Q2 2019 – Green Credentials

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.

Q2 Returns:

Q2 Net Worth

  • Cash Savings Accounts £3200 (+£400)
  • Investments £1550 (+£1000)
  • Property £33,300 (-£1000)
  • Cars £3000

My net worth now sits at £~35,400, an increase of £2.2k over the past three months, which is a little less impressive than the previous quarter. This makes my rolling twelve month increase £14,900. Cannot complain.

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). My goal emergency fund is three months total household expenses (£6k) in my name, plus a further three months (£6k) held jointly. I now currently hold £2650 in my name, and £300 held jointly. Some way to go.

My Santander 5% saver matured, so those funds were moved into a new high interest Nationwide current account. I used the excellent Bank Account Savings website plus Money Saving Expert to select another regular saver, opening a joint current account with First Direct for their switching bonus and then a linked 5% savings account (2, 3). I’ve also started squirreling cash into a Starling pot. The intention is to have liquid savings spread across three or four independent banks, with different card providers (MasterCard vs Visa). Protection against business and liquidity risk.

Goal 2: Pay off short-term debts

Short-Term Debt Q2

This has been the area of greatest progress. At the start of 2019 my short terms debts stood at £1.25k to family and £2.6k on 0% interest credit cards, then £250 and £2k respectively at the end of Q1. Those figures are now £0 and £650, and the credit card should be cleared this month. This will leave me free of unsecured debt for the first time in (I think) four years. Once the debt is clear, my money is free to be channelled into…

Goal 3: Save 25% of my earnings

Savings Rate Q2

I calculate my savings rate using this formula:

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

My current mean savings rate for 2019 is 18.4%, short of my goal. I had a March outlier thanks to a tax refund, and in May my effective savings rate was close to zero due to work-related bills (exams, course fees etc). Worth noting in the NHS it’s expected you pay for your exams, courses and training yourself. You can claim it back through tax, but only certain elements. The rest you take on the chin.

Goal 4: Live more sustainably

I’ve been pretty crap at keeping track of what we’re using from the garden rather than purchasing. With summer in full swing we’re getting at least two dinners a week just from home-grown produce. We’ve also made lots of little changes around the house to move away from plastic. These have included:

  • Switching toilet roll

We looked into the brand ‘Who Gives A Crap’, but I was pretty pissed off to find out all their recycled/ bamboo eco loo-roll comes on a slow ship from China (4). Not exactly sustainable. Instead we used The Ethical Consumer, an amazing website that ranks consumer products by multiple ethical/ sustainable/ fairtrade measures, to find Ecoleaf by Suma (5). Suma are a co-operative in the UK who have been producing sustainable, fairtrade products since the 80s.

  • Shampoo bars

Again we tried to use The Ethical Consumer. We actually found the Lush ones are pretty good, and despite costing £8.50/each, they seem to last a couple of months (6).

  • Washing powder ball

The Ecozone Eco-balls we bought are supposed to last 1000 washes (7). A recent change, so we’ll wait to reserve judgement.

  • Switching cleaning products to Method

Nice and easy as they’re stocked in mainstream supermarkets.

There’s loads of guides and blogs out there with tips on how to live with less plastic. I’d recommend starting off with the 100 Steps to a Plastic-Free Life (8).

Goal 5: Commence investing

I’ve not been very disciplined investing this quarter. In April I topped up my existing holding, but in May I held cash back to open a crowdfunding investment (still pending). My cash savings are calculated towards my Personal Allowance, whilst my investments are held in my Vanguard ISA. I have managed to get my investment portfolio spreadsheet at a stage I’m happy with (for now), so here’s a few example graphs:

Tax Efficiency Q2

Region Allocation Q2Country Allocation

Because I’m contrary, I’ve decided to actually try to calculate my worldwide exposure on a country by country basis. I currently just hold Vanguards Developed World Ex-UK Fund. I’m far more exposed to the US than I’d like, and so I’ll be opening some new holdings to diversify over the next two quarters.

