The Full English Accompaniment – Wealth whispers

What’s piqued my interest this week?

This picture, from meta-aggregation site Reddit, triggered me.

The Shrink comes from an old family. We have an extensive family tree taking up many interconnected A1 sheets, and several books have been written about both maternal and paternal ancestors. These families are not rich. They fell from grace long before my parents came around, and many of the extended family survive at the mercy of universal credit. This is one of the reasons for my peculiar attitude to wealth. I have learnt from my family that all that is won can be lost by your children. Attitude is more important than cash. The Shrink’s great x 5 grandfather may have been a Victorian Buffett, but he didn’t teach his grandson not to splash it all on fine wine and pheasants.

This created an underlying distrust of overt displays of wealth. Encounters with people classically defined as aristocrats reinforced this. No lord gives a damn about your 68-plate Landrover. Wealth whispers.

I feel this attitude sits well with financial independence. You don’t maintain great wealth by spending it frivolously. To an extent, I think the financial independence movement needs to credit the millionaire next door concept as part of it’s roots. The original 1996 Millionaire Next Door book found that millionaires were disproportionately clustered in blue-collar neighbourhoods due to white-collar professions spending on luxury goods and status items (1). The follow-up focused on how financial attitudes (and advertising/ cultural shifts) pushed people to live a pseudo-affluent lifestyle of “freedom to consume” (2). Credit and loans means you can consume whatever you want, when you want, and deal with the consequences later. Consumerism and debt props up a stagnating economy by borrowing from future prosperity. Lifestyle magazines and the media focus on self-made stars (footballers, rockstars etc) encourages people to believe that anyone can rise to the top and have everything. And even if you don’t get that million-pound AC Milan contract you can emulate your favourite footballer by buying a Merc C-class. You just have to get finance at 18.9% APR to do it, paid for by your job managing a Vodafone call centre. Other brands are available.

Across the ages debts don’t make a person rich. Greeks and Romans knew the value of saving. Samuel Pepys turned £25 to £10,000 by working hard and saving (3). The core concepts of saving, spending only what you can afford, keeping debts and credit lines small cross-cut history and movements. Modern articles on how to be the millionaire next door could be copy-pasted to FI (4). The lesson is that you can’t get rich by ‘flashing the cash’.

Have a great week,

The Shrink

Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

Fools and Mortals – Bernard Cornwell

Tim Hale’s Smarter Investing – hur-bloody-rah

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://en.wikipedia.org/wiki/The_Millionaire_Next_Door
  2. https://thinksaveretire.com/the-next-millionaire-next-door/
  3. https://www.independent.co.uk/arts-entertainment/books/features/samuel-pepys-diary-a-decade-worth-recording-5515913.html
  4. https://www.marketwatch.com/story/heres-how-you-can-be-the-millionaire-next-door-2015-07-14
  5. https://www.bbc.co.uk/news/business-46505692
  6. https://www.bbc.co.uk/news/business-46502650
  7. https://www.bbc.co.uk/news/business-46505688
  8. https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-price-collapse-cryptocurrency-latest-value-prediction-analysis-a8675766.html
  9. https://www.independent.co.uk/travel/news-and-advice/crossrail-delay-opening-latest-update-london-underground-elizabeth-line-tfl-sadiq-khan-a8676076.html
  10. https://www.reuters.com/article/us-usa-stocks-bears/almost-half-of-sp-500-stocks-in-a-bear-market-idUSKBN1O928G
  11. https://www.bbc.co.uk/news/business-46530860
  12. https://www.reuters.com/article/us-imf-economy-lipton/imf-warns-storm-clouds-gathering-for-global-economy-idUSKBN1OA0SG
  13. https://www.telegraph.co.uk/news/2018/12/11/commuter-victory-rail-firm-ditches-ironing-board-seats-new-trains/
  14. https://www.theguardian.com/us-news/2018/dec/12/as-climate-change-bites-in-americas-midwest-farmers-are-desperate-to-ring-the-alarm
  15. https://www.dailymail.co.uk/money/investing/article-6484131/The-best-worst-performing-funds-investment-trusts-2018-far-revealed.html
  16. https://www.telegraph.co.uk/business/2018/12/09/ratesetter-falls-deeper-red-acquiring-carcass-motor-finance/
  17. https://www.cnbc.com/2018/12/13/richard-branson-the-9-to-5-workday-and-5-day-work-week-will-die-off.html
  18. https://simplelivingsomerset.wordpress.com/2018/12/12/odd-christmas-sales-and-consumerism/
  19. https://monevator.com/weekend-reading-can-we-take-back-control-from-brexit/
  20. https://monevator.com/money-is-power/
  21. https://youngfiguy.com/mrs-yfg-how-my-poor-self-worth-costs-me-10000-a-year/
  22. http://www.msziyou.com/overlooked-slovenia-bulgaria/
  23. https://www.pragcap.com/3-reasons-hold-long-bonds-short-rates-rise/
  24. https://humbledollar.com/2018/12/first-impressions/
  25. https://www.financialsamurai.com/patient-capital-is-the-key-to-long-term-wealth/
  26. http://www.retirementinvestingtoday.com/2018/12/is-visible-fire-movement-changing-for.html
  27. http://quietlysaving.co.uk/2018/12/09/restarting/
  28. https://littlemissfireblog.wordpress.com/2018/12/11/november-side-hustle-report/
  29. https://littlemissfireblog.wordpress.com/2018/12/13/monthly-catch-november-to-december-18/
  30. https://littlemissfireblog.wordpress.com/2018/12/08/diversification-isnt-only-for-your-portfolio/
  31. https://gentlemansfamilyfinances.wordpress.com/2018/12/04/how-i-learned-to-stop-worrying-and-love-the-calm/
  32. https://gentlemansfamilyfinances.wordpress.com/2018/12/07/stocks-and-shares-more-like-shocks-and-scares/
  33. https://gentlemansfamilyfinances.wordpress.com/2018/12/11/graphs-i-like-income-vs-outgoings/
  34. http://www.thefinancezombie.com/2018/11/still-ere.html
  35. https://inspiringlifedesign.com/posts/2018-goals-review.html
  36. https://indeedably.com/financial-planning/
  37. https://indeedably.com/opportunity-cost/
  38. https://sharpenyourspades.com/2018/12/06/10-highlights-from-the-grow-your-own-blogs-november-2018/

