Hello and welcome back to Mortgage Advisor on FIRE. This week I discuss the level of competence the UK government is demonstrating (spoiler: it’s not high). I also touch on my journey to Romania, for my first visit since December 2019. Also, I look at how to become a millionaire and the time it would take to achieve this. First, the Quote of the Week:
Quote of the Week
I can’t recall a UK government being more incompetent than the one led by Boris Johnson. It’s just one embarrassment after another. In a time with no pandemics or wars, it could almost be funny. However, we are living in dangerous times with Brexit, Covid and the rise of the Taliban in Afghanistan all requiring a coherent and well reasoned response. We simply don’t have anyone capable of heading up that response in government. The only thing this government is good for is being the subject of memes.
Being in government is not like a normal job, or at least it shouldn’t be. The concept of being on holiday from your role as a senior minister is bizarre. It should be a position that is a 24/7 job, with the idea that you take your breaks as and when you can. It should be a position that has enough support so that you don’t get burned out, despite the potential for long hours. This is what a life in public service demands. Saying all that, I don’t have an issue with a government minister taking a break. The issue is one of perception. Was it right for the Foreign Secretary to take a holiday abroad whilst the situation in Afghanistan was worsening by the hour?
If there is one thing that Covid has demonstrated, it’s that many jobs can be done remotely so long as you have a secure internet connection. Had Dominic Raab cut short his break and set up a temporary office, where he was working tirelessly on this crisis, that would have gone some way to improving his image. To think that someone, somewhere, thought that stating the sea was closed was going to extinguish this fire is just absurd, and only goes to show how out of touch the Westminster elite is.
Weekly Update
I started the week getting ready for the work to our bathrooms in September. We needed some tiles for our bathrooms and I didn’t want to spend too much, as it’s just to make the place look a bit more presentable when we sell. I had real trouble finding a company that would deliver all the way up to the apartment though. Each firm I contacted would only do a curbside delivery which is always an issue when ordering heavy or bulky items. I found some basic white gloss tiles and ordered 18 meter², which is the amount needed plus ten percent for breakages. This meant we needed 18 boxes, with each box weighing 14.85kg.
Our apartment block has two entrances; one which has a flight of stairs before you get to the lift, and another with a lift down to the ground floor. The former results in a much shorter distance to walk, with the latter being at least twice the distance to walk to our flat. The driver who delivered the tiles was just a courier and, although he was friendly, he could not help carry the tiles to our flat. So, on Tuesday I carried all 18 boxes from the curb, up fifteen steps, and through two fire doors before getting to our apartment. By the time I was done, I was seeing god and I’m atheist.
As the week drew to a close, we started our journey to Romania. Normally we try to get the bus from Sheffield to Robin Hood airport (also known as Doncaster-Sheffield airport, or DSA). However, it seems that the direct bus service has stopped. So, with time pressing we decided to take the hit and order an uber. We have flown from DSA many times in the past, but not since January 2020. The uber driver was fretting on the journey about paying a fee to enter the car park at the airport. I checked the DSA website and it stated that there was a fifteen minute window for dropping off, for which you would not be charged.
The driver proceeded to the wrong entrance for the airport, and then took us to another entrance which was for service vehicles. Eventually, we ended up at the right entrance. However, at the barrier, the driver was hesitant to push the button as he thought he would be charged. After much dithering on his part, and we were getting stressed because it was just after 14:00 by this point, he suggested we jump out as it was just a short walk to the terminal. Thinking this was the lesser of two evils, we agreed. As we were getting our cases out of the book, airport security came up and stated they had fined him £100 and taken his licence number as he was blocking the entrance to the airport.
We didn’t have time to hang around, so we set off walking to the airport. As we joined the queue for the baggage drop, I noticed that the driver had not yet ended the journey, so I cancelled the trip on the app and sent a message to uber about what had happened. I was worried the driver would try to hand the fine over to us. However, I had a call from uber support and they are refunding the cost of the trip (over £40) and putting measures in place to make sure we are not paired with that driver again. It was also frustrating that we had to ask him to wear a damn mask, but that’s another story I can’t be bothered with right now.
