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

 

 

 

 

 

 

 

 

Advertisements

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 Financial Dashboard – February 2019

The goals for February were:

  • Sell £50 worth of stuff
  • Calculate and set a budget for Entertainment
  • Reduce consumption of single use plastics
  • Finish the raised beds
  • Set up an account with an investment platform

Checking the assets and liabilities:

Assets Feb 2019Liabilities Feb 19

These are taken from my Beast Budget spreadsheet. This month my net worth grew by £984 (~3%). For the first time I’ve ended the month with a net worth >£30k. I put another £200 on my 5% Santander saver, paid down our wedding loan to a family member and my credit card bill. I also put money aside as budgeted for future professional and car expenses.

Goals:

Goal achieved: Sell £50 worth of stuff

Sold some car parts, got £50 in cash, spent it on soil (rock ‘n’ roll). I’ll increase this for next month to keep the impetus up.

Goal achieved: Calculate and set a budget for Entertainment

Again I went back over the past year’s spending to calculate what my average is. I’ve previously classed entertainment as daily living type costs, and kept gym and hobby fees separate. For this year and to produce a proper budget I’m going to include them all together, so that it encompasses eating out, the cinema/ theatre/ concerts/ events, the gym and my other esoteric hobbies. There’s been a lot of variance in monthly spending, from £~50 to £~250, accounted for by concert tickets and times when we’ve eaten out a lot. In the last couple of months we’ve spent around £100, but we’ve barely left the house. I’m going to budget £150/month for the future, and anything left over at the end of the year can be used to top up ISAs.

Goal achieved: Reduce consumption of single use plastics

Gradual progress here, through small changes. We’ve moved to only buy loose fruit where possible. Our veg is delivered loose. Our meat is delivered wrapped in waxed paper. We’ve switched some of our cosmetic items, so that we only buy paper earbuds, and we’ve made re-usable face-wipes for makeup from old material. We’ve switched to shampoo bars, which are more expensive but seem to last much longer (this sort of thing). We’ve switched back to soap bars from liquid hand soap. Slow but steady, with plenty more to do. Next month I want to look at other ways we can reduce our environmental footprint.

Goal failed: Finish the raised beds

I’m tripling my veg patch size by rebuilding the raised beds using fly-tipped or old pallets and free/ cheap soil. This is taking bloody ages. Trying to scrounge free or cheap soil through gumtree and facebook is slow. I’ve probably put in about five tonnes of soil so far, with the same to go.

Goal achieved: Set up an account with an investment platform

I’ve spent much of the month looking at online brokers using Monevator’s excellent guide and a few other websites (1, 2). As we’re coming to the end of the tax year my first purchase will be pretty simple. I’ve opted to go with Vanguard directly and have set up an account in anticipation for making my first payment in March.

Budgets:

  • Groceries – Budget £300, spent £207.01, last month £185.03 Continue to underspend.
  • Entertainment – Budget £150, spent £92, last month £97.30.
  • Transport – Budget £460, spent £405.44, last month £124.75. MOT and tax costs came in under budget, so a little carries forward for next month.
  • Holiday – £150, spent £0, last month £133.09. Need to start putting a little away here.
  • Personal – £50/ £5.50/ £61.52. Had a rejig here which I’ll explain next month
  • Loans/ Credit – £350/ £288.99/ £-445.78. This is now net change for the month.
  • Misc – £50/ £186.45/ £123.34. Had a rejig with the new spreadsheet here too. Misc payments this month:
    • £50 cash on soil (plus £50 from the car parts)
    • £20 cash for a work event
    • £50-odd at B&Q on more house things

In the garden:

See above for a raised bed update. The greenhouse is now full of seedtrays with early crops, and the dining room table covered in potatoes being chitted.