Until next time,

The Shrink

References:

  1. https://www.reddit.com/r/UKPersonalFinance/
  2. https://bankaccountsavings.co.uk/
  3. https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
  4. https://myplasticfreelife.com/2017/09/who-gives-a-crap-recycled-or-bamboo-toilet-paper-without-plastic/
  5. https://www.ethicalconsumer.org/home-garden/shopping-guide/toilet-paper
  6. https://www.independent.co.uk/extras/indybest/christmasgifts/fashion-beauty/shampoo-hair-soap-plastic-free-green-beauty-environmentally-friendly-a8505026.html
  7. https://www.ethicalsuperstore.com/products/ecozone/eco-balls/
  8. https://myplasticfreelife.com/plasticfreeguide/
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The Financial Dashboard – April 2019

The goals for April were:

  • 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

Checking the assets and liabilities:

April AssetsApril Liabilities

These are taken, as always, from my Beast Budget spreadsheet. This month my net worth grew by £1,108, 3.34%. I put the final £200 in my 5% Santander saver, which matures next month. Santander have dropped the interest to 3% now so I’ll probably open a separate account elsewhere. We continued to pay down our family wedding loan. At the end of last month the clutch began to go on my daily driver, so I stumped up for a replacement. This went partly on my credit card, so swallowed up efforts to reduce that debt, but I was able to clear part using money put aside in a car maintenance savings pot.

Goals:

Goal failed: Sell £100 worth of stuff

Continuing to fight hordes of time-wasters, asking me to part with big ticket items for tuppence. Wearisome.

Goal achieved: Set up pots for holiday and personal money

Quick and easy win this. My accounts now have an organised flow, where my salary comes into my main account, then anything after bills and direct debits gets moved into my Starling. This has spaces set up, which I’ll start to fill with the budgeted holiday and personal money.

Goal achieved: Look at other ways to reduce environmental footprint

I’ve already spoken about moving to a sustainable energy supplier (Bulb) and trying to reduce our plastic usage. We eat local and healthy, though I admit with busier work comes decreased time to actually organise healthy food. We’ve reduced our plastic consumption for toiletries, using shampoo and soap bars, switching back to washing powder in cardboard boxes. Toilet roll was an issue. Most supermarket toilet roll isn’t recycled, the production process is surprisingly damaging and toxic, and then it’s all wrapped in plastic and shipped to us. A great case in point of clever branding is the new company Who gives a crap (1). They make a big thing of eco credentials; all their loo roll is either recycled or from sustainable bamboo, it’s wrapped in paper and 50% of the profits are donated to safe water/ waste charities. My major issue; all this loo roll gets containerised from factories in China invalidating some of the headline eco credentials.

In looking for alternatives I found the shopping guides from the excellent website Ethical Consumer (2). They score and rank companies on their ethical and environmental merits to produce a list of bestbuys. We opted for the UK manufactured Ecoleaf, which is the same price as standard supermarket loo-roll, and half the price of Who Gives a Crap. We’ll be using the website again, as it’s got guides for most household products, which can be purchased on the Ethical Superstore (3).

Goal failed: Finish my portfolio spreadsheet

It’s surprisingly hard to find a platform for a portfolio that has all the functionality I want. I’ve amalgamated/ butchered YFG and Firevlondons’ spreadsheets, but I’m still not happy.  I’m going to give the Rebo app developed by Andy at Liberate Life a go (4, 5). May well end up drafting something new.

Goal achieved: Set up regular stock investment

A set amount a month is now going into my S&S ISA. I’m somewhat limited in my portfolio options at the moment, due to using Vanguard as my platform. I’ll cover what I’m going to do about it in my next Quarterly update.