DSA is not a great airport. It’s very basic and the only reason we use it is because it’s the only local airport you can get a direct flight to Bucharest from. If you fly from Manchester, you have to change at Heathrow, Amsterdam or Munich. This adds hours to the journey. So, we just put up with it for the sake of a faster journey.
In the terminal there is no organisation, apart from a cordoned-off seating area at the Weatherspoon pub. When the gate was announced, a wave of people marched to the desk with no discernable queue. An announcement came out inviting those with priority boarding to come forward. We paid extra for priority boarding just so we could avoid more hassle. This meant we had to push through crowds of people to get to, what we thought was, the end of the priority boarding line. However, as we got in line, some guy behind started talking in Romanian. My girlfriend snapped back at him and wouldn’t tell me what was said until later, as she thought I would say something back. She knows me well. I don’t generally react to idiots, but if something does get my back up I tend to lose my shit. What this guy had said was racist against British people. So yeah, I would probably have reacted.
This is the first time I’ve been back in Romania since late December 2019. I flew back just before Christmas that year, and my girlfriend stayed until just after the new year. The last time I was here, my blog was still very new. Now, I’m writing this in a sleepy village in rural Romania early on Sunday morning as I’m wired from all the caffeine from the journey.
2021 Goals – to be achieved by 31/12/2021
1 – Reduce weight to 92.8kg. (Current weight 121.5kg).
2 – Finish 104 new books. (Current total: 82).
My weight loss stalled a little this week, and it’s going to be difficult to maintain in Romania due to the fantastic food there. I’m looking forward to the lemon chicken my girlfriend’s family make, as well as the schnitzel that is served fresh from the pan. There is also a soup called supa de galuşte, which is a clear soup with semolina dumplings with carrots and fresh parsley. Some people choose to add vinegar, which is also my preference. My favourites at the house are branza (Romanian cheese), with fresh tomatoes and vinete (aubergine which is grilled and pureed).
I have also read some excellent non-fiction since the last post, such as The Skeptic’s Guide to Alternative Medicine, and Prisoners of Geography. The former looks at the bizarre, and dangerous, alternative medicine industry and is a nice introduction to the subject. The latter was fascinating as it delved into political history and how it’s been shaped by geography.
Financial Update
Assets
Premium Bonds: £21,500.00 (no change from last update).
Stocks and Shares ISA: £26,917.79 (up £84.80 from last update).
Fuck It Fund: £175.00 (no change from last update).
Crypto: £553.38 (down £40.58 from last update).
Pensions: £49,333.19 (up £665.10 from last update).
Residential Property Value: £207,807.00 (no change from last update).
Buy-to-Let Property Value: £134,098.00 (no change from last update).
Total Assets: £440,384.36 (up £709.32 from last update).
Debts
Credit Card: £162.02 (down £1,929.48 from last update).
Residential Mortgage: £158,492.24 (no change from last update).
Buy-to-Let Mortgage: £93,061.34 (no change from last update).
Total Debts: £251,715.60 (down £1,929.48 from last update).
Total Wealth: £188,668.76 (up £2,638.80 from last update).
Investment Income in 2021: £2,440.09 (target £5,000).
A great week that saw my debts come down massively. I was able to free up cash through selling some things I no longer needed. This money was used primarily to reduce my credit card, although I have put some cash on one side to help pay for the bathroom work we are having done in September.
My total wealth is creeping towards £190,000. Hopefully, a good week in the stock market will see that happen. This week also saw my rental income hit my bank account, which took my investment income for the year to almost half my target. In September I should see some dividends for the stocks I hold. It’s looking like I will just miss out on the goal of £5,000, but I don’t think I will be too far off.