Goals for next month:

  • 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

What’s in the pipeline:

  • Stoicism and the finance world
  • Green Credentials
  • Property Renovation Lessons Part III
  • Plus the usual Full English Accompaniments and other drivel…

Happy March everyone,

The Shrink

References:

  1. https://monevator.com/find-the-best-online-broker/
  2. https://www.moneysavingexpert.com/savings/stocks-shares-isas/

 

The Financial Dashboard – January 2019

The goals for January were:

  • Sell five more childhood toys. Sell five more car parts – Failure
  • Develop a single spreadsheet for all my financial data/ graphs etc – Success
  • Finish my Investment Strategy Statement – Success
  • Check our household green credentials – Success
  • Check utilities for potential savings – Success

Checking the assets and liabilities:

Assets

Liabilities

These are taken from my Beast Budget spreadsheet. This month my net worth grew by £867 (~3%), so that I’m now sitting just under £30k. It was a pretty poor month on the savings front with no overtime or extra shifts, the added expense of a holiday and the GMC and Royal College both deciding to take their pound of flesh. I’ve saved another £200 on my 5% Santander saver, and started paying down our wedding loan to a family member, but the Royal College bill went on the credit card (slap on wrist) nudging my debt up. February will also be lean as I start a new job and wait for a new payday. Luckily my new pay should be a fair bit more thanks to the vagaries of the NHS. Got to love a nationalised monopoly!
Goals:
Goal failed: Sell five more childhood toys. Sell five more car parts

I continue to fail here, and I wonder if that’s because I’m trying to sell lots of unusual oddments and expecting everyone else to want my old shit. I have gradually increased the amount of stuff listed on eBay, and have sold ~£20 quid worth of kit. I’ve also braved Facebook and Gumtree, with some success. I’m going to change this for next month and make it a more achievable sell £50 worth of stuff.
Goal achieved: Develop a single spreadsheet for all my financial data/ graphs etc

I’ve streamlined our various household spreadsheets into a new, improved Beast Budget, adding some new functions and graphs at the same time.

Jan Net Worth

Jan Credit Card
Goal achieved: Finish my Investment Strategy Statement

Now complete and to be found here.
Goal achieved: Check our household green credentials

This was a really interesting exercise, and exposed where I’m lying to myself in my bourgeois way. I ran our household information through the WWF Carbon Footprint calculator (1).

Carbon Footprint

Oh dear. Where’s it all going?

Breakdown

Ah. Breaking it down:

Home – We’re doing pretty well. Our energy is supplied by Bulb (message me for a £50 referral bonus), which is 100% renewable electricity and 10% renewable (bio)gas. All our lightbulbs are LED, our boiler is old but regularly serviced, our white goods are low-energy and the whole house is well insulated with double glazing etc.

Stuff – We don’t buy much in the way of clothes or consumerist claptrap, and I think this is mainly raised by the fact we bought new appliances when moving into our house.

Food – We’re doing reasonably here too. We eat meat three or four times a week, but I want to get this down to two. We eat a varied seasonal diet from local organic sources, and I want to grow and preserve more at home.

Travel – Oh bugger. This’ll be the (count ’em) four short haul, four medium haul and two very-long haul flights we’ve made in the last year. Seriously bad for the environment and won’t be doing that in 2019! I also need to get my bike serviced and start using it for local journeys.

This has been useful enough as an audit exercise that I’m going to check my progress quarterly for 2019 to see how I get on improving matters.
Goal achieved: Check utilities for potential savings

I try to check for potential savings every 3-6 months. Uswitch and MoneySavingExpert reckon we can save £45 over the year if we switch to EDF, Lumo or Octopus (2). I’m really happy with the customer service with Bulb (fanboi), and I’m willing to suck up £45 to know my energy is coming from renewable sources. Our previous Plusnet connection went from £27 to £38 in December, so I called their retention department who couldn’t match Virgins 100mbp for £22/month offer. We’ll wait and see whether the reality matches the quoted service.
Budgets:

  • Groceries – Budget £300, spent £185.03, last month N/A. We had lots of Christmas food left over, but happy with this!
  • Entertainment – Budget £300, spent £97.30, last month N/A. Going to look into entertainment spending this month.
  • Transport – Budget £460, spent £103.12, last month £233.69. Remarkably little this month, but MOTs and tuning costs loom.
  • Holiday – £150, spent £133.09, last month £0. Went skiing, fully catered chalet kept £ costs low and moods high.
  • Personal – £50/ £0/ £0
  • Loans/ Credit – £350/ £400/ £556.67. Upped payments to credit cards now.
  • Misc – £50/ £30/ £20.