Budgets

  • Groceries – Budget £300, spent £184.25, last month £207.01.
  • Entertainment – Budget £150, spent £99.38, last month £76.50.
  • Transport – Budget £460, spent £851.53, last month £329.90. Grim.
  • Holiday – £150, spent £0, last month £0.
  • Personal – £100/ £41.88/ £47.57.
  • Loans/ Credit – £350/ £88.97/ £748.44.
  • Misc – £50/ £121.92/ £81.77. Misc payments this month:
    • £40-odd at Dunelm for bathroom furnishings
    • £30-odd on chicken feed
    • £50 on bathroom fittings

In the garden:

Everything is starting to come up, my favourite time of year in the garden. We have: two types of tomatoes, two types of potatoes, two types of onions, radishes, salad leaves, lettuces, courgettes, spring onion and various beans. The clematis is in flower and the raspberry is shooting up canes. All good things.

Goals for next month:

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

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

  • Our wedding pricetag
  • 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 May everyone,

The Shrink

References:

  1. https://uk.whogivesacrap.org/
  2. https://www.ethicalconsumer.org/home-garden/shopping-guide/toilet-paper
  3. https://www.ethicalsuperstore.com/
  4. https://reboapp.co.uk/
  5. http://liberate.life/index.php/2019/05/01/track-portfolio-rebo/

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/

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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 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/

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/

 

Frugal Motoring – Should I buy a hybrid?

In Frugal Motoring I discuss how I run cheap cars, the pros and cons for various purchasing methods (straight up cash, loan, PCP, lease), diesel vs petrol vs hybrid vs electric, ongoing political/ government motoring related machinations and how to keep your car running. Here I’ll look at the pros and cons of hybrid cars, some of the history and some worked costings.

Which hybrids am I talking about?

Hybrid vehicles have been around for as long as there has been motorised transport. Petrol-electric hybrid trams were first patented in 1889 (1). The Woods “Dual Power” of 1915 used a combined system of electric motor below 15mph and petrol engine up to it’s max of 35mph, which also charged on-board batteries. Just like a modern Prius (1).

It was a commercial failure, as were most attempts at developing electric vehicles up until the turn of the century. Batteries could not provide the range, speed or flexibility required for most users. The energy density of petrol outstripped conventional batteries. Rural communities lacked an electricity grid, and oil-based fuels were much more portable. The idea was ahead of the technology. Lots of companies toyed with electric vehicles, including AMC (developing regenerative breaking systems for the failed Amitron) and Audi (the Audi Duo, a plug-in parallel hybrid 100 Avant quattro), BMW (CVT hybrid-electric E34) and Volvo (with a gas-turbine hybrid 850/S80) (2, 3). It was Toyota with the Prius and Honda with the Insight that were the first mass-produced hybrids, using the trusty petrol engine as backup. Battery technology and the focus on reducing emissions has pushed the pace of change, and since the turn of the century hybrids have begun to become mainstream (1).

Types of hybrid

For sake of simplicity there’s five hybrids I’ll talk about:

  • Mild
  • Series
  • Parallel
  • Series/ Parallel
  • Plug-in (4)

Mild hybrids

A bit of a weird halfway house where the petrol (or diesel) engine is the main driving force, and an electric motor replaces the starter and alternator to provide a boost when accelerating and battery regeneration when breaking. The more powerful electric motor also allows the engine to turn off when coasting or when stopped, as part of stop-start emissions technology (5). The electric motor can’t propel the vehicle on it’s own, and systems are generally at a lower voltage. This is a route taken by most US and European marques, including the Mercedes, BMW, Audi and Peugeot, and allows for greater fuel efficiency with little change to drivetrain structure (5).

Series hybrids

In some ways the simplest design, a series hybrid attaches a fuel-burning engine to the batteries or electric motors. Electric motors provide the drivetrain and motion, and the petrol engine is there to top up the batteries or provide the electricity. This system allows the engine to run continuously at peak efficiency, but requires large batteries and motors to provide sufficient power (6). A clever idea and a solution to range anxiety for those with city cars that occasionally need rural jaunts. Because of the larger motors and batteries they tend to be more expensive, and aren’t really mainstream. The only one I can think of is the BMW I3 REX (Range-extender), which was discontinued (7). Make your own by connecting a diesel generator to an electric milk float.

