Part 261: Are you not entertained?

Hello and welcome back to Mortgage Advisor on FIRE.  This week I discuss the upcoming Labour budget, and take a look at why I won’t get bored when I FIRE.  Also, it turns out I look Danish to some…

Weekly Update

I look Danish.  I’ll take that.  Let me explain…

Earlier this week I accompanied Oana when she had her head and face scanned by a tech company.  They were offering £50 for volunteers to be scanned with their likeness potentially being used in video games, adverts, and in facial reconstruction software for medical and legal applications.  It’s interesting stuff.

When we arrived, Oana was taken to a make-up chair and I sat on one of the sofas.  The people were asking Oana where she was from because of her name and accent.  No one guessed correctly but we have a new one to add to the list; Finnish (which reminds me of the Antti Niemi call which I will come back to).  

I then asked where they think I’m from (Sheffield, UK).  The woman I was sitting with looked at me thoughtfully.  

Her: Well… I’m thinking Scandinavia.  You’ve got this whole Viking thing going on.

Me: Hmmm… that’s interesting.

Her: Danish?

Me: Danish? Yeah, I’ll take that.

Her: Where are you from?

Me: Sheffield.

According to the people there, I have an accent that sounds like a mix of Scandinavian and Mancunian.  A few years ago I did one of those 23&Me tests and much of my genetic background comes from Norway.  

As of now, I’m formalising my change of name to David Finehair.

Antti Niemi

This one is too good to ignore.  For those who don’t know, Niemi was a goalkeeper from Finland who spent much of his career in the UK, with a decent spell in Scotland.  Someone once called TalkSport to lament the fact that Niemi had not been selected for the Scottish national side.  The call went something like this:

Caller: Why doesn’t he look at Niemi?

Host: He’s Finnish.

Caller: He’s not finished he’s 28.

Host: No, he’s Finnish.  He’s from Finland.

Caller: What do you mean?

Now, we’re going down the rabbit hole because it’s possible the caller was one of those people who buy into the conspiracy theory that Finland does not exist.  Yes, there’s a conspiracy theory out there which argues the country of Finland is not real.  I’m convinced most people arguing this are doing it for a laugh, and to be fair some of the posts about it can be pretty funny.  

So, in summary, Oana is not from Finland because it doesn’t exist, and Antti Niemi is finished.  Thank you for attending my TED Talk, and I will not be taking any questions.

Botanical Gardens and other walks…

We’ve been for quite a few walks this week and it’s our favourite time of year for looking at trees.  The colours in Autumn are amazing, with all sorts of gold, copper, and shades of red.  We saw many squirrels and got some great photos:

Won’t you get bored?

I was chatting with a friend this week about FIRE, and one of the points we discussed was the common questions asked when you tell someone about your FI plans.  The most common question is typically, “Won’t you get bored?”

So, when faced with someone who is planning to retire from work years, maybe decades earlier than normal, rather than asking how they are doing it, the burning question is whether that person will be bored.

I think that people ask this because they’ve been conditioned from a young age to anchor their life around school, and then work.  It’s what most people consider normal; you go to school, and then you find work for 35-40 hours each week.  

Getting out of the traditional mindset and into a FI mindset is hard work, and can be mentally and emotionally uncomfortable for some.  It can challenge your beliefs and what values you were raised with.  Most people learn about money from their parents, and if those parents were the sort who thought money was a dirty subject, then you were probably not going to learn much useful information.  

Life is short and the world is vast, and here follows a list of reasons I would not get bored once FIREd.

Things to do…

1. Travel the world: I would have so much time to explore new countries, cultures, and cuisines, seeing places I’ve always wanted to see.

2. Building my Blog: I would have much more time to work on this blog, with more regular posting.

3. Learning New Skills: From cooking to photography, from DIY to coding.

4. Volunteering: Helping out with causes I believe in.  

5. Writing a Book: I’ve got several folders full of ideas for books, but I’ve never had the mental energy to commit to them whilst working.

6. Investing and Financial Projects: Learn more about investing and possibly start some new FI-related projects.

7. Reconnecting with Nature: Hiking, biking, camping, or even wildlife photography.

8. Spending Time with Loved Ones: Unhurried time with friends and loved ones, where new memories can be created.

9. Starting a Passion Project: Building or designing something from scratch, whether it’s art or something practical.

10. Becoming a Mentor: Using my experience and knowledge to help mentor people starting on their FI journey.

11. Health and Fitness: Starting an exercise regime that works at my own pace, rather than scrambling to find time around work.

