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.
So that’s 2020 done and dusted, a global annus horribilis. For some it’s seen mounting debt, for others an opportunity to save. I’ve spent a lot of time reflecting. Here’s the update.
- Cash Accounts £12,000 (-£1,300)
- Investments £7,950 (+£1,850)
- Property £49,700 (+£1,100)
- Cars £2000 (no changes)
This quarter we finished some major house renovations, had a tiny UK-based holiday, and spent the rest of the time locked down and hermit-like at home gorging on fancy food. House renovations sucked up some saved cash, but my net worth was boosted by my continued investment and the stock market bounce back.
As a result of the above my net worth now sits at ~£67,500. This has continued the rough progression of £20k/year increases; my end of 2018 net worth was ~£28,500, and end of 2019 was ~£49,700. Unlike previous years this increase hasn’t been smooth, and has seen decreases in some months (renovation spending, stock market falls). I’ve mean averaged a monthly net worth increase of 1.7%, combining to a year total of ~20%.
Goal 1: Build an emergency fund
My first 2019/20 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 currently hold £12k in cash accounts, so by rights this goal should count as complete. I’ve learnt over the course of the year that holding cash in our joint current account is not sensible, as it tends to evaporate purchasing nice things for our house/ life. Lifestyle creep I suppose. £8,800 of my emergency fund is in my name, split about 50% premium bonds, 40% cash saver, and 10% Starling ‘pot’. The Starling emergency pot is the instant access option, with the cash saver available in 24-48 hours, and the premium bonds <5 days.
For 2021 £12k remains my emergency fund target. Our stripped back monthly household expenses run around £1,800-2,000, so £12k allows a six month buffer. I plan to make my emergency fund (almost) entirely separate from the rest of my cash accounts. This means upping a few pots to be about £6k premium bonds and £4.5k cash saver, with the rest in my Starling pot and our joint current account. I also need to get my unsecured debts back to £0. So for 2021, the goal is: Finalise emergency fund structure and pay off credit card.
Goal 2: Save 30% of my income
I calculate my savings rate using this formula:
Savings rate as % = ((Income – spend) + Cash savings + Investments + Pension contributions) / (Income + Pension contributions)
Despite the wobbles thanks to (a) NHS payroll and (b) house renovations, I’ve smashed my savings rate goal with an end year mean average of 34.7%. This is way above previous years (2018 15%, 2019 23.5%). I blame lockdown. In line with my plan for incremental goals, 2021 will be: Save 35% of my income.
Goal 3: Calculate savings made by growing my own food
This goal proved to be harder than expected for two main reasons. First, it’s kind of hard to work out how much you’re actually savings; it requires tabulating all your produce and then cost comparisons with supermarkets. It’s a level of spreadsheeting that I couldn’t bring myself to. My little gardening notebook goes bare when the renovations took over my time, but I kept a rough tally. I spent ~£50 on seeds (yes, a lot) over the course of the year, and grew about ~£80 worth of veggies. Second, my own apathy as a result of the first.
I’ve learnt something important from this goal. Making targets, goals and objectives for hobbies can make them a chore. Gardening, cars and blogging are all hobbies I enjoy. They’re supposed to be relaxing. If I’m trying to reach a target then it stops being something to enjoy. The Mad Fientist covered this well in his recent post “A Better Alternative to Resolutions and Goals” (2). Instead I need to just make time for the process, and let outcomes result as they will. Goal 3: Make goalless time every month for hobbies.
Goal 4: Make changes to reduce carbon footprint
It feels like lockdown has enforced this on so many people. We have not flown or been abroad for holidays. My commute is a fraction of what it was. We continue to eat local produce, and we use Splosh for our household cleaning (3). If you want to give them a go use referral code YQL240THX1 to get 15% off. We use Bulb for our energy. We rarely buy new clothes, and if we do they are organic sustainable cotton or wool. We’ve been buying gifts and household items from the local zero-waste shop. Our veg/ fruit comes from either the local organic co-operative, or if from a supermarket we only buy seasonal UK stuff. Our meat comes from a fantastic butcher who only sources local, high welfare animals. We’ve reduced our meat consumption so it’s a treat, roughly now three veg, two fish, two meat/ week. Next steps will be switching to milk bottle delivery, and getting our fish delivered by the local fishmonger from UK catch. Overall, I feel like we’ve made quite a few low-hanging lifestyle changes.
From here, it’s thinking about bigger impact changes we can make. Switching to an electric car is tempting, but probably not meaningful given the tiny amount of driving we do in efficient, older cars. Installing solar panels/ ground source heat pumps etc are probably not economical until we have a larger home. Suggestions welcome.