Series-Hybrid

Parallel hybrids

Here the electric motor and/or the petrol engine power the vehicle by being mated to a combined drivetrain, increasing complexity and potential drivetrain losses, but decreasing energy conversion losses. Here the high-torque nature of electric motors are often used for stop-start, with the petrol/ diesel engine providing the higher power required at higher speeds. The combination means smaller motors and batteries can be used, reducing costs while increasing efficiency. Regenerative breaking recoups the battery losses, with further recharging from the petrol engine’s alternator (4, 6).

Parallel-Hybrid

Series/ Parallel hybrids

The logical next step in development was to combine these two systems (6, 8). This is what Toyota did with the Hybrid Synergy Drive in the Prius, and what is now found in most hybrid systems (9). In it’s simplest form the transmission is set up so that two modes of driving are available; an electric motor only for low speeds, and a petrol engine for higher speeds that also recharges the batteries at high RPM cruising. In some applications the electric motor is used to provide a power boost at high speeds, and the electric motor can act as a generator through regenerative breaking. The use of more complex transmission systems allows for different proportions of electric motor power and petrol engine power to be used at different times. A further development is the use of engine designs and valve-timing maps in the petrol engine which alternate to the more fuel-efficient but less powerful Atkinson-Miller cycle (9).

Series-Parallel-Hybrid.jpg

Plug-in hybrids

The final step in development was to add the ability to charge the batteries from the mains, rather than being solely dependent on the engine/ regen. These basically do what they say on the tin. They usually have a larger battery capable of 20-30 miles of range, with a mains connector enabling you to run them entirely on electric for short commutes, saving the petrol engine for fast or long journeys. Due to the larger (heavier) battery they can be less efficient than a pure EV or solely petrol car. Examples here are the hugely popular Mitsubishi Outlander (who basically nailed the market by providing eco-conscious chelsea-tractorists the first PHEV 4×4), plus newer Honda Accords, Chevy Volt and Hyundai Ioniq (10).

Mitsubishi Outlander PHEV

Tax benefits

Hybrids are looked on less favourably by HMRC than in the past. Pre-2001 things were just done on engine size. Then HM Gov made efforts to move away from polluting cars, continually driving emissions ratings lower, pushing tax brackets to follow. It got so good that the government got fed up of everyone having fun, so from April 2017 hybrids tax rules were changed to make it harder for hybrids to be used as a tax-break. They also made it a lot more complicated, because they’re politicians. This actually means buying an older car can work out cheaper. Up to March 2017 this was the state of play (11):

Pre-March 2017

So it was as simple as if your car produced less than 100g/km CO2 it was free tax. From April 2017 (post Dieselgate) the Gov implemented a system where tax was calculated based on the Real Driving Emissions 2 (RDE2) standard (take that VAG), with a discount for the first year and a supplement if the car had a list price over £40k payable for the first five years. This looks like this (12):

First PaymentSubsequentSupplement

Notice that this still subsidises cheap EVs, but not hybrids. The other tax benefits to mention for everyday users are that home electricity incurs only 5% VAT rather than the 20% on fuel (13). Company car users get further benefits when selecting a hybrid or pure electric vehicle, through benefit-in-kind (BIK) and various means. Rather than listing them all out here I’d recommend a read of the useful “Tax Benefits for ultra low emission vehicles” cribsheet from the Office for Low Emission Vehicles, and the comprehensive calculator at nextgreencar  (14, 15).

Worked examples

One of the reasons for this article is we’re deliberating replacing MrsShrink’s car with a hybrid or electric. We wanted to run the numbers to see if we could actually save money by replacing. We’d be buying second-hand which means we can navigate the tax system to our benefit with plenty of online guides to help, but for the purposes of this calculation I’ll also include some PCP options (16, 17, 18). The benefit of second-hand is that the 20% increase in new purchase price of a hybrid is mostly lost (although still present) due to depreciation (19). We’ve chosen to look at a new Hyundai Ioniq, a three-year old Mitsubishi Outlander, a six-year old Prius and an eight-year old CR-Z. The Ioniq is Whatcar’s 2019 hybrid car of the year, coming with a five-year warranty and looking super sleek and futuristic (20). For the purposes of this calculation I’ve used PCP (it’s the cheapest, but read the reasons I hate PCP here) over two years, with a £3k deposit and 10,000 mile limit on the base model PHEV (cheapest) (21). My table includes Hyundai’s claimed 252mpg but I’ve used the real-world figure obtained when by a couple of different magazines who ran a long-term test Ioniq hybrid for MPG calculations (22, 23). CO2 emissions of 26g/km mean it’s tax free for the first year. A Hyundai yearly service is quoted at ~£130.