12. Learning a New Language: Being able to dedicate more time and mental energy to learning a new language.

13: Entertainment: There’s an almost endless supply of books, films, shows, plays, games, and other hobbies to explore. 

14: The Internet: An archive of the history of human civilisation.  A quick Google search suggests it would take almost 25 million years to browse the whole internet, not accounting for the rate at which new information is added.  

This is just a quick list I’ve popped together off the top of my head.  Becoming FI doesn’t mean that you can never work again, either.  It just means that money is no longer the main factor in choosing how, where, or when to work.  

Diabetes UK Step Challenge

A massive thank you to those who have donated, and a reminder that I’m still accepting donations until the end of October.  If you’d like to donate, you can do so here.

Letters to Oana

Part 2 of the series Letters to Oana is now live.

Looking Back

Part 16 of the Looking Back series is also live.

What I’m Doing

Listening: Good Boys 2: Unleashed by Jeremy Robinson (audible).

Watching: Looking for something – any suggestions?

The second book in the Good Boys series has been released, and Saturday afternoon saw an email drop in my inbox announcing the release of the next book in the Stone Man series by Luke Smithard.  I’m going to go back and relisten to the previous books in the series first and I can’t wait.  

Below is the Audible summary of the book and I highly recommend the series for fans of sci-fi and horror.  I’ve had a few interactions with the author and he seems a decent guy.  Also, some of the series takes place in Sheffield which is a bonus.

Polenta

Do you know what polenta is?  Have you at least heard of it?  I’ve been craving an orange polenta cake (yes, I know it’s very specific) and so we’ve been trying to track down polenta in the supermarket.  

Our local Tesco does not stock it, nor had three separate members of staff even heard of it.  We also asked in Marks and Spencer with the same result, and finally, Waitrose where it took a few attempts to find someone who had heard of polenta.  We thought we had found some in a little corner shop but their polenta was massively out of date.  

I didn’t think polenta was that unusual, but it would seem I was mistaken.  The long and short of it is I no longer crave that cake, so we have a big bag of polenta spare.  We’ve decided to use it to make Mamaliga, a traditional Romanian dish.  

Reddit Post

Reddit is my preferred social media app for scrolling and judging, and one of the subreddits I enjoy reading is r/hypotheticalsituation.  I’ve had a thought rattling around my brain for a while and I eventually got around to posting it.

There were some great suggestions, including some I’d not thought of.  One person said they’d consult experts in the sciences to see what questions would be best.  Another person said they’d ask how to increase their lifespan by 20%. 

So, would you ask anything?

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Financial Update

Assets

Premium Bonds: £15,100.00.

Stocks and Shares ISA: £92,369.14.

Fuck It Fund: £1,230.27.

Pensions: £86,423.37.

Residential Property Value: £237,447.00. 

Total Assets: £432,569.78.

Debts

Residential Mortgage: £185,383.74. 

Total Debts: £185,383.74.

Total Wealth: £247,186.04.

Some of my investments took a massive hit late in the week, with my ISA dropping almost £3k.  It’s just part of the normal fluctuations of any stock market investment, but it’s impossible to not feel something when there’s a sudden drop.

It’s going to be interesting to see what the next two weeks bring as we have the Labour budget and the US Presidential Election.

The Budget

I don’t remember being as nervous about an upcoming budget as I am now because it seems almost anything is on the table.  I don’t see Labour messing around with income tax or national insurance, but other than that it could be brutal for investors and savers.  

ISAs

There are a few ways we, FI followers, could be hit.  The first one that springs to mind is changing the nature of ISAs.  We have a generous allowance of £20,000p/a we can invest in a stocks and shares ISA, with no cap on the overall value of the account.  Income within an ISA is free of tax, as are profits from the sale of units.  It’s a fantastic tool for building wealth, but it does remove a lot of potential money from the tax system.

I would not be too upset if the £20,000 annual allowance was reduced, even if it was halved.  However, a lifetime cap on an ISA balance would be a gut punch if it wasn’t something high like £2M. Any limit would have to be low enough to make a difference, so a high limit is probably less likely.  There have been some calls for ISAs to have a lifetime limit of £100,000, and should this happen I, and many others, will be pissed.  