Thoughts on the Future
One reality I’ve had to face is that I’m not going to be able to secure a second BTL on my own in 2021. I could go for a lower spec property, but there’s no point. My criteria for a property are fairly simple; three bedrooms, decent area and a price no more than around £140,000. The market is so hot at the moment that people are paying way over the odds for these types of properties. There will be a slight reset in the near future, and so I’m going to wait until early next year when, I hope, I’ll be able to secure a second BTL with my JV partner.
In the meantime I am considering transferring some of my Premium Bond balance into my ISA. I have £13,000 left from my £20,000 allowance for his tax year. I could take that money from the Premium Bonds and replenish it between now and April 2022, when the ISA allowance refreshes.
Who Wants to be a Millionaire?
Being a millionaire has often been considered the milestone by which people are considered rich. However, inflation means that being a millionaire now is not as meaningful as it was fifty years ago. Make no mistake, being a millionaire in 2021 through your own hard work is still a hell of an achievement. I have started thinking about when I might hit this milestone. The first thing we need to consider, though, is how to define being a millionaire.
I can think of the following definitions.
- Having at least a million pounds in cash.
- Having assets and cash that are valued at over a million pounds.
- Taking your total assets, then subtracting your debts, and being left with a total value of a million pounds or more.
I’m not a fan of the first two definitions, and I’ll explain why using an example. Let’s call my hypothetical investor Derek. He borrows £300,000 from four different lenders, meaning he has £1,200,000 in cash, but he also owes £1,200,000. Derek uses this cash to buy twelve properties for £100,000 each. However, there is a drop in property values meaning each property loses £10,000 value. Derek’s portfolio is now worth £1,080,000. Definition two would suggest he is still a millionaire, despite the fact he is technically £120,000 worse off than when he started and is now in negative equity.
In the UK, approximately 1 in 20 people are classed as a millionaire, according to the third definition. This is actually more than I thought. I would suspect that many of these people are millionaires in the sense that their property value has increased over time, as opposed to them accumulating wealth through cash, equities or other investments.
So, how long will it take me to become a millionaire?
My total wealth at the moment is £188,668. I’m 18.8% of the way to becoming a millionaire. What follows is just my own personal preference, rather than being based on anything logical. I would want at least half my wealth to be made up of non-property assets, such as stocks and bonds. So, the real question here is how long will it take me to accumulate £500,000 between my ISA, bonds and pension?
As things stand, I have roughly £97,750 from those asset classes. Assuming that my investments return 8%, which is in line with historical data, and that I invest £250 every month, my investments should be worth at least £500,000 in 17-18 years. I would be in my mid-50s at this point, which is pretty good I think.
What is interesting with these calculations is that the monthly amount saved has only a minor impact on the time taken to accumulate £500,000. The biggest impact comes from the compounded gains. For example, reducing the monthly investment to £100 but keeping the same investment term and rate of interest, you would still have over £420,000 after 17-18 years. Compound interest is insanely powerful.
There might be ways that I could speed up the timeframe for hitting this level of wealth but I’m content to follow the process rather than fixating on the outcome. If I concentrate too much on the outcome, I risk losing sight of the basics which could have disastrous consequences. Ultimately, slow is fast. I know the process works, so if I follow the process I will achieve the outcome eventually.
Biolink
You can now find all my social media pages by checking out my Biolink at bio.link/davidscothern.
Please show your support
I spend several hours each week writing this blog and make it freely available to all readers. I do not hide my content behind a paywall. However, maintaining a website incurs costs. If you can afford a small donation, it would be gratefully accepted. Click on the Buy Me A Coffee image to be taken to my supporter page. You can either make a one off donation, or sign up to a monthly subscription. If you can’t make a donation, please share my blog on your social media.
You can still see Sweep’s Instagram @sweep_the_kelham_island_cat.
Finally, have a look at Darren Scothern’s fantastic blog at darrenscothern.com.
Mortgage Advisor on FIRE. 