in a dichotomous split. Very few good homeowner residential houses appear to be coming on the market, but there has been a dearth of run-down empty residential houses. These aren’t the untouched since the ’70s care-home-funders (rare), or the probate bargain basement bombsites (also rare). They’re clean, cheaply furnished and fitted, reasonably located and appropriately maintained, often with little in the way of updating to boiler/ insulation/ central heating, and missing original features or flashy new additions. Are these the single-property landlords getting out, we wondered? Are these sales providing a lifeline drip feed of property to an otherwise slow market? Has the Bank of England/ Gov played an absolute blinder by crowing about interest rate rises long enough (with minimal change) to scare out those whose BTL portfolio would creak under pressure, and therefore save a future property crash? Are government economists that good at calculating socioeconomic dynamics?

No individual can predict property price change. Discussing the above with the same friend he told me he was happy about the changes. For too long, says he, property has gone up and up, and people could buy with little fear of loss for those making daft decisions. Now in his words – “it’s a market again”.

Happy weekend!

The FIRE Shrink

Side orders:

http://thefirestarter.co.uk/matched-betting-no-lay-acca-tips-tricks/#more-4243 – Matched Betting side-hustles

https://www.theguardian.com/your-financial-future/2018/mar/22/eight-financial-apps-to-transform-how-you-deal-with-money – useful apps to consider, I’m investigating Mint

https://www.theguardian.com/money/2018/apr/21/renting-property-how-does-it-compare-around-the-world – what it says in the URL

http://quietlysaving.co.uk/2018/04/20/4-years/ – Happy 4th Birthday Quietly Saving!

The Yearly Plan

The first yearly plan for my finances, this data is just before tax-year 2018/9.

Up until now I’ve been pretty ad hoc with my finances, much like most professionals (I assume). Budgets are based on how far into my overdraft I am and spending in line with my means. Big surprise bills go on 0% credit cards. I’ve always spent as much as I’ve earned, and have limited tolerance for overexposure (unlike some colleagues). Time now for a change and some structure, namely the flowchart from r/UKpersonalfinance

My main debts are mortgage, credit card, and a small loan to a family member to pay for our wedding. The loan has no interest, and the credit card is 0% for another 2 years. I make more than minimum payments (usually 10x) each month.

Goal 1: Build an emergency fund.

Initially one month, but I’d like 6 for security. I’ve been investigating where to put this, and reading about new banks for current accounts. I’d like to have the benefits of a digital bank as I’m abroad a few times a year. This appears to be a good summary:

https://www.telegraph.co.uk/personal-banking/current-accounts/monzo-atom-revolut-starling-everything-need-know-digital-banks/

So I may set up a Starling account and a Santander 1-2-3 regular saver for it’s 3% interest rate.

Goal 2: Pay off debts

Simple really, but I’ll set up a plan rather than ad hoc.

Goal 3: Reduce superfluous outgoings.

Not too many, but deserves it’s own post.

Goal 4: Commence investing!

I’ll check back in quarterly to see how I’m meeting goals.

Yours,

The FIRE Shrink

Full English Accompaniment – Stamp Duty Land Tax and Land Transaction Tax

What’s piqued my interest this week.

With lots of other UK bloggers chatting away about the new tax year, here’s something different.

As I’ve mentioned earlier, myself and soon-to-be MrsFIREShrink are imminently purchasing property. As residents of the principality from the 1st of April this year we get the Land Transaction Tax instead of the SDLT.

It is largely the same as the old SDLT, but with some % and threshold changes. Instead of the SDLT 2.5% base, with LTT it will be 3.5%, but this will only be paid over £180k rather than £150k. Above £250k it will still be 5%, then 7.5% over £400k, 10% over £700k and finally 12% over £1.2 mil. More here:

https://beta.gov.wales/land-transaction-tax-calculator – Welsh Gov calculator

https://stamp-duty-calculator.co.uk/land-transaction-tax-calculator – calculator which includes comparison to SDLT

http://gov.wales/funding/fiscal-reform/welsh-taxes/land-transaction-tax/?lang=en – the legislation

Sadly as homeowners we miss out on the recent first time buyers stamp duty offer and Help-to-buy ISAs. MrsFIREShrink and I will still be a little better off, and Welsh Gov reckon so will most others. The sting for the wealthy aligns with my broadly liberal values, but I’m sure I’ll be whinging in future years and welcome comments below. It comes as part of a general move to devolve tax legislation, so it’ll be interesting to see how it all pans out!

Other side orders:

https://youngfiguy.com/happy-new-tax-year – YoungFIGuy summarises this years tax changes in his latest blog post

UK house prices post biggest monthly increase for six months – https://www.theguardian.com/money/2018/apr/09/uk-march-house-prices-post-biggest-monthly-increase-for-six-months – Halifax show house prices improving

But not in London- London house prices falling at fastest rate in nine years, says Halifax – https://www.theguardian.com/business/2018/apr/12/london-house-prices-falling-fastest-rate-nine-years-halifax

But fall in property available means a rate rise is less likely? -Rate rise doubts as property demand falls, says RICS – http://www.bbc.co.uk/news/business-43724002

The Financial Dashboard – The Beginning

Each month I plan to do a financial dashboard check and publish how I’m doing to reach my yearly goals. Currently it should be pretty simple due to my lack of investments.

Here’s the front page from my Beast Budget excel chart.

March 2018 Dash

Ouch.

Breaking it down.

Assets March 2018

£690-odd in my current account as monthly float. £115k in value of my property. A few £k in jewellery and cars. The life insurance? is as this is currently being renewed.

As for pensions… ah pensions. I pay into the NHS Pension scheme, at a rate of 9.3% with the NHS contributing 14.3%. A healthy 23.3% theoretically. The value given in this is my current lump sum redeemable value. The NHS Pension is complex enough to warrant it’s own blog post as I’ll try to make sense of it.

Liabilities March 2018

The majority of this is the mortgage on the property I own. The £2.5k owed to family and £4.3k on credit cards are both 0% interest, borrowed to pay for an upcoming relocation and nuptials. The student loan will gradually be paid down, but I’m in no great rush to clear this as it currently accrues paltry interest.

So that’s the baseline, and the only way is up!

The FIRE Shrink