Unintended Consequences

People tend to work out how to hit a target or restriction with the least amount of effort or stress.  Should ISAs be targetted in this way I think it will have unintended consequences.  

The thing is, people don’t want to part with their money.  Those with six-figure ISAs will find other ways to protect their cash and it could even involve cashing in their ISAs to buy other asset classes or to pay off their mortgage.  When these people are older, they will no longer have the same financial buffer to fall back on which may increase dependency on the welfare state.  It would just be kicking the can down the road. 

In short, I wouldn’t be opposed to reducing the annual investment allowance but I would be massively opposed to any sort of cap on lifetime balances unless it was such a high limit as to be pointless.

Dividends

We only have a small dividend allowance as it stands, so removing it entirely would not feel like much of a loss.  If the government leaves ISAs alone I wouldn’t lose any sleep over the dividend allowance being scrapped entirely.  I would question how much money this would raise for the treasury though.

Capital Gains Tax

This is one that I’m fully expecting to change in a couple of ways.  First, I think the allowance will be cut or removed altogether.  Second, I think the rate of tax charged for CGT will be reviewed. 

The smart way to handle this would be to charge a modest amount for gains up to £3,000 each year (£3k being the current allowance).  The modest amount could be as low as 5%, with the CGT charge increasing in line with income tax bandings.  The thing about CGT is that if you set it too high, people will just stop selling and incurring chargeable gains.  It needs to be high enough to make a difference but low enough to not put people off.  

In 2022/23 approximately £14.4B was raised through CGT with less than 400,000 people paying this tax.  The Office for Budget Responsibility is predicting that CGT will raise just over £15B in the current financial year.  With a financial “black hole” of £22B reported, CGT is not the answer in isolation.

Pensions

It’s looking likely that there will be some impact on tax relief for pension contributions and on the level of national insurance paid by employers.  Under current rules, employers pay NI on wages except for that paid into a pension.  If this was changed so that employers paid NI on all wages, even those invested into a pension, it is thought it could raise billions for the treasury.  Once more we have to think about the unintended consequences further down the line.

Many employees pay extra into their pensions to fund retirement with the bonus of reducing their tax and NI.  Rightly or not, some people will look at a change such as this and think it’s not worth paying as much into their pension.  This could lead to increased dependency on the welfare state years later.  

Another potential change to pensions could relate to the tax relief given on contributions, but that’s a subject that I’m not going to tackle here as it would require much more time, brainpower, and caffeine.

ISA v Mortgage

With all these possible changes to taxes and allowances, I started looking at my ISA and mortgage in comparison.  One, somewhat jokey, suggestion from a friend was to simply cash in the ISA and use it to pay down the mortgage.  Then, some time later take out a further advance to replenish my savings.

Although the situation is more complex because of early repayment charges and limits on how much can be invested into an ISA, it got me wondering about the point at which my ISA would be double my mortgage balance.  The idea would be to pay off the mortgage but still have a decent chunk of savings.

The Calculations…

I ran a few projections based on different rates of growth, savings, and payments off the mortgage debt.

As things stand I pay approximately £330 off my mortgage debt each month.  Due to daily interest, the amount of interest charged in monetary terms will drop over time.  However, for the sake of simplicity, I assumed it would remain the same.

If I pay £330 off my mortgage debt each month, and invest £200 in my ISA each month, with annual growth of 6%, it would not be until July 2031 that my ISA balance would exceed my mortgage balance.  I’m not talking about it being double my mortgage, but rather just exceeding it.

If I tweak the scenario so I’m paying £400pm off the mortgage, and investing £250pm with 6% annual growth, then my ISA would be £50,000 higher than my mortgage by August 2033.

I completed a final calculation assuming that my ISA balance was £20k higher now (to account for maxing out the allowance in April’25), with the mortgage coming down by £450pm and the investments still increasing by £200pm and 6% growth…..

August 2035 is when my ISA would be double my mortgage debt.  There’s no specific reason I’m looking at double as a target, and it is entirely arbitrary.  It would be nice to be mortgage free that soon though.  

That’s all for this week.  Thanks for reading, and I hope you have a great week ahead.

Disclaimer

The views and opinions in this blog are my own, and do not represent the views or opinions of my employer, nor should they be considered advice.  

If you want personalised financial advice, seek an appropriate professional.  If you are in financial difficulty, seek advice via the resources below:

StepChange

MoneyHelper

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