The second contender is the Mitsubishi Outlander (24). The best-selling hybrid 4×4. Autotrader found me a 2016 PHEV model with 30k on the clock for a reasonable £260/month, again on PCP. Same £3k deposit. Mitsubishi claims between 139 (RDE2) and 156mpg depending on where you look, but again real road tests find it more like 40mpg average (25, 26). 46g/km of CO2 means free tax. A quick google finds people on car forums quoting £300 from Mitsubishi for a service. At 3 years old I’d hope the tyres would be ok, but we’ll throw in £30/month to cover a couple of replacements over the course of the year.

Next is our old friend the Prius. 2013 models come in a range of prices depending on spec. Straight-up hybrids start about ~£9k, with around 80k on the clock, whilst PHEVs start at £14-15k. This time we’ll take a standard hybrid and purchase it outright with our £3k deposit and a £6k credit card at 0% interest, with the intention of paying back in 24 months. We would intend to own for five years, and so we’ll take a guestimate at residual values by looking at what an eleven-year old Prius currently costs; between £4-6k. If we say £5k then we’ve essentially paid £4k to own a car for five years. For the sums I’ve used the credit card £6k over two years, plus the sum of the final residual value minus the deposit over the five year ownership; i.e. (credit card/24) + ((residual value-deposit)/60). This simulates financing the depreciation (like PCP) and what you would need to save over five years to go from £3k to £5k deposit (without interest). Stated MPG for the Prius is 70.6mpg, but real world appears to be more like 55mpg (still bloody impressive) (27, 28, 29). Yearly servicing stands between £180 for a minor to £350 for a major (so we’ll call it £250). As a six year old car I’d expect higher consumables, so I’ll add £50/month to cover wear and tear repairs/ tyres etc. For a 2013 model the 92g/km of CO2 means free tax.

The final contender is the Honda CR-Z, a quirky little coupe which was billed as the first hybrid sportscar (30). It’s a proper oddball, not as quick as it’s looks suggest, not big enough to be particularly usable for a family (31, 32). Made from 2010 to 2015, a 2011 model with 50-70k miles can be had for as little as £5.5k. We’ll take one of those for the maths, with £2.5 on a 0% credit card over two years. Residual is more difficult, but I’ll lowball an estimate of £2k after five years, losing £3.5k of value. Same formula for this as the Prius when calculating depreciation costs, just changed slightly to account for the drop of residual versus deposit. CO2 of 117g/km means a tax cost of £20/year. MPG is quoted at 56, but real world tests find it to be closer to 45-50 (a bit pants TBH) (33) Servicing is quoted at £200/year, and as an older car again I’d expect a bit more in terms of wear and tear although most places agree the build quality is high.

So how do the sums add up when compared to my daily Green Car. I’ve tracked all 40,000 miles with an average MPG around 33, it costs me £25/month in tax, and over the four years of ownership I’ve spent £2000 on purchase and another £2.4k on servicing and wear and tear, for a total of £92.40/month. Here’s the final breakdown:

Comparison

Summary

The sums say it all. On paper, my cheap and cheerful petrol car has cost me less to run for four years than a new hybrid would. The old lump is not pretty, it’s not fancy and it’s more polluting, but it serves it’s purpose. Ignoring the depreciation costs I would still spend more than half what I do now to run a hybrid. The MPG and tax improvement is not significant enough to offset the purchase cost. Hybrids have two powertrains, they’re heavier than a car with one powertrain; they shoot themselves in the MPG foot. There are also concerns about the durability of batteries, although the number of Prius taxis with 250k miles under their belt seems to disprove this. The volume of EVs and hybrids sold continues to rise in the face of falling wider car demand (34). I think I’ll wait for further depreciation to bring hybrids into my price bracket, and we’ll have to see if they’re a technological dead-end to be overtaken by pure electric vehicles, or will remain as a market option in the future.