 

 

 

 

 

 

 

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The Financial Dashboard – November 2018

With the long holiday I’ve missed out October, so here’s a chance the catch up.

The goals for October and November:

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

Checking the assets and liabilities:

Nov AssetsNov Liab

These are taken from my Beast Budget spreadsheet. Over the two months my net worth has grown by £4427 (19%). This is down to my quarterly revaluing of our property, which sees my portion go up by £5k, hiding two months of heavy spending. My actual savings rates have bounced either side of 0, despite putting money into my mortgage, savings accounts, credit cards and pensions. We spent several thousand on our honeymoon. We’re not looking at the figures properly, as it’s a once in a lifetime thing, but it was probably £4-5k all in, travelling around the far east for three weeks.

During that time I saved £400 in my 5% interest Santander saver and for the first time since February this year my credit card debt is under £3000.

Goals:

Goal achieved:  Clear out and sell/ dump items from the storage unit

Goal achieved: Sell five more items

I’ve cleared my storage lock-up garage. In the process we sold several pieces of spare furniture, with a couple more to sell along with a whole host of stored car parts. I’m trying to get better with this, as I have a tendency to snaffle rare or good quality parts when I see them, ‘just in case’. I took a full estate-car load to the dump too. By giving up the storage unit I’ve reduced £120 of monthly motoring outgoings. So we continue – Sell five more childhood toys. Sell five more car parts.

Goal achieved:  Establish weekly and monthly joint grocery account expenses

I’m going to cover this in the next quarterly update, as more data is better. I think I’ll take an average across the whole year and look at how I can restructure our diet and shopping to get a better budget.

Goal failed:  Service the red car

I harpooned myself here. I bought the parts to do the work (£50-odd quid), and then promptly filled my garage up with crap decanted from my storage. Bah.

Problem is this continues a theme. I love working on my cars, but rarely get the time any more, especially with continued house renovations and now the garden. My garage is full of sofas, lawnmowers and boxes of books, so it looks unlikely I’ll be able to wheel either car in there for tinkering any time soon. I’ve not actually been able to work on a car for at least a year, and this not only makes me sad but it also isn’t good for the cars. Nothing knackers a motor like a long period of inactivity.

Last month I spent a long weekend away with old friends for a stag do. Two of them are doing quite well for themselves and run brand new high-end German sports cars. They both spend a lot on these cars, but as they use them daily it’s an expense they’re happy to pay for the ‘smiles per miles’. Another bloody phrase I hate. It made me question my habits. I’m not about to abandon my bangernomics tendencies, but my current cars aren’t exactly costing pennies. I think I’ve spent £1150 on work on the red car this year alone, to only turn 250 miles in that time. I’m tempted to cut my losses and buy something either a bit worse to hack over the winter, or save up and buy an appreciating classic. Watch this space. In the interim I’m going to spend this month looking over my previous motoring spending and setting a realistic monthly budget/ savings target for my cars, to gradually build up their own replacement/ repair/ improve/ invest fund.

Goal failed: Finish reading Tim Hale’s Smarter Investing

Read fiction whilst away. Will finish it this month.

Budgets:

  • Daily living and entertainment – £0 from my account, but technically a lot more from the joint.
  • Transport – budget £300, spent £233.69, last month £217.23. Keep reducing this.
  • Holiday – a lot.
  • Personal – £50/ £20.64/ £90
  • Loans/ Credit – £200/ £571.77/ £425. Paying any new additions plus £250 off my credit card every month now.
  • Misc – £50/ £16.40/ £47.97. Took some cash out for the pub.