Goal 5: Automate investments and savings
Another success from this year, automating things so I pay my Freetrade account first. My regular savers have come to an end, and as noted above, I’m pretty close to my emergency fund target. I’ve recently found out about the Principality Thank You Saver, which is a 1.4% regular saving offering for NHS workers in South Wales (4). Lovely stuff. I’ll be using that to top off my emergency funds. In my investments, I’ve mixed adding new funds/ stocks and topping up existing holdings.
Core/ Satellite Passive/ Active Split
I’ve basically spent this quarter topping up my iShares EM ETF and Vanguard FTSE All World holdings (fancy a free share? Sign up to Freetrade using this link, and we both get one). The YTD time-weighted rate of return is 13.44% in my Freetrade ISA, whilst my Vanguard ISA has a 23.15% absolute return. The graphics in my Freetrade account suggest my time-weighted rate of return is a couple of percentage points above VWRL, whilst maintaining a smoother progression thanks to holdings in TRIG, UKW and a couple of consumer staples. I really need to benchmark my investment spreadsheet to properly calculate this.
I continue holding some cash as a buffer. I’ve gradually realised I am actually more risk averse that I thought. I idealise that I am gung ho, and willing to YOLO on individual stonks. My behaviour pattern is quite the opposite, as although I’m holding lots of equities and DIDN’T SELL!!1!!111!, I didn’t buy cheap tech stocks, instead purchasing counter-cyclical holdings. Hindsight is 2020.
Plans for 2021:
Some changes here. I’ve been reading a lot of Slate Star Codex, and in that vein I am going to start assigning goals predictions on whether I will achieve them. I’ll also make some rough predictions with conviction percentages for the next year. I already do this in as part of my Investment Strategy Statement and in a paper diary about my personal life, so I might as well move it here, with passages redacted. This is essentially an experiment analyse my underlying bullish/ bearish traits at future predictions. Therefore, targeted goals:
- Finalise emergency fund structure and pay off credit card – 80%
- Save 35% of my income – 40%
- Make goalless time every month for hobbies – 60%
- UK vaccination will be completed before the July – 75%
- Greater than 200,000 UK COVID deaths – 30%
- UK has worst death rate as percentage of the population in the world – 60%
- Under-reporting in developing nations hides significant pandemic effects – 90%
- The UK tier system is still in use in December 2021 – 60%
- The UK experiences another ‘lockdown’ in winter 2021/2 – 75%
- COVID-19 mutates into a form immune to the current vaccine – 40%
- I am personally working in office >80% of the time again at some point in 2021 – 10%
- Someone I am close to will die of COVID-19 – 25%
- Endemic COVID-19 circulates in the population with lockdown easing and shops re-opening – 80%
- … and self-isolation becomes normalised – 80%
- … and higher death rates tolerated among the over 50s with consistent effect on life expectancy by end 2021 – 75%
- Boris resigns – 60%
- Keir Starmer above BoJo in the opinion polls – 80%
- Inflation above 2% – 75%
- … due to Brexit-resultant shipping and food cost rises – 60%
- There are resultant food shortages – 10%
- Homeless rate rises – 95%
- Foodbank usage rises – 95%
- House prices continue to increase – 75%
- FTSE100 above 7,000 – 60%
- FTSE100 remains above 6,500 – 80%
- FTSE100 hits 7,500 – 20%
- FTSE250 hits 22,000 – 60%
- S&P500 hits 4,000 – 75%
- S&P500 hits 2,500 – 30%
- £ hits $1.40 – 50%
- We have £100k in equity – 95%
- We start to overpay our mortgage – 30%
- I have £15k invested – 30%
- I am saving £1k/month – 30%
- We have [redacted] – 90%
- MrsShrink [redacted] – 75%
- We replace one of our cars – 50%
- The project car gets repainted – 25%
- The project car gets sold – 10%
- We have a holiday – 80%
- Outside of the UK – 20%
- I learn another language – 30%
- I continue to exercise at least three times/ week for the whole year – 75%
- I can do a pull-up again – 40%
- I can do a hand-stand press up again – 20%
- I return to [redacted] – 10%
- I complete [redacted] – 25%
- My ongoing work has not conformed to anticipated plans – 90%
- I publish [redacted] – 90%
- I publish [redacted] – 25%
- I publish on average four posts/ month – 40%
- Most page views ever this year – 30%
- This blog gets abandoned – 10%
Let’s see how this bit of fun plays out.
Happy 2021 everyone. Let’s hope for a better year,