The Financial Dashboard – May 2019

The goals for May were:

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

Checking the assets and liabilities:

May AssetsMay Liabilities

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

Goals:

Goal achieved: Sell £100 worth of stuff

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

Goal failed: Finish my portfolio spreadsheet

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

Goal achieved: Get two extra blog posts out

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

Goal achieved: Re-mortgage

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

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

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

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

Goal achieved: Set up new bank accounts

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

Budgets

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

In the garden:

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

Goals for next month:

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

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

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

Happy June everyone,

The Shrink

References:

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