Part 31

Introduction

Hello and welcome back to Mortgage Advisor on F.I.R.E.  This week I will look at a possible change in my investment strategy, and discuss why FIRE is so important to a post-Covid world.

Weekly Update

Despite my last week sucking, I have to remember it’s all relative.  People are dying every day and I have less than no faith in this government to protect us.  The whole Dominic Cummings issue is absolutely absurd.  It’s the sort of news story one would expect to see in a former Soviet state, where they are transitioning from communism to democracy; not in a country that is heralded as a free and democratic state.  

You might be wondering why my last week was so bad.  Although I believe my blog should be open and transparent, there are certain things I draw the line at, especially where the privacy of other people is involved.  So, apologies but no major drama here.

I stated last week that I would update following a viewing of a potential BTL.  Well, we’ve had several viewings cancelled because the vendors have accepted offers before our viewing came around.  Back to square one.  However, a friend mentioned in passing that she might be looking to sell her BTL to use the equity for buying a bigger residence for herself.  I’m waiting to hear back about what sort of asking price she feels is fair.  

Health Update

Current Weight: 115.1kg (down 1.2kg from last update).

Current Body Fat: 39.3% (down 1.9% from last update).

BMI: 34.8 (down 0.3 from last update).

Weekly Goal: lose 0.75kg

Ultimate Goal: 90kg

Overall a great week for weight loss.  I’ve been eating well and doing resistance work.  I’ve got to take it slowly though as I can’t afford another injury.

Financial Update

Premium Bonds: £15,700 (no change from last update).

Stocks and Shares ISA: £8,585.36 (up £248.96 from last update).

Fuck It Fund: £5,050.49 (no change from last update).

Property Value: £181,626 (no change from last update).

Total Assets: £210,961.85 (up £248.96 from last update).

Residential Mortgage: £144,372.10 (no change from last update). 

Total Debts: £144,372.10 (no change from last update).

Total Wealth Figure: £66,589.75 (up £248.96 from last update). 

Investment Income in 2020: £31.44 (no change from last update) (target £2,000).

Another week where my ISA is moving up.  I’m still not convinced we are through the worst of this crisis though.  I suspect we are in a lull before the next wave of economic crises present themselves.  I think as we approach the end of the year, we are going to see a reduction in house prices as the market becomes saturated with people trying to sell up following a loss of income.

I’ve had to laugh a little in the last few days as I’ve had a few chats with people who have stopped buying shares because of the state of the economy.  Now is the perfect time to buy though.  You make your profit when you buy, not when you sell.  It’s amazing how the average person acts in exactly the opposite way one should when it comes to trading stocks.  You buy low, you sell high.  Granted, there are some other factors to consider such as the trend and performance of the share but you don’t stop buying when the price drops.  It’s like seeing your favourite snack at the shop on offer and saying “no thanks, the price is too low”.

Fuck It Fund Woe

In the last few months the rate of interest on my Fuck It Fund has dropped from 1.1% to 0.5%.  Although earning interest is not my primary concern, I don’t want to be taken for a ride.  I’m thinking about reallocating some of the funds in that account into other asset classes.  My current thinking is to withdraw £3,000 and place £2,000 in my ISA and £1,000 in Premium Bonds.  That would still leave me with just over £2,000 in liquid cash.  It’s definitely a good idea to keep some cash completely liquid, but with those rates being more than halved, I have to think about whether that cash is pulling its weight.  Many investors have likened each unit of cash to a worker, working to make you more money.  Well, with rates that low, it’s like my Fuck It Fund has gone on strike.  

If I was to withdraw cash from the Fuck It Fund, I would need to replenish it.  I want to have at least six-months of expenses covered from my emergency fund, and leaving £2,000 would cover 2.5 months of basic living costs.  So why not just keep the Fuck It Fund where it is if I’m just going to build the fund back up again?  If rates were low and the stock market was not depressed, I would probably just keep things as they are.  The stock market is so attractive at the moment though, and I might not get to invest again at these levels for a long time.  Overall, I think it makes sense to reallocate my resources.

Beyond Covid-19

It’s important to explain what Covid-19 actually stands for.  It’s CoronaVirus Disease 2019.  It’s a catchy name but the thing that’s important is that we are almost half way through 2020 and we’re still not past the peak of the Covid-19 outbreak.  Some parts of the world, such as Brazil and the US, are still not over the worst of this first wave.  Then, we will probably be hit with a second wave further down the line.  

As we see the economic impacts of Covid-19 unravel over the next few months and years, we will probably see businesses go under, people struggling financially and pension policies suffer poor performance.  When people, and businesses, struggle for money it is common for the immediate needs to be met at the expense of long-term needs, such as retirement planning.  People who were otherwise putting money away for their retirement may need to use that money in the present just to meet their basic living costs.  I’m not saying this is necessarily wrong; people have to eat and they have to pay their bills.  What this could mean is that these people may not have the same level of retirement provision in place by the time they retire if they are raiding their savings and investments now.  

Many people take a passive approach to their financial future by handing cash over to their employer’s pension plan.  These plans vary in quality.  Some employers will match an employee’s contributions whilst others will pay 2% for every 1% the employee pays.  These types of policies are great because they are basically giving you free cash.  However, not all employers provide such schemes and it pays to research what type of plan you are paying into.  Also, another fairly cheap investment people can make during this time is an investment in their financial education.  A library card can open up access to a whole world of financial education books.  This can help people to take a more active role in their financial future, and this active role might help mitigate the losses people are experiencing now as they are no longer tied to investments that were a mystery previously with all sorts of fees attached.  

Well, it’s been a much shorter post than normal this week, but to be honest I didn’t feel like writing much of anything.  Hopefully next week will be a return to normal.

Final Notes

Thank you for reading this week, and I hope you have a great week ahead.  If you are following F.I.R.E. or would like to know more about it, please get in touch via Twitter (https://twitter.com/NowWeLive01) or leave a comment on this post.  ​

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