In the garden:

I’m mid-way through building the raised beds and I’ve prepared the greenhouse ready for seedtrays next month. The raised beds are 2 foot high (to ward off carrotfly) and constructed from old pallets I’ve scavenged with tanalised upright supports. I’m collecting a load of free topsoil found on Gumtree next week to fill them up and then they should be ready for planting.

Goals for next month:

  • Sell £50 worth of stuff
  • Calculate and set a budget for Entertainment
  • Reduce consumption of single use plastics
  • Finish the raised beds
  • Set up an account with an investment platform

What’s in the pipeline:

  • Stoicism, Ascetism and the modern world
  • Property Renovation Lessons Part III
  • Frugal Motoring – Should I buy a Hybrid?
  • Plus the usual Full English Accompaniments and other drivel…

Happy February everyone,

The Shrink

References

  1. https://footprint.wwf.org.uk/
  2. https://www.moneysavingexpert.com/utilities/you-switch-gas-electricity/

Investment Strategy Statement – Part 4 – Accounts, Funds, Taxes & Rebalancing

Wrapping up my ISS with the mechanical stuff.
Taxes

Exploit tax-free allowances where possible

MrsShrink and I are both UK resident fully compliant UK taxpayers. 2018/19 I have been on the cusp of higher rate tax, and will need to review once I get my year end P60 for the three (actually sort of four) jobs I’ve been on PAYE (1). From 2019/20 onward it looks like I’ll be in the higher rate 40% bracket.

I plan to exploit four tax-sheltering methods:

1. Interest from cash savings and emergency funds will stay within my Personal Savings Allowance

This latest weapon in the public’s tax armory allows for £1,000 tax-free savings for basic rate tax payers and £500 for higher rate (2, 3). Interest from our high interest current accounts holding our cash emergency fund will aim to be held within this limit.

2. Filling up ISA allowances

Once our emergency fund is topped off we will contribute to ISAs (4, 5). In the short term all my stock market purchases will fit within the £20k/year wrapper (6). MrsShrink is likely to use Cash ISAs (7). We will utilise the Marriage Allowance if such circumstances arise (8).

We are considering using LISAs as well, but their benefit appears limited to the government bonus (9). We’re not first time buyers, so such an account would be for the long-haul and intended to supplement our income post-60. They’re a complex product and I’m not sure I’m happy with the lack of flexibility, so this will be another area to think about in the future (10).

tax efficiency

3. Pensions Contributions

I will maximise my tax relief on my pension contributions. I’m in the enviable position of having pensions held in two of the most generous funds left in the country; the NHS Pension Scheme and the Universities Superannuation Scheme. Both are sort of defined benefit schemes. The NHS Pension Scheme functions as a career average revalued earnings (CARE) scheme (11). The USS is a hybrid defined benefit and contribution scheme, where DB is paid on salaries up to £57,216.50 and DC over that figure (12, 13). I will detail both schemes in separate future posts. I shouldn’t really have both (this has happened due to some HR oddness) and so I need to sit down and unpick. The complexities of my professional life mean that I am likely to be bouncing between services for the foreseeable future, so this will remain a headache.

The secondary headache in this is that both pensions may be hard up against the lifetime allowance cap (14, 15). As a defined benefit scheme my NHS pension is multiplied by 20 and added to any lump sum to give a capital value (16). Many of my senior colleagues have been hit with substantial (five-figure) unexpected tax bills since the reduction in the lifetime allowance. It’s therefore not clear to me yet if making further contributions will be tax effective, or which pension scheme will be the most advantageous for a potential early retirement (17, 18, 19, 20). A matter for future reading.

4. Other investment structures

Longer term areas of interest:

  • Venture Capital Trusts
  • Enterprise Investment Schemes
  • Seed Enterprise Investment Schemes (21, 22)
  • Premium Bonds (I dared to speak thy name!) (23, 24)
  • Property (25, 26, 27, 28)

Accounts and Funds

Split holdings across multiple providers and platforms to reduce risk

We will use the bank account savings website (or similar if superseded) to maximise returns on liquid cash holdings (29). This will be split across multiple accounts to remain within the FCSC £85,000 limit (30). Tax-free accounts will be the preferred method for holding passive equities, bonds and stock.

Assets will be allocated across investment accounts to reduce costs, provide further security and reduce platform risk (31, 32). Initially I will aim to keep investments within the £50,000 FCSC protection limit (33). As stated in my ISS part 3, I intend to allocate ETFs across fund holders to meet allocation targets. No provider will hold more than 25% of my holdings after year five (to give me time to actually build the damn thing up!).
Rebalancing

Rebalance quarterly using Swedroe’s 5/25 through purchases

A basic tenant of my investment plan is to sell rarely, if ever. My stock purchases are for the long haul. Therefore I aim to check and buy back to allocation each quarter through purchases (34, 35). Boundaries for this are set using Larry Swedroe’s 5/25 rule; 5% absolute or 25% relative percentage variance (36). If this implicates selling I will wait until year end to optimise Capital Gains Tax. Allocations will be balanced annually against global markets plus my own weighting. On the active naughty step portfolio investments are free to do their own thing but will be re-evaluated against the overall portfolio yearly at the 10% stocks, 10% active target.

I’ll revisit this and update periodically, but for now that about wraps it up.

Take care,

The Shrink

References:

  1. https://www.gov.uk/income-tax-rates
  2. https://www.gov.uk/apply-tax-free-interest-on-savings
  3. https://www.moneysavingexpert.com/savings/personal-savings-allowance/
  4. https://www.gov.uk/individual-savings-accounts
  5. https://www.moneyadviceservice.org.uk/en/articles/isas-and-other-tax-efficient-ways-to-save-or-invest
  6. https://www.fool.co.uk/investing-basics/isas-and-investment-funds/stocks-and-shares-isas/
  7. https://www.fool.co.uk/investing-basics/isas-and-investment-funds/isa-basics/
  8. https://www.gov.uk/marriage-allowance
  9. https://www.fool.co.uk/investing-basics/isas-and-investment-funds/lifetime-isas/
  10. https://youngfiguy.com/why-the-lifetime-isa-is-not-a-simple-to-understand-product/
  11. https://www.moneywise.co.uk/managing-your-pension/pensions/the-lowdown-nhs-pensions
  12. https://www.imperial.ac.uk/human-resources/working-at-imperial/pension-schemes/uss—universities-superannuation-scheme/changes/pension-schemes-explained/
  13. https://www.uss.co.uk/members/members-home/the-uss-scheme
  14. https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance
  15. https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-lifetime-allowance
  16. https://www.bma.org.uk/advice/employment/pensions/lifetime-allowance
  17. http://www.legalandmedical.co.uk/3-reasons-to-have-a-pension-pot-that-is-over-the-allowed-limit/
  18. https://chasedeveremedical.co.uk/2018/02/22/beware-the-lifetime-allowance-charge/
  19. https://www.telegraph.co.uk/money/special-reports/should-i-retire-at-55-because-of-my-125m-nhs-pension/
  20. https://www.uss.co.uk/members/members-home/retirement-articles/2018/the-easy-way-to-keep-track-of-your-annual-and-lifetime-allowances
  21. https://www.moneyobserver.com/how-to-invest/how-to-invest-tax-efficiently-beginners-guide
  22. https://www.fool.co.uk/investing-basics/how-shares-are-taxed-2/tax-efficient-investing/
  23. https://www.moneysavingexpert.com/savings/premium-bonds/
  24. https://www.nsandi.com/premium-bonds
  25. https://www.moneyadviceservice.org.uk/en/articles/tax-and-property-investment
  26. https://www.out-law.com/topics/tax/property-tax-/tax-treatment-of-reits/
  27. https://www.investorschronicle.co.uk/tax/2017/08/31/how-farmland-is-taxed/
  28. https://www.whatinvestment.co.uk/how-to-invest-in-forestry-2134293/
  29. https://www.bankaccountsavings.co.uk/calculator
  30. https://www.fscs.org.uk/what-we-cover/
  31. https://www.bogleheads.org/wiki/Asset_allocation_in_multiple_accounts
  32. https://www.thisismoney.co.uk/money/experts/article-2553851/How-I-know-DIY-investing-platform-safe.html
  33. https://www.fscs.org.uk/what-we-cover/investments/
  34. https://www.investopedia.com/articles/stocks/11/rebalancing-strategies.asp
  35. https://www.bogleheads.org/wiki/Rebalancing
  36. https://awealthofcommonsense.com/2014/03/larry-swedroe-525-rebalancing-rule/