In the garden:

The early frost while we were away last month killed off much of our late crop. We managed to save some late potatoes which are now in the greenhouse, along with a host of salad crops. I’ve dug over the ground and I’m making plans for new beds.

Goals for next month:

  • Sell five more childhood toys. Sell five more car parts.
  • Set a realistic monthly savings target for motoring
  • Establish weekly and monthly joint grocery account expenses
  • Finish reading Tim Hale’s Smarter Investing

What’s in the pipeline:

  • Property Renovation Lessons Part II
  • Investment Strategy Statement – Part 3 – Asset Allocation
  • Investment Strategy Statement – Part 4 – Funds, Accounts & Rebalancing
  • FIRE for your Mental Health
  • Plus the usual Full English Accompaniments and other drivel…

Happy December everyone,

The Shrink

 

The Full English Accompaniment – Are banks safe?

 

What’s piqued my interest this week?

One of my threads of thought this week has followed the TSB issues and a Radio4 Moneybox episode a few weeks ago. It transpires that fraudsters used the opportunity to see others bank account information during TSB’s blunders as a a good ticket to cash-out town. This week we had the admission from TSB that at least 1300 customers lost money due to fraud as a result of their IT changeover (1). Nils Pratley at the Guardian sums it up nicely; for all TSB apologises, it doesn’t change the incompetence (2). Between this, and a discussion with YFG on an old Full English about the TSB debacle, I decided to have a chat with some friends who work IT security. One is a white-hat hacker, the other works as an IT security consultant and provides subcontracted coding services (as well as currently writing some code for a little spin-off). Both confirmed what I had read before; that the monolithic goliaths that are the main high street banks have pitiful IT infrastructure.

It makes sense. These are banks founded on the premise of an on-site vault, a list of ledgers and a network of staffed branches. Their IT was adopted ad-hoc, as a necessity, developed or brought in to fit the old model. The old model was anachronistic, it included human foibles and errors, and a degree of leniency to allow for it. Trying to bring in coders, explain and then cram all that into Windows 3.1, then 95, then 2000, etc was never a long term solution. IT departments are not the moneymaking focus of a high street bank, they don’t win all the praise, so the funds will only stretch to essential patching. This is not safe. Threadneedle street is trying to combat this by setting cyber security challenges to recruit IT experts to bolster their security (3)

Sadly, there lies my concern. A bank, by definition, should be a safe place. Your money no longer resides in a huge locked vault. It sits on an online ledger, protected by minimally patched although mostly secure firewalls and security systems. Security systems prone to outages and instability, as Tesco Bank customers found this week (4).

Which is why I find ‘challenger banks’ so tempting. The Starling Bank CIO, John Mountain (strong name), was interviewed last September about working at a bank that is challenging traditional IT thinking (5). Starling have released their API and ran a hackathon of their systems at London Campus in April this year (6). Anne Boden, the Starling CEO, is reported to have said that a bank should not have an IT department, as it’s whole business is now IT. In John Mountain’s words:

“We don’t run a technology function here because the whole business is a tech function”

Will I move all my money into ‘challenger banks’? Probably not. The Rothschilds’ don’t throw their banking system out with the bathwater every time there’s a systemic crisis. Traditional banks will have to learn the hard way, as TSB are doing. For the time being I’ll split my pots as, after all, a bit of diversification can’t help can it?

Have a great weekend,

The Fire Shrink

Side Orders

News:

Blogs/ Opinion pieces:

What I’m reading:

When Breath Becomes Air by Paul Kalanithi – Useful for a sense of perspective

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.theguardian.com/business/2018/jun/06/tsb-admits-1300-customers-lost-money-from-accounts
  2. https://www.theguardian.com/business/nils-pratley-on-finance/2018/jun/06/tsb-apologises-a-lot-but-its-real-problem-is-about-competence
  3. https://www.cio.co.uk/cio-interviews/bank-of-england-cio-robert-elsey-sets-cyber-security-challenge-3678401/
  4. https://www.theguardian.com/business/2018/jun/05/tesco-bank-customers-shut-out-from-online-and-mobile-services
  5. https://www.computerweekly.com/news/450426542/CIO-interview-John-Mountain-Starling-Bank
  6. https://www.starlingbank.com/hackathon/
  7. http://www.bbc.co.uk/news/business-44366731
  8. https://www.telegraph.co.uk/finance/newsbysector/transport/8613090/Crossrail-financed-by-600m-bond.html
  9. https://www.theguardian.com/society/2018/jun/08/nhs-workers-agree-pay-rise-three-years
  10. https://youngfiguy.com/why-having-your-hopes-and-dreams-crushed-can-be-a-good-thing
  11. http://diyinvestoruk.blogspot.com/2018/06/equities-outperform-bonds.html
  12. http://blog.letsventure.com/investor-insights/top-9-tips-to-be-a-successful-angel-investor/
  13. http://www.collaborativefund.com/blog/the-psychology-of-money/