References

  1. https://en.wikipedia.org/wiki/Hybrid_electric_vehicle
  2. https://en.wikipedia.org/wiki/AMC_Amitron
  3. https://en.wikipedia.org/wiki/Audi_100#C3
  4. https://auto.howstuffworks.com/different-types-of-hybrid-cars.htm
  5. https://en.wikipedia.org/wiki/Mild_hybrid
  6. https://www.ucsusa.org/clean-vehicles/electric-vehicles/series-vs-parallel-drivetrains#.XG_LuOS7Lcs
  7. https://www.carmagazine.co.uk/car-reviews/long-term-tests/bmw/bmw-i3-range-extender-2017-long-term-test-review/
  8. http://autocaat.org/Technologies/Hybrid_and_Battery_Electric_Vehicles/HEV_Types/
  9. https://en.wikipedia.org/wiki/Hybrid_vehicle_drivetrain#Power-split_or_series-parallel_hybrid
  10. https://www.autocar.co.uk/car-review/mitsubishi/outlander-phev/first-drives/mitsubishi-outlander-phev-4h-2018-uk-review
  11. https://www.gov.uk/vehicle-tax-rate-tables/rates-for-cars-registered-on-or-after-1-march-2001
  12. https://www.gov.uk/vehicle-tax-rate-tables
  13. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/709655/ultra-low-emission-vehicles-tax-benefits.pdf
  14. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/709655/ultra-low-emission-vehicles-tax-benefits.pdf
  15. https://www.nextgreencar.com/company-car-tax/
  16. https://www.carbuyer.co.uk/tips-and-advice/155171/how-to-buy-a-secondhand-hybrid
  17. https://www.whatcar.com/news/what-is-a-hybrid-car-and-should-you-buy-one/n1290
  18. https://www.driving.co.uk/car-clinic/buying-guide/time-ditch-diesel-comparing-costs-driving-hybrid-plug-hybrid-electric-car/
  19. https://www.nextgreencar.com/hybrid-cars/buying-guide/
  20. https://www.whatcar.com/hyundai/ioniq/saloon/review/n17205
  21. http://configure.hyundai.co.uk/build/ioniq/summary?trim=hybrid-se-1099
  22. https://www.autoexpress.co.uk/hyundai/ioniq/mpg
  23. https://www.greencarguide.co.uk/car-reviews-and-road-tests/hyundai-ioniq-plug-in-hybrid-review/
  24. https://en.wikipedia.org/wiki/Mitsubishi_Outlander
  25. https://www.telegraph.co.uk/cars/mitsubishi/mitsubishi-outlander-phev-long-term-test/
  26. https://www.carbuyer.co.uk/reviews/mitsubishi/outlander/phev-suv/mpg
  27. https://www.driving.co.uk/car-reviews/toyota-prius-mk3-review-2009-on/
  28. https://www.autotrader.com/car-reviews/2013-toyota-prius-new-car-review-201161
  29. https://www.carbuyer.co.uk/tips-and-advice/155095/used-toyota-prius-buying-guide-2009-2015-mk3
  30. https://www.autoexpress.co.uk/honda/cr-z
  31. https://www.driving.co.uk/car-reviews/the-clarkson-review-honda-cr-z-2010/
  32. https://www.autocar.co.uk/car-news/used-car-buying-guides/used-car-buying-guide-honda-cr-z
  33. https://www.autocar.co.uk/car-review/honda/cr-z-2010-2013/mpg
  34. https://www.nextgreencar.com/news/8592/ev-sales-oppose-declining-uk